DeFi Workshop Andrea Paulillo

so hi everybody and thanks for being here and uh it's a pleasure to be speaking at this uh conference um my name is Andrea poo I am the co-founder and partner of a small consultancy company here in Naples I'm originally from Naples I'm home and I am an assistant professor in chemical engineering at UCL University College London in the United Kingdom um and the title of this my talk is complementary forces the interplay between sustainability left cycle assessment and blockchain the first two all right I went very much forward all right so before starting a little bit about me and a little bit about the loop and then I'll tell you what the structure of my talk is so I am a chemical engineer I study in Naples I'm originally from Naples I study here at University of Naples I did my PhD in chemical engineering at UCL I stayed there I became did a postdoc and then I became a professor and I also hold the prestigious research Fellowship from the UK Ro Academy of engineering um and I specialize in sustainability assessment and life cycle assessment that's my specialization on what I do research and consultancy on I have written a number of research papers I hold research grants and and I do consultancy for a number of industrial uh Partners now an important disclaimer here as you can see from my um uh career curriculum I am no expert in blockchain I know what blockchain is but I'm not an expert I believe you are much more than me I an expert in sustainability and life cycle assessment what I will talk about is how these Concepts and tools could be implemented with blockchain and what are the advantages and disadvantages challenges and potential benefits um now a little bit about uh eloop if it works okay so elop is as I said a small consultancy company found in 2018 headquartered in Naples we also have another um uh we also have a small office in London UK which is where I live and it was founded by a number of people who had the aspiration to contributing to the ecological transition by trying to reduce environmental impacts of products companies and in general human activities so we do a number of things but essentially we do sustainability assessment of products or Technologies for example which there is a lot of demand especially in northern Europe but in Italy the demand is growing we do similar circula assessment we support companies in communicating their Environmental or social performance and in general in reducting uh uh the so-called non Financial reports which are more and more widely uh uh used in in Europe now so what this talk will be about it will be structured in three parts the first is all about setting the stage so I will Define what sustainability is and what life cycle assessment is and then I will talk about the connections the potential connection between sustainability and life cycle assessment and the blockchain looking at how life cycle assessment can enhance the environmental sustainability of blockchain and vice versa how blockchain can improve the implementation of LCA right so I you have any all right so I want to do something but I don't have my laptop uh link there so I want to start by asking you what sustainability mean to you and this is an exercise I typically do with students uh um in my lecture and the reason being that most people don't know what suab is or how it is uh framed in the uh uh typically in the research field it is typically widely uh uh um misunderstood right so we won't be doing this exercise don't do it simply because I don't have my laptop so I can't check the results it would have been great though but what I typically get from my students and the people to whom I present is that sustainability is all about the environment environmental impact uh uh circular economy uh it could be conservation ecology and this kind of stuff that's these are the typical questions I get and I believe this would have been the the answers I would have uh gotten from uh you however the concept of sustainability is much wider um the most widely accepted Definition of sustainability was um developed in 1987 in the so-called our common future is a report reducted by the world commission environment and development so they Define sustainability as the ability of humanity to ensure that it meets the needs of the present without limiting future generations to do the same right it's a very vague and wide concept there are two things which are important one is the concept of needs and they clearly say the needs of the poorest to which overriding priority should be given and secondly is the concept of limitations limitations on of our technology on the ability of the environment to meet our needs essentially we cannot meet our needs by what is provided by the environment now another important uh think that this uh definition captures is that uh and which became evident in those years is that uh uh economic growth is typically accompanied by environmental degradation environmental impacts however we do need this economic growth for example to alleviate poverty right so there is a clear tension between these aspects and that's why sustainability is typically depicted with three overlapping circles which are coming up hopefully here there you go so that's how it is typically depicted so sustainability is what manages to balance economic considerations with environmental impacts and societal impacts and when we balance these three dimensions loes um uh uh decision spaces we get what we call sustainable Technologies decisions so sustainability is not only about environment sustainability is also about economics and also about so societal impact we typically base our decision on only on the economy the soal bottom line whereas we should move into sustain development where we balance these three aspects so that's the key about sustainability and what I wanted to introduce to start now to assess sustainability what we need to do we need to assess these three aspects so we need to assess the environmental performance of a product or a technology we need to assess its societal