ESG Should Pay Attention to Ethereum
As the CEO of a blockchain-based investment business, dejure.io, I have spent some time thinking about the intersection of blockchain, cryptocurrencies, and ESG investing. With Ethereum’s move to a proof-of-stake protocol, a far less energy-intensive mechanism than proof-of-work for validating blockchain-based transactions, a good argument can be made that Ether is a solid ESG investment.
I will leave a deep explanation of the technology which underlies cryptocurrencies such as Ether (or “ETH” as it is often called) and Bitcoin to others — there are many great sources of information for the curious on these topics. Instead, I will keep it simple: ETH is the second-largest cryptocurrency by market capitalization and its blockchain, Ethereum, is in the process of taking a significant step forward in reducing its energy use by moving to proof-of-stake validation (although this is certainly not the only reason for the move).
But there is more to Ethereum and ETH than just a blockchain and its cryptocurrency which are moving toward better energy efficiency. The Ethereum blockchain can not only process transfers of ETH, but also run fully developed applications. Many of these applications are financial and have been referred to as “DeFi,” short for “decentralized finance.” There are lending applications, trading applications, and even applications for buying and selling digital art. Many of these applications are peer-to-peer, with no middleman — which is why they are called decentralized. They have the potential to replace segments of our existing financial system and with it plenty of computer systems, cars being driven to banks by customers and employees, and the rent-seeking fees of “old” finance.
Transactions on the Ethereum blockchain do not discriminate on the basis of race, gender, sexual orientation, or anything else — other than technical skill. Almost any application that can be imagined, can be built on Ethereum (and indeed several other blockchains — like Algorand, another proof-of-stake chain). And many DeFi applications have governance by stakeholders as a central focus.
As a result, Ethereum and other proof-of-stake blockchains can align well with ESG principles. And, by way of full disclosure, our business issues digital assets over Ethereum and we are exploring use of Algorand.
