The gradual spread of cryptocurrencies and their growing popularity soon led to the exploration of all the many applications of this technology and the digital ledger that tracks its movements: the blockchain. It soon became apparent how these technologies can be a valuable medium for activism and the nonprofit world.
But how does blockchain technology work? What are its benefits? And how does it relate to activism?
How the blockchain works
One can think of the blockchain as a huge database, a digital ledger composed of numerous blocks, which stores within each block data pertaining to a single transaction.
This ledger is open source: this means that it is accessible by anyone who is part of the blockchain network. Although this may seemingly pose a danger to one’s privacy, it is actually one of the key factors in the security of the blockchain itself.
In fact, thanks to this system in which everyone has access to the entire blockchain ledger, when a transaction takes place between two users (or any other form of interaction) it must be validated by all participants in the network. Once approved, it is inscribed in a blockchain that is no longer modifiable.
The opportunities for activism
The use of a decentralized system
First of all, it is interesting to highlight how cryptocurrencies and blockchain represent an economy quite different from the capitalist economy we are used to.
In fact, one of the key features of the blockchain system is that it is decentralized: that is, it is managed directly by the various nodes in the network, that is, the users themselves. So, it avoids the intermediation of more traditional bodies such as banks.
The blockchain, therefore, cannot be controlled by any political entity or government.
Explicative in this regard is the case of Apple Daily, a Hong Kong newspaper that has, over time, expressed its pro-democracy stance. The newspaper was forced to close in June 2021, following the enactment of a new national security law in China.
This event was a severe restriction on press freedom. So, Chinese activists found a way to preserve 4,000 articles from Apple Daily forever. The articles were in fact uploaded to a decentralized file storage platform that works through blockchain, ensuring the immutability of the stored files.
This event showed the great potential of blockchain technology as a means of activism and resistance to centralized power.
An alternative currency
Cryptocurrencies represent an alternative currency that has enabled millions of people to purchase basic necessities. This has been especially the case in developing countries, which are often characterized by economic uncertainty and local currency instability.
In this context, cryptocurrencies are an excellent alternative to traditional currency mainly because they are so easy to access. For example, no bank account is required to manage cryptocurrencies: a mobile device and an Internet connection are often sufficient.
The ease of access to cryptocurrencies, both in terms of money and in terms of managing one’s wallet, opens the door to the world of cryptocurrencies even to younger activists.
Indeed, younger people, not yet enjoying economic independence, find it difficult to be able to financially support causes they believe in. Thanks to cryptocurrencies, donating to nonprofits becomes easier for everyone, Gen Z included.
Transparency and privacy
We come to the last two factors inherent in cryptocurrencies and blockchain that represent an opportunity for the world of activism: transparency and privacy.
The blockchain system represents a double guarantee for those who decide to donate to certain causes. On the one hand, it ensures transparency on the part of the organization receiving money. On the other, it preserves the privacy of the donor, who cannot be identified in any way, thanks to the private and public key system.
As explained earlier, the blockchain system allows anyone who is part of the network to view the transactions that take place. This mechanism ensures complete transparency about how organizations receiving money spend the funds they receive.
Ensuring privacy is especially important in countries where protesting for certain causes can also lead to the arrest of activists. In this context, being able to financially but anonymously support nonprofits and NGOs ensures that activism can be done in complete safety.
One example of how blockchain has helped activists is provided by Micah White, founder of the Occupy Wall Street movement, who believes that “cryptoactivism represents the future of activism.”
White has created a system, within the blockchain, that has helped Chinese activists anonymously spread messages protesting censorship in the country.
White has in fact created a smart contract (i.e., contract written on blockchain) that, when it receives a cryptocurrency called Ethereum, returns a token called “Reigning Emperor.” This phrase would be on the Chinese government’s list of censored words: just posting the phrase “reigning emperor” online could lead to Chinese citizens being arrested.
Thanks to the system created by White, activists were able to spread their message of protest securely and anonymously, as the identity of the person making the transaction cannot be traced from the blockchain ledger. Moreover, because it is inscribed on a blockchain, the phrase has become unchangeable and indelible.
Crypto and climate change: a closer look
Cryptocurrencies and blockchain technology have also become prominent in numerous debates inherent to the issue of climate change.
While the use of cryptocurrencies such as bitcoins is condemned because of the amount of energy required to produce them, the potential for their use as an alternative currency is being extolled and proposals for greener cryptocurrencies are being developed. There is also recognition of the role blockchain can play in combating climate change.
In 2021, a report by Galaxy Digital compared the energy consumed by cryptocurrencies and the traditional financial system, exhibiting data that seem to point in a positive direction for crypto. Indeed, the report would highlight how energy consumption by the crypto system is actually significantly lower than the energy consumed by traditional banking systems and gold mining.
Nevertheless, the weight of cryptocurrencies in global energy consumption is still a topic for discussion and further investigation.
That is why the U.S. Committee on Energy and Consumer Affairs recently announced a hearing on energy consumption by cryptocurrencies. Specifically, this hearing will focus on the analysis of energy consumption by blockchains that operate through the “proof of work” system. Let’s see what this is all about.
Why is the energy cost of cryptocurrencies so high?
The reason is related to the way cryptocurrencies themselves are produced.
We explained earlier that every transaction recorded in the blockchain must be validated by the network itself.
To validate a transaction, a great deal of calculation must be done to verify that all the data inherent in it is correct. This clearly requires a great deal of energy. For this, some users, called “miners,” make the computing power of their computers available to perform these operations. As a reward, they get cryptocurrencies, generated precisely from this process of computing and validating transactions.
To be validated and enrolled in the blockchain, a transaction must receive the consent of at least 50 percent + 1 of the network. In fact, the mechanism by which through these powerful calculations a transaction is validated consists of a consensus algorithm called “proof of work.”
The developers of Ethereum have proposed an alternative consensus algorithm to proof of work, called “proof of stake.” In proof of stake, to propose oneself as validators of transactions, one only needs to “block” 32 ETH (the cryptocurrency used in Ethereum), which cannot be spent in any way.
Among those who propose themselves as validators, the system selects certain nodes in the network from time to time based on the so-called “coin age,” which is how long the 32 ETHs have been deposited, and a random factor.
Compared with proof of work, proof of stake makes it so that even those with lower-powered computers can participate in the validation process and receive rewards. For this very reason, proof of stake uses less power than proof of work.