impact and its economics right and when we do these three things we are effectively assessing the sustainability of a technology and there are three um uh uh tools to that one is called Lyle assessment which I mentioned earlier is what I typically do in research and in consultancy which quantifies the environmental performance of a product technology there is social life cycle assessment looking at societal impact and then there is life cycle costing looking at the economic parts right okay so as you may notice all these three technologies have some in something in common which is they have the same towards a beginning life cycle right so the what underpins these Technologies is that they have a life cycle thinking perspective so they look at the entire life cycle of a technology or a product um and in fact there is a um an important initiative by the United Nations environmental program trying to make this concept much more widely used all right so that's all about sustainability now what is life cycle assessment it is a standardized widely adopted methodology I will tell you what applications it has um that enables quantifying the environmental performance of a product if you think about the carbon footprint that we all uh hear about nowadays that's an application of Lal um assessment and that's basically the structure of the framework I won't go into the details but essentially you start by defining the goal and the scope you collect the data you quantify the impact you interpret the result we'll need this framework in a second where we'll look at how blockchain can improve this methodology now um so there are four main features of LCA which are key firstly it adopts a life cycle perspective and it looks at a wide range of environmental issues so it is climate change but not only it could be resources depletion it could be toxicity it could be human environmental toxicity could be ozone depletion and so and so forth so these two things enable to identify tradeoffs amongst different options there is most of the time there is not one technology which is better than another across all environmental impacts there are always tradeoffs to be considered that's why LCA is key it is quantitative it it puts a number of environmental performance so we can tell how much one is better than the other and it is based on science so we're not making it up there is a lot of uh uh science backing backing this um tool now how how it is is it used it's only research it's used a lot and uh the time I did my PhD which was 10 years ago the uh application in uslca has increased exponentially really exponentially so it is a it is used a lot by governments for example the European commission us it a lot there is a there is a huge team doing LCA on their policy to formulate new policies how to implement the policies and how to assess whether these policies are working from an environmental perspective I've listed here a number of um uh EU directives regulation that are based on LCA the ecodesign directive uh something which is talked about a lot um recently the carbon B adjustment siba there is the circular economic action plan the farm to Fork strategy all of these require an NCA to be conducted it is used a lot by Industries for example to quantify the carbon food of their product which can be done for efficiency purposes or most importantly for marketing uh uh purposes for increasing the reputation of their brand unil a huge company at qu in the UK they have uh 50 people team doing that and then theoretically it's also used by citizens by us to support decisions so if we have two products for example say that have the same price knowing that one product has a lower environmental impacts might steer our decision towards that that product and for example I show here a number of of examples of products do doing exactly that so in the UK Ole which is oat milk it's you know it's one of the biggest alternative mil milk Brands and they report the carbon footprint there corn again they are I believe a vegan altern meat alternative they have their carbon footprint here milk in general they report the carbon footprint so there are a lot of products if you buy um a ticket for a train in Italy I believe they'll tell you what their carbon footprint is and how much lower is for example compared to an airplane um if you have ever seen this the EU EOL label which is a label um promoted developed by the European Commission on the products that are say uh top 10% products in a given category that from an environmental perspective that's again based on LCA so these labels effectively are a decision support tool right they should enable us to make more informed decisions and again these are based on LCA so just to give you an example there are so many applications of it and it's expanding and specifically for this you can understand where the um possibility of integrating blockchain are in terms of transparency for example to make sure that these are not simply green washing but we'll get there in a second now um right so as I said I will talk about I will adopt two perspectives first how LCA can improve the environmental sustainability of blockchain with a case study and the second perspective is how blockchain can improve LCA so start with the first how LCA can assess or improve the environmental sustainability blockchain I will look I will look at the case of the most famous blockchain technology simply because not because I like it a lot simply because it's the only blockchain technology that that's been um assessed by LCA in the research in the literature in general which is Bitcoin and Bitcoin mining so in this study what they did is they wanted to quantify as you know Bitcoin mining very energy intensive energy intensive means a lot of environmental impact so they want to quantify the energy consumption and the carbon footprint of global Bitcoin mining in 2018 so one of the most interesting things they did they linked the carbon footprint which is the the carbon emissions right greenhouse gas emissions to the hush right which is if I may use an improper