Chainlink founder and CEO Sergey Nazarov stated at Consensus 2021 on Tuesday that decentralized finance (DeFi) might be critical to mitigating climate change.
Nazarov outlined two specific scenarios in which Chainlink 2.0’s hybrid smart contract approach, in which blockchains offer security and decentralized oracle networks gather data off-chain, may be useful.
His remarks come at a time when the energy consumption of cryptocurrencies, particularly those that employ the computationally expensive mining technique pioneered by Bitcoin, has become a hotly debated topic. Recently, Michael Saylor, CEO of software business MicroStrategy, and Elon Musk, CEO of Tesla, gathered a group of North American miners to encourage energy-efficient techniques and battle the public view of cryptocurrency as a “dirty” sector.
Without referencing the escalating dispute, Nazarov stated that the openness and economics of blockchains may influence human behavior in positive ways.
“Fundamentally, blockchains are really effective at producing proof and providing incentives,” Nazarov explained.
First, he discussed how oracle networks may aid in the expansion of regenerative agriculture. This is a type of farming that leaves the land healthier as it is farmed, deepens the soil, and retains more carbon in it for a longer period of time.
Agriculture is a high-risk industry, which makes worldwide expansion of these approaches difficult. Farmers in poor countries require assistance to protect themselves against weather dangers (such as droughts and flood).
“I think what climate change will do is it will shift rain patterns and it will shift how rain patters will be utilized,” Nazarov said, which will change weather risks, with more dramatic weather events.
However, the analog world’s insurance system frequently does not reach these locations.
“This is where I think decentralized crop insurance through insuretech protocols like Arbol that use things like Chainlink and Ethereum are truly amazing,” Nazarov said.
Chainlink is making its Oracle network available to organizations that want to extend risk management beyond the traditional reach of insurance firms.
Oracle networks, according to Nazarov, can help make carbon credit systems more dependable and trustworthy.
“You’re able to prove things that are meaningful about environmental outcomes,” Nazarov said, tracking things like reforestation and carbon capture. This will make carbon taxing and credits something more reliable and trustworthy, he argued.
“I think at the end of the day, you have a truly amazing ability to make DeFi as a market function,” Nazarov said. “More importantly, it actually creates a market for various societal outcomes.”
Nazarov also discussed how the openness of DeFi may, in the long run, make centralized financial products look less enticing, reduce fraud across the global financial system, and improve the environment. All of this, he argued, is made possible by the power of fully decentralized blockchains to access data from the real world.
“The real fascinating thing for me is how people still have a question about whether things like DeFi or blockchain gaming will continue to grow,” Nazarov said.