Why did I decide to use blockchain to do emissions trading? It all started about two years ago when I went to an NGO that was already a big player in biogas to see if they could help. The NGO was really lovely, and I thought we could do something, but there was one thing that was holding us back. It's the certification for emissions trading. To certify emissions trading, which is not part of the national system, you have to ask a private organisation to issue the certification.
That's what we were told.
We need €200,000 to get the certificate and €40,000 to ensure that the biogas is produced properly every year.
This would have been possible for a large renewable energy project, such as a mega solar farm, but a small organisation like ours can't pay the amount for a renewable energy project for poor farmers. A mega-solar project will not be charged 40,000 euros for the annual renewal because they only need to be checked one site. So, I wanted to find something cheap that could replace the authentication of emissions trading, and that's where blockchain came in.
The difference between a blockchain and a database is well-spoken. There is a similar comparison between the blockchain-based authentication mechanism and the general authentication mechanism for emissions trading.
The first difference between a general database and a blockchain is whether it is centralised or decentralised. For example, credit card data is managed centrally by the credit card company, which is the middleman in the transaction. With blockchain transactions, no such centralised person is managing the transaction. This is also the case with emissions trading. In emissions trading, which is generally done through certification, the company that issues this certification gets the approval. The company that does the emissions trading controls the transaction in a centralised way, like a credit company. For this reason, the middleman will charge a fee to manage the transaction. In blockchain emissions trading, there is no middleman, so there is no middleman to pay.
Why is it that blockchains can be trusted without middlemen and without certification bodies? As I mentioned in the previous article, it is a trustworthy system because the ledger's records are not entrusted to a few people or organisations but are shared with all participants, thereby limiting data loss and prohibiting data tampering by majority vote.
By saying it cannot be tampered with, the blockchain can only fill in or read data. It is a record of all the transactions that have ever taken place. On the other hand, a general database can create, read, update and delete data entries. And these functions are usually given to particular people.
And there is a lot of freedom in the data that can be entered into a blockchain -- the first layer of financial transactions and the second layer of information, such as a doctor's note shared between people who have done business, or the third layer of information, such as a supply chain shared by many. More interestingly, unlike ordinary databases, which use, for example, Amazon's cloud service, which can be trusted to store the information. Blockchains will be powered by a number of untrusted pieces of hardware.
In short, a typical database or authentication mechanism requires trust in the authentication authority and the infrastructure and human resources to support it, which makes it more expensive. Blockchains, being decentralised, do not require trust in the infrastructure or human resources used. Instead, the blockchain mechanism itself is a trustworthy mechanism. Given these differences, isn't it interesting to see why blockchain is a financially advantageous mechanism?
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