Blockchain, Intellectual Property, Environment and the Future
During the past few years, a new technology has developed, which is expected to replace many current digital platforms. I want to explore a few of the up, and downsides, of our present and future lives on the blockchain.
The blockchain was first presented by Satoshi Nakamoto in 2008. It is possible to build blockchain-based applications for use within practically any sector, and in particular where these are used to record any transaction of value through so-called smart contracts.
Given how widespread digital distribution is in today’s economy, blockchain technology has been identified by some as the biggest revolution since the internet.
An advantage of using the blockchain for transactions is that it allows for instant, decentralised and secure transactions, for which there is no need for intermediaries such as brokers, agents, etc. Data stored on the blockchain is generally considered incorruptible.
Blockchain and the IP profession
It is widely agreed that the Intellectual Property profession as we know it, is likely to be greatly impacted by the blockchain.
- Creation of New IP – Firstly, just looking at the most obvious impact of the blockchain technology, we are already seeing a large and increasing number of patent and trade mark applications relating to blockchain technology being filed. We would expect that these numbers are likely to increase dramatically as the technology becomes more widespread. As with many areas of new ground breaking technology, these early breakthrough patents and trade mark rights may become very valuable.
Looking slightly further downstream, blockchain technology is also expected to open up other possibilities.
Whilst some of these impacts are already being felt, some others may take considerable time to make an impression while we wait for the industry to become comfortable, with, say, regulatory constraints being removed. There are also long-felt needs in the IP community for the use of blockchain technology instead of tried and tested processes. For example, some examples of how blockchain technology may be utilised are:
- Blockchain protection – Blockchains use various time-stamping schemes which opens up for more reliable recordal of intellectual property assets. This may result in fewer disputes over ownership, facilitating collection of royalties, etc.
- Blockchain authentication – For detection of counterfeit or fake goods. Several applications have already been built or are underway that aim to track and identify products such as diamonds or fashion items and make duplication or the creation of counterfeit goods impossible.
- Smart IP contracts – Smart blockchain-proofed contracts and recordals may spell the end of backdated documents with e.g. invention dates and assignment dates. They will add reliability to the IP system to the benefit of IP owners and stakeholders.
- IP registry services – When the IP registries replace their current centralised systems with blockchain technology, the records will become more trustworthy and also able to be updated and shared immediately. Useful applications can then also be built on top of these records without having to wait or physically verify the data.
Consequences of designed inefficiencies
As with all disruptive technologies, the impacts of blockchain technology will be felt across many industries, and will change how we do business. This ground breaking technology sounds exciting, perhaps even truly revolutionary in some applications. However, as with all new technological breakthroughs, there are likely to be some negative consequences also that need to be considered.
For example, looking at the digital currency Bitcoin, which is one of the most well-known (although perhaps not entirely well understood) uses of blockchain technology, we can explore one of the potential downsides of this new technology – its significant environmental impact.
Bitcoin is thriving, with a current market cap of over US$300 billion. Bitcoin’s incredible price run to break over $17,000 earlier this year has sent its overall electricity consumption soaring, as people worldwide bring more energy-hungry computers online to mine the digital currency.
If the digital currency remains at these current prices, cryptocurrency analyst Alex de Vries estimates that it would be profitable for Bitcoin miners to burn through over 24 terawatt-hours of electricity annually as they compete to solve increasingly difficult cryptographic puzzles to mine more Bitcoins.
This averages out to a shocking (sorry) 215 kWh of electricity used by miners for each Bitcoin transaction (there are currently about 300,000 transactions per day).
To put this in perspective, an average American household consumes 901 KWh per month. Therefore, each Bitcoin transfer represents enough energy to run a comfortable house, and everything in it, for nearly a week. On a larger scale, De Vries’ index shows that bitcoin miners worldwide could be using enough electricity to at any given time to power about 2.26 million American homes.
Since 2015, Bitcoin’s electricity consumption has been very high compared to conventional digital payment methods. This is because the dollar price of Bitcoin is directly proportional to the amount of electricity that can profitably be used to mine it. As the price rises, miners add more computing power to chase new Bitcoins and transaction fees.
Whilst it is impossible to know exactly how much electricity the Bitcoin network uses, it’s quite clear that even at the estimated minimum level of 77 KWh per transaction, there is a problem. At the not-unreasonably-estimated consumption rate of 215 KWh, there is an even bigger problem.
That problem is carbon emissions.
Using publicly available on a coal-powered Bitcoin mine in Mongolia, de Vries has calculated that this single mine is responsible for 8,000 to 13,000 kg CO2 emissions per Bitcoin it mines, and 24,000 – 40,000 kg of CO2 per hour.
To put this in some perspective, the average European car emits 0.1181 kg of CO2 per kilometre driven. So, for every hour the Mongolian Bitcoin mine operates, it’s responsible for (at least) the CO2 equivalent of over 203,000 car kilometres travelled.
As the Bitcoin price continues to rise, so too does the electricity consumption, and therefore its overall carbon emissions. Blockchain is inefficient tech by design, and this gets to the heart of Bitcoin’s core innovation. In order to achieve a functional, trustworthy decentralised payment system, Bitcoin imposes some very costly inefficiencies on participants.
Whilst there have been some proposed improvements, which promise to increase the number of transactions Bitcoin can handle by at least double, since Bitcoin is thousands of times less efficient per transaction than a credit card network, any improvements will need to get thousands of times better.
In the context of climate change, and the need for the world to transition to a low carbon economy, it’s worth considering Bitcoin’s currently large environmental footprint.
So perhaps the surge in the blockchain technology will inevitably lead to other technology advances in green tech to help offset the significant environmental impacts of the new digital technology.
This in turn will lead to more activity in the IP space, and may well spawn new developments in other areas that can benefit from the technological advancements.
The march of progress continues.