The document discusses blockchain technology as a potential sustainable solution for the future, highlighting its capabilities in data management and smart contracts. It addresses energy consumption concerns associated with proof-of-work systems and notes the transition to more energy-efficient mechanisms like proof-of-stake. Additionally, it emphasizes various blockchain applications, particularly in supply chain management and sustainability efforts.

1. Blockchain Technology:
a Sustainable Concept for the Future?
“Die Blockchain-Technologie: Ein nachhaltiges Konzept für die Zukunft?“
Kryptorechtstag, October 2023
Prof. Dr. Ingo Weber
ingo.weber@tum.de
http://imweber.de/
Full professor at TUM and
Director IT infrastructure & digital transformation
at Fraunhofer

2. Blockchain – replacing centralized trusted authority
2
Organization 1 Organization 2 Organization 1 Organization 2
Centralized Trusted Authority
Traditional trusted environment Blockchain trustless environment
Blockchain network

3. How?
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• Immutable data base
• Public ledger
• Every node hosts a replica
• Distributed consensus
- No central owner of
consensus
• Transaction is verified by
every node
• Combination of knowledge
from Distributed Systems,
Peer-to-Peer, Cryptography,
Incentive Systems and Game
Theory
Blockchain network

4. Imagine an empty ledger book
On the first page, we write the current account balances
• Say, 100 KRT-$ per attendee:
− Alice: $ 100
− Bob: $ 100
− Charly: $ 100
− Ingo: $ 100
− …
Now imagine we make a lot of copies of the ledger; one per attendee
Bob wants to buy a copy of my blockchain book, so he transfers $ 40 to me
• We all need to update our ledger copies, so Bob writes and signs a note (like a cheque) about the
transaction, and sends a copy of that to each of us
• We all check that (i) he has the money, and (ii) the signature is his
• Then we add this transaction to page 2 of the ledger
Intuition: physical ledger copies (1/2)
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5. Now I want to buy a copy of Alice’s new book, so I transfers $ 60 to her
• I write and sign a note about the transaction, and
send a copy of that to each of you
• You all perform your checks as before, then add my transaction to page 3 of the ledger
The current account balances are:
• Alice: $ 160
• Bob: $ 60
• Charly: $ 100
• Ingo: $ 80 …
Analogy:
• Ledger is the data structure, pages are blocks
• Transactions are transactions, but signatures are digital
• From the sender account, anyone can check the validity of the signature
• We need to ensure everyone has the same version of ledger (consensus),
no pages can be removed, etc.
Intuition: physical ledger copies (2/2)
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6. What is a Blockchain?
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Visualization of a Blockchain: http://ethviewer.live

7. Blockchain 2nd gen – Smart Contracts
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• 1st gen blockchains: transactions are financial transfers
• Now Blockchain ledger can do that, and
store/transact any kind of data
• Blockchain can deploy and execute programs: Smart
Contracts
• User-defined code, deployed on and executed by whole
network
• Can enact decisions on complex business conditions
• Can hold and transfer assets, managed by the contract
itself
• Ethereum: pay per assembler-level instruction

8. Well, blockchains are exciting because they can be used as a new
foundation for re-imagining systems:
• Neutral infrastructure for processing transactions and executing programs
• Potentially interesting for innovation at all touch-points between organizations or
individuals
➢Blockchain applications have the potential to disrupt the fabric of society,
industry, and government
Blockchains can also be used as a technology platform to handle hard
issues of data replication and system state synchronization with high
integrity.
So what?
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9. Xiwei Xu, Ingo Weber, Mark Staples.
Architecture for Blockchain Applications.
Springer, 2019.
http://dx.doi.org/10.1007/978-3-030-03035-3
→ accessible from the TUM network
Blockchain book
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10. Cryptocurrencies
• ‘Baked in’ to the core platform of public blockchains
- base currency of blockchains
• Symbiotic relationship
− Blockchain keeps track of the ownership of portions of that currency,
e.g. Alice owned 2 Ether, transferred 1 Ether to Bob, offered 0.01
Ether to miner
− Cryptocurrency enables the incentive mechanism for blockchain
operations
Digital tokens
• Created and exchanged using smart contracts
• Represent assets
− Fungible asset: individual units are interchangeable, e.g. company share, gold
− Non-fungible asset: represents a unique asset, e.g. cryptokitties, car title
Not all applications are the same:
• Transferring coins / tokens vs. tracking movement of physical goods
• Core difference: where is the default version of the truth, on or off-chain?
Cryptocurrencies and Tokens
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Created with DALL-E-2

