As an emerging technology, blockchain has attracted the attention of a wide range of organizations, including energy corporations, startups, technology developers, financial institutions, and governments worldwide.
- Most of the power used for crypto mining originates from renewable sources.
- The existing international banking system consumes far more energy than blockchain technology.
- While there will undoubtedly be hurdles, crypto and blockchain can pave the way to an environmentally sustainable world.
The growing need for sustainable development
The modern world desperately needs answers for sustainable growth and a green economy. Indeed, environmental sustainability charts the path to long-term success and a higher level of life. A green economy may aid in environmental issues, resource use, and the well-being of those at the bottom of the economic pyramid.
The transition to a sustainable environment has far-reaching economic and societal implications. The “go green” theme has resonated worldwide with this degree of rationality. Green entrepreneurship also comes out mainly as one of the essential strategies for achieving a green economy.
As a result of the fight for environmental sustainability, an entrepreneurial mindset has emerged, founded on an inherent capacity for managing companies. The importance of entrepreneurship in generating a wealthier and more ecologically friendly society has gained acknowledgement.
The displaced debate on blockchain’s environmental impact
Technological innovations have made significant contributions to economic prosperity and human progress. Blockchain technology is one of the innovations that has a lot of potential for current and future generations. In recent times blockchain has changed how financial transactions occur.
As an emerging technology, blockchain has attracted the attention of a wide range of organizations. Industries with clear interest include energy corporations, startups, technology developers, financial institutions, and governments worldwide. People all across the globe believe that blockchain technology can significantly innovate and improve the current digital economy.
However, as cryptocurrency adoption and usage continue to rise, a heated discussion about blockchain’s carbon impact has erupted. Controversies have erupted worldwide about cryptocurrency mining and the amount of energy it requires.
However, the debate about cryptocurrency’s environmental impact ignores one crucial element. It is critical to remember that crypto is still in its infancy, akin to where the internet was in 2002. The entire space is still in its early stages, and much remains untapped.
This crypto adventure’s first ten years have far exceeded anyone’s greatest dreams. Simultaneously, it has enabled industry participants and innovators to analyze what works and does not.
The proof-of-work consensus algorithms that run the blockchain network, for example, actually need a significant amount of energy. However, these debates over crypto’s environmental effect overshadow that the entire crypto ecosystem is transitioning to a cleaner, greener, more sustainable future with much-reduced carbon emissions.
Ethereum is leading the way in blockchain sustainable solutions
The recent launch of Ethereum 2.0 marks a transition from a proof-of-work (PoW) consensus to a proof-of-stake approach (PoS). The decentralized method that runs blockchain networks is known as PoW. The technology requires massive amounts of energy to confirm transactions and issue new coins. However, PoS enables miners to generate and authenticate block transactions depending on the amount of coins they hold.
Because PoS requires substantially less hardware than PoW, the energy necessary to support safe transactions will only decrease in the future. According to projections, Ethereum 2.0’s PoS mechanism will be 99 per cent more energy-efficient than PoW versions.
The effects of PoS are already noticeable, with the Ethereum network utilizing about 100 Twh less than the Bitcoin network. In this consensus revolution, Ethereum is far from alone. The next-generation blockchains such as Cosmos Cardano, EOS, and Polkadot continue to adopt their own variants of PoS.Read: How Blockchain Technology Could Help Energy Transitions in Africa
Cryptocurrency mining and validation use renewable energy
On the allegation that cryptocurrency represents a threat to the environment, it is critical to separate the energy sources utilized by crypto miners. Research data reveals that most of the power used for crypto mining originates from renewable sources.
According to University of Cambridge research, the renewable proportion of these energy mining pools can reach up to 78 per cent. Although outliers depend on the world’s location, hydroelectric electricity, in particular, is quickly emerging as the de facto power source for crypto-mining operations.
Another point to consider is that cryptocurrency miners are increasingly consuming extra energy that otherwise ends up wasted. Crypto mining farms have absorbed excess capacity and averted the wastage of underutilized renewable energy.
Blockchain’s lesser energy consumption than traditional finance
It is also worth noting that the existing conventional banking system consumes far more energy than blockchain technology. All of the components that comprise the global banking network consume significant energy. In reality, the traditional banking industry finances some of the most ecologically destructive initiatives on the planet.
When focused on an environmentally harmful factor, it is critical to keep gold mining in mind. After all, this is an industry largely reliant on fossil fuels. Even the World Gold Council, the industry’s primary lobbying arm, has acknowledged the metal’s massive carbon footprint. The council stressed that the industry’s emissions must decline by 80 per cent over the next 30 years to fulfil the Paris Climate Agreement objectives.
Clearly, traditional banking and mining appear to contribute far more to greenhouse gas emissions than crypto. The focus should switch to making crypto and blockchain a positive, revolutionary force in the energy industry. As a result, the operational costs will reduce and open up a new window of transparency. Consequently, blockchain initiatives have already gained acceptance and application in various industries. Use cases include wholesale power distribution, P2P energy trading, electrical data management, and commodities trading.
The global supply chain, notably the energy industry, is one area ripe for change. During the shift from polluting fossil fuels to a clean, renewable future, industry participants should search for strategies to reduce and simplify the processes involved in energy extraction and transportation. Blockchain technology provides a platform that allows for real-time speed, efficiency, traceability, and transparency.
The pathway towards sustainability remains viable through blockchain
Blockchain technology offers optimism for environmental sustainability. For example, Tata Steel, a prominent Indian steel giant, collaborates with HSBC to test smart contracts on the blockchain. The method entails shipping raw materials worldwide while reducing contract settlement timeframes from weeks to days. A significant quantity of energy ends up saved in the process.
Meanwhile, the Carbon Utility Token (CUT) is an example of a rising class of green assets aimed primarily at assisting enterprises in managing their carbon permits. Each CUT token sold contributes to investments in carbon capture and offset projects, offering a meaningful step toward carbon neutrality in the crypto ecosystem.
As more businesses continue to include Bitcoin and other cryptocurrencies on their balance sheets, it’s comforting to know that CUT offers a way to offset the carbon footprint associated with each currency entirely.
While there will undoubtedly be hurdles, crypto and blockchain can pave the way to an environmentally sustainable world. The dialogue surrounding crypto and energy encourages everyone to take part in accelerating the transition to clean energy sources while providing all actors with the means to do so.