word perhaps one computation right so they link it to the hash and then to the hash rate and uh this is interesting because there is no uh uh doing an LCA on one Bitcoin one Bitcoin mining doesn't have any sense because the ash rate determines the energy consumption and that was an interesting approach they adopted so what did they look at they looked at two things essentially a you need to do Bitcoin money you need equipment you need a computer and they looked at what computers actually use for this you need to manufacture the computer at some point after typically 5 years you need to dispose of it um and that computer will have a specific efficiency Computing efficiency so energy consumption so they looked at these three things and they also looked at the geography where is mining happening why is the geography important because the source of energy depends on where you are if I am in Iceland my energy will come from um hydroelectric and geothermal if I in India will come from cold and these two are very different terms of carbon emissions so they had to understand where Ming is happening what share of the global Ming is happening in different geographies so what they found was that um this is the carbon footprint of one Terra ases okay which amounts to 15 M of CO2 then based on these energy consumption MW hour per teres then what they did they basically linked they looked in 2018 they looked at the hash rate 2018 and by knowing the hash rate they could estimate the carbon footprint and now that varies according to the hash rate the higher the ash rate the more energy consumption the more carbon emissions um and they found that in 2018 uh Bitcoin mining had 7 17 megatons of CO2 equivalent of emissions right now is it a lot or not to give you an idea 17 megatons of CO2 equivalent is roughly the carbon emissions of a small to mediumsized European country Croatia so to some extent is a lot um but of course and again I'm no expert this is based on May I say an architecture of Bitcoin or a way of mining which is based on proof of work as I understand the the shift to proof of stake would significantly change the energy consumption and therefore the carbon footprint this has not been done in yet in the literature as far as I know at least so that's what they did and what is also interesting as I mentioned they looked at the geography geography is key right so they had to understand where mining is happening so this table show shows the the global share of mining in different regions worldwide and they found that in three it's mainly happening in China specifically in these three regions in China they have basically over a quarter of Bitcoin money 2018 and then uh in some proportion in Russia and then they also report the contribution of this region to the global carbon emissions of Mining and as you can see here in inner Mongolia China they had a 12% share of global mining but they contributed to a quarter of carbon emissions right so this is telling us that the energy source in that region pretty bad and in fact is mainly cold so all these three regions China China and Canada actually you see where the contribution to carbon foot is higher than the share it means that it has a very bad um grid Ms Right the opposite occurs from Iceland Sweden and Norway they have roughly 4% of global mining but they contribute to less or around 1% their energy source is very clean Norway is all about hydro electricity like Sweden and Iceland I mentioned geothermal and um um hydroelectricity so here it shows so this is the value they got right for one ter milligrams of CO2 equivalent they showed that if all the energy required for Bitcoin money was coming from coal we would double the um the carbon emissions if it were coming from Hydro it would be much much lower and these intermediate estimates are basically estimates found in the literature from different consultancy we may say and what first in this is the share Global Bing that they assume to happen in China which as I mentioned there a lot of coal um powering the the grid so that gives us an understanding of how actually it's the next slide um gives us an understanding of how LCA can be used to uh improve the environmental sustainability of the technology it can help us identify critical stages where the impact are coming from and now we can then improve or reduce the carbon emissions for example in this case we looked at essentially I mean I I could have guessed that but it's a lot about energy consumption so moving to countries where the majority of the energy source is from renewable would make a substantial change this can be applied to any blockchain technology as I mentioned Bitcoin the case of Bitcoin is simply because it's the most famous everybody knows it and it's the only one that actually is in the uh uh uh literature there is a lot to be done around that now let's look then how blockchain can improve LCA which is also super interesting and to do that I need to first point out what are the key challenges of LCA so in life cycle assessment we look at the entire life cycle of a product right so we need a lot of data think if I want to do the LCA of a car think how many pieces are in a car and how complex is the supply chain of that car okay so the collection of data is very complex LCA is time and resource intensive 80% of our time is on collecting the data time intensive means is also costly the accuracy of data is key if don't we don't have accurate data we won't have accurate results and there are basically issues with the the the accuracy but also the um Precision of that that data and finally transparency and credibility issues nowadays clearly uh uh every company is trying to um uh report their environmental performance they want to show they great they have very low environmental impact they will this will improve their brand reputation potential increasing sales but there is a lot of green washing clearly right so if I read a number do I believe that or not do I know how it was calculated there is a lot of green washing and I tell you I work in this industry there is a