11. Blockchain Technology:
a Sustainable Concept for the Future?

12. Proof-of-Work 1/2 (ex )
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• Nodes compete for right to create block
• Solve a hash puzzle
- Easy to verify, difficult to solve
- Takes effectively random time, proportional to
computational power
H(nonce || H() of previous block || Tx || … || Tx) is very small
00000…
Output space of hash (256 bits)
Target space
• If the Hash function is secure: the only way to succeed is to try a huge number of
values
• Probability(wining next block) = fraction of global hash power the miner controls
Transactions
⁞
H( ) of previous block
Nonce

13. Not energy-efficient
• Electricity consumption of Bitcoin is … high
• Sources: https://ccaf.io/cbnsi/cbeci and https://ourworldindata.org/energy/country/austria
Proof-of-Work 2/2
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14. Not energy-efficient
• Electricity consumption of Bitcoin is … high
• Sources: https://ccaf.io/cbnsi/cbeci and https://ourworldindata.org/energy/country/austria
Proof-of-Work 2/2
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95.5

15. Not energy-efficient
• Electricity consumption of Bitcoin is … high
• Sources: https://ccaf.io/cbnsi/cbeci and https://ourworldindata.org/energy/country/austria
Proof-of-Work 2/2
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95.5
99.0
66.9

16. Not energy-efficient
• Electricity consumption of Bitcoin is … high
• Sources: https://ccaf.io/cbnsi/cbeci and https://ourworldindata.org/energy/country/austria
How about emissions?
• Much more difficult to estimate
• Bitcoin can be mined anywhere, in particular right next to a hydro plant – and be switched on only when
the price for hydro electricity is low
• Example from 2021: “In the wet season in Sichuan and Yunnan, enormous quantities of renewable
hydro energy are wasted every year. […] these provinces are the heartlands of mining in China,
responsible for almost 10% of global Bitcoin mining in the dry season and 50% in the wet season.”
− Source: https://hbr.org/2021/05/how-much-energy-does-bitcoin-actually-consume
• How much of the energy consumed by Bitcoin is carbon neutral? Estimates quoted in the above source
range from 39% to 73%
Proof-of-Work 2/2
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17. Select the next mining node based on fractional control of the native digital currency
• Aligns the incentive of digital currency holders with the good operation
• Does not necessarily select the next miner based on largest stakeholding
• More cost-efficient, shorter latency
Delegated Proof-of-Stake
• Accounts delegate their stake to other accounts rather than participating in
transaction validation
Ethereum:
• Go-live of PoS in Sep. 2022
• Estimated reduction of energy by about 99.98%
• Source of figure: https://ethereum.org/en/energy-consumption/
Proof-of-Stake (PoS) Since Sep. 2022:
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18. Select the next mining node based on fractional control of the native digital currency
• Aligns the incentive of digital currency holders with the good operation
• Does not necessarily select the next miner based on largest stakeholding
• More cost-efficient, shorter latency
Delegated Proof-of-Stake
• Accounts delegate their stake to other accounts rather than participating in
transaction validation
Ethereum:
• Go-live of PoS in Sep. 2022
• Estimated reduction of energy by about 99.98%
• Source of figure: https://ethereum.org/en/energy-consumption/
Proof-of-Stake (PoS) Since Sep. 2022:
18

19. Some blockchain use cases related to sustainability
• Notarization / certification of properties, e.g., organic foodstuff,
use of renewable energy, etc.
• Caveat: most of these use cases create transparency, allow auditability, etc, but
data could be forged from the beginning, and fraud could often only be
detected with audits → trusted auditor required
• “Programmable money” allows attaching policies / rules to money on how it can
be spent [Weber & Staples, 2022]
• Could be used to limit organic supermarket to only buy certified organic food,
renewable energy, etc.
• Caveats: relies on certification as per above; the money
might be perceived as less attractive (1 € ≠ 1 prog.€);
high effort to implement
Sustainability beyond operational energy consumption
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Created
with
DALL-E-2

20. Challenges:
• High energy consumption in PoW blockchains (e.g., Bitcoin).
• Environmental concerns due to non-renewable energy sources.
Sustainable Innovations:
• Transition to energy-efficient mechanisms: PoS, DPoS, PoA.
• Ethereum 2.0's move from PoW to PoS.
Blockchain's Sustainable Applications:
• Supply Chain: Ensure product origin and ethical sourcing.
• Energy: Decentralized energy grids and peer-to-peer trading.
• Carbon Credits: Facilitate carbon credit verification and trading.
• Circular Economy: Track product lifecycles for effective recycling.
Considerations:
• Emphasis on sustainable energy sources.
• Accurate data input for transparent tracking.
Summary: Blockchain and Sustainability
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…by ChatGPT

21. Blockchain Technology:
a Sustainable Concept for the Future?
“Die Blockchain-Technologie: Ein nachhaltiges Konzept für die Zukunft?“
Kryptorechtstag, October 2023
Prof. Dr. Ingo Weber
ingo.weber@tum.de
http://imweber.de/
Full professor at TUM and
Director IT infrastructure & digital transformation
at Fraunhofer