One point of continual criticism when it comes to cryptocurrency is the outrageous amounts of energy that are needed to continually process transactions. The dialogue around sustainability within blockchain started when people began to look into the energy consumption of Bitcoin, with the high figures shocking many investors.
As of May 2021, Bitcoin was using more energy than entire countries, beating out Norway, Bangladesh, Switzerland, and many more in consumption. As Bitcoin is a proof-of-work cryptocurrency, which means computers have to solve complex mathematical problems to mine the next block in the chain, lots of energy is consumed as these computers ferociously process.
Comparably, the annualized impact of Bitcoin cannot be understated, with power consumption equal to that of Thailand, a carbon footprint equal to that of the Czech Republic, and small IT waste equal to that of the Netherlands.
Even looking at single transactions, one bitcoin transaction would consume the same amount of energy as a U.S. household does in almost 72 days. That relative carbon footprint would be like watching almost 200,000 hours of Youtube, which is over 8,300 days, or almost 23 years.
With the overwhelming emissions, electrical energy consumption, and electronic waste, it’s no wonder that cryptocurrency companies are turning to ways to reduce their emissions.
How Green is BItcoin?
While Bitcoin consumes a lot of energy, one little-known fact was that in 2017, the vast majority of that energy actually came from green sources. 74% of the global energy supply that was consumed by Bitcoin came directly from green sources, with the majority being siphoned from hydropower in China.
However, a major spanner was thrown into the works in 2021, when the Chinese government banned Bitcoin mining as they saw it as too much energy consumption for the country. Since then, the industry average for green energy sources dropped to around 25%, significantly lower than the 42% from the year before. This demonstrates that Bitcoin is failing to keep up with its own sustainability.
While there doesn’t seem to be much hope for Bitcoin, this is by far from the only cryptocurrency. On the contrary, large parts of the blockchain community have taken up the green energy rally, bringing different sustainability methods to their own cryptocurrency projects.
What is the blockchain community doing about sustainability?
Responding to the alarmingly high emissions of key cryptocurrencies like Bitcoin, many different blockchain companies are turning towards sustainability as a way of reducing emissions while also appealing to the vast majority of younger investors that are looking for a sustainable option.
There are three core strategies currently being implemented by different blockchain companies in order to reduce carbon emissions:
- Promises and agreements
- Carbon offsetting
- Proof of Stake
Let’s break these down further.
The blockchain industry isn’t ignorant or obtuse to the environmental impacts that they’re causing. On the contrary, many companies acknowledge their carbon emissions and are actively working toward reducing them. Part of this movement is the Crypto Climate Accord, which is an agreement signed by over 200 cryptocurrency companies that seek to reach net-zero greenhouse gas emissions by 2040.
This agreement helps companies share tools that allow them to rapidly progress towards climate neutrality, seeking to create a low-carbon cryptocurrency industry. If principles and plans are followed, this project is set to make a major change to energy consumption within this industry and where that energy is sourced from.
Some blockchain systems, especially those that are more environmentally conscious, are actively pushing to take their level of sustainability to the next level. One P-o-S blockchain platform, Qtum, recently announced that they’re partnering with Binance Charity in efforts to plant 10,000,000 trees worldwide.
From this initiative, Qtum aims to become completely carbon-neutral, planting trees to offset their emissions each year. As they use proof of stake, this is entirely possible, with their first 100,000 trees offsetting all of their emissions since their platform launch back in 2017. This is a wonderful example of blockchain businesses using practices that are seen in other industries and replicating them to help move towards a more sustainable business model.
Proof of Stake
Part of the problem with cryptocurrencies like Bitcoin is that they require an incredible amount of energy to verify a single transaction, as they are what’s known as proof of work transactions.
However, over recent years, many crypto enthusiasts have suggested that people begin to transition to Proof of Stake cryptocurrency protocols. A P-o-S protocol can take as little as 0.01% of the energy that P-o-W takes, instantly making it a much more viable option.
Equally, as P-o-S cryptocurrencies like Solana can process more transactions per second, they are much more viable for long-term expansion, making them a popular choice for the long run.
Solana grew by 400% in only a few months back in 2021, demonstrating the rapid movement of investors to the more energy-efficient P-o-S protocols.
Although the cryptocurrency industry does indeed have a high level of carbon emission compared to other industries, the active movement to change this is already underway. Whether it be through singing and complying with energy-efficiency agreements, turning towards P-o-S cryptocurrencies, or even using carbon offsetting strategies, there is a lot to be done to combat emissions.
Considering the continual growth of the blockchain industry, the early movement toward more green energy-conscious decisions and practices is a great sign for what’s to come. With the importance of the environment on everyone’s mind, it’s comforting to see an industry so vigorously commit to changing their energy-consumption sources.