lot of it so these are key challenges in LCA so how can blockchain then improve on these uh uh challenges right so to me the most important one is about transparency and traceability right so if we can ensure that the data used for an LCA is held in a blockchain or is developed recorded distributed bya a blockchain technology we are Ure we are ensuring that it is transparent everyone can see that and it is traceable right which is really the most important uh uh element for this CL closing environmental information nowadays again because of the issue of grein washing secondly it's about of course decentralization so ensuring that that data once there cannot be manipulated so I cannot um make my carbon emissions lower by changing a few numbers here and there because as you know once since there it cannot be easily manipulated if you think about the what happens with Volkswagen emissions a few years ago where they tampered with some of their data well you can't do that once it's in the um in the blockchain it can be done at the source of course there is a lot about efficiency right if we record our data automatically potentially in real time via a blockchain technology the data collection is much easier it's all up there and it's about basically the loading and and and doing the rest of the analysis so the efficiency of collecting the data is much much improved and as I mentioned data collection is around 80% of our time 80% less time means also cheaper for companies to do that and also there is uh there is there are potential for integrating then LCA with other uh emerging Technologies I will make an example with the internet of things but also a lot about big data which is enabled uh can be enabled by um blockchain there is also a lot about artificial intelligence nowadays of course um so all these things can um improve uh the application of LCA and this slide which I mentioned earlier shows how a blockchain based LCA framework can improve the LCA in each and every step starting from the when we set the scope of our study if we have all that data up there already we can we are not limited to restricted in the number of think about a car in the number of pieces of the car that I can assess because I know I will have all the data so the data collection is easy I'm not limited in what I'm going to assess I'm also much more transparent on that side as I mentioned in collecting data so in the inventory analysis it can be done automatically it can be linked to the internet of things having data real time data again this makes stuff much more um efficient when we assess the environmental impacts if we have data that is precise ACC accurate our results would be precise and accurate which is also very good and then with the help of all that data big data that can help in the interpretation results and then covering potential issues and um hotpots now this is uh uh one uh system architecture that is proposed by a group of researchers where they showed how we can integrate LCA with blockchain and The Internet of Things using four basically levels so the infrastructure is made by Internet of Things smart sensors the stuff can for example record energy consumption in the manufacturing of a car and stuff like that and of course the storage of this data which is which can be a bottleneck then this data is then recorded in a blockchain based LCA so we will need the stuff we need are the inputs energy water and all kind of stuff we use in a products and all our emissions and the ways to we produce the blockchain based LCA would process record the data and make it available for performing lcas and these kind the applications are there are some here but essentially are are so wi it can be use for energy saving uh uh management it can be use for Waste Management product information environmental communication and so on and so forth and these the users are again what I mentioned earlier governments noos consumers and Enterprises so there is a lot of potential out there it's very the the actual applications are very limited we look we looked into literature to see is it actually done we could find only 2K studies and I'll talk about one now which is about the Dutch Dairy uh sector so basically in Netherlands in 201 15 they wanted to reduce the carbon emissions of the dairy sector by 20% clearly you understand there are a lot of farms there are over 10,000 Farms you need to collect data from all of them to ensure that you are meeting your uh uh targets and this is a challenge a lot of data to be collected so the problem was exact large scale data collection from over 20 12,000 Dairy Farmers if I had to do it manually it would take me I don't know a decade perhaps um so basically their solution was to integrate blockchain based LCA with big data uh that streamlined the data collection from all these uh uh um Farmers oh my so what they did uh basically there was actually already a system in place for recording the nutrient use fertilizer use in in these Farmers um by these Farmers they added another layer to collect additional information this was recorded via blockchain and then there was basically an a real time almost exchange between a blockchain and LCA software which would calculate data automat aut atically and this was very interesting because it automated the calculation for 12,000 uh Farmers then it fed back this data back to the farmers they could see how they were improving in real time their um their carbon emissions which would motivate them even more to achieve the uh uh the targets so clearly an interesting uh case study as I said we found only two a lot of of potential out there um right so again uh I'm not an expert in blockchain but what do I see as uh the big challenges in integrating LCA with with blockchain there are three to we to me the most important is about scalability scalability is about the amount of data you need the amount of is generated you need to store and the amount of data you need to transmit right the second you have a bottom NE clearly and for the for the first you need a lot of cloud storage for example one um figure that that's that is stuck in my mind is the amount of data that is generated by one engine of an airplane every 30 minute one engine of an airplane generates 10 terab of data for 30 minutes think about a continental flight uh uh Twitter generates 12 terabyt of data now you understand when we are linking LCA with the Internet of Things smart sensors there will be so much data storage first and all this data if we want real time connection will be to be transmitted and that's another important uh um potential bottom NE at least in my opinion there may be issues with data privacy now I know blockchain is on privacy theoretically speaking from what I understand is much safer the other ways to share the data but if you are a company most of the time you don't want to share the data at all right so if you want to enable that your data will need to be shared there and will will need to be there basically for a long time so potentially companies or people that do not understand how that works will have issues with the privacy of their data for example I work with the nuclear industry I can tell you they will never put their data in a blockchain technology because they are um but there is a lot about that and there is a lot about collaborations and ensuring that in a supply chain all the stakeholders agree to do that and they they they they upload and they collect the data in the same way only in this way we can automatize this process and then achieve that the kind of efficiency I mentioned um earlier again these are what I see as challenges no expert in blockchain would would be happy to hear your opinion on that and this is my I have no idea how I did with time but this is my final slide on my take home message take home message is sustainability and LCA and blockchain are highly complementary right so the LCA can improve the environmental system blockchain and there is there's there's been a lot of criticism for example associated with um Bitcoin mining on whether it is actually environmental sustainable blockchain as technology but most importantly blockchain can make our life easier make the process more efficient and make most importantly the data transparent and traceable this is really key in this field to avoid green washing so they are highing compl complementary and there will be integration at some point it's not a matter of if we happen it's about when will happen who will do that I'd like to do that but again I'm an expert in only one of the too and that's the end of my believe of my talk yeah thank you very much for listening and let me know if you have any [Applause] questions are there any questions so hi I'm Lorenzo do you think that this implement a will work on the ethereum blockchain or do you think we need just another blockchain because you know that blockchains are not equal so it's a very easy uh answer I don't know because I'm not an expert in this I I have no idea whether it can work um I don't know the the details technically you should tell me whether it can work or not actually I don't know but why SC for scale okay for scale with that amount of data so basically it's the data the problem yeah yeah no but that's why I say scalability for me it's again I I don't know much but I could guess um but yeah it's not a matter of whether it can be done I believe it's a matter of when it can be done when we have the you know the the infrastructure to implement this kind of uh um integration sorry if I could not answer but oh are there other questions no I I'm interested to to to understand so you you uh talk about um this this project no based on on blockchain and uh uh there are many as you you show there are many constraint no uh so what's the the reason why this should be implemented on a blockchain so I mean there are a lot of uh issues connected to data that's are big data we are speaking about big data so it it's very difficult to implement so why I don't know a government or a foundation should select blockchain instead of a normal technology and invest maybe something to to uh to assure traceability and consistency of data this is my right so it's a it's a very good question so um at the moment the way it works if I want to do an LCA there will be some database providers I will go into the literature on Google I will look for research articles gray literature I will look for the data and I will put my data there and I will Source the the reference that's how it works right um it's inefficient I tell you because I do that it's inefficient it takes a lot of time most importantly companies nowadays take one company Google if you go on Google Google will tell you that they are carbon neutral since 2017 I don't believe them one bit that's the main problem is the trans Arcy of this information because at the moment they can tell you whatever and they do not have to show anything for it if we can Implement that that information will be a transparent to everybody and second traceable you know exactly what data they used so they can't lie so we are solving the most important issue there the the final part of my answer is that you talked about government so this stuff is not implemented by government it is used by them right so government the European commission and I collaborate with them they will do what I do right they will go in the literature and look for the data right they will not Implement a database themselves right so if we can ensure that every single industry does that or the big ones once the European commission want to quantify the carbon emissions of something they will have a system there which they can trust they can look at the data they look they know it's immutable it cannot be change or manipulated and they can use that immediately them researchers citizens so that's the main thing for me the main thing is traceability and transparency ensuring they're not lying because nowadays most of the stuff we see I don't believe it and the second part is efficiency as I mention does that answer your question to some extent it okay are there other questions that means it's all clear