It’s time to address blockchain’s poor sustainability record as concerns grow and hearings are held in the United States about the impact of the cryptocurrency industry on the environment. In order to reduce energy consumption by 99.99 percent, blockchain transactions should be overhauled first.
Unlike traditional money, which is issued by a central bank or government agency, a cryptocurrency is not. Blockchain technology underpins cryptocurrencies like bitcoin and ether, making it possible to trade them.
Miners create new coins by solving complex mathematical puzzles in the process of mining. The mining process also verifies the authenticity of transactions on the cryptocurrency network.
A “proof of work” or “proof of stake” mechanism is used to verify crypto transactions.
Proof of work necessitates a global math competition among miners from all over the world. In return, the winner receives a predetermined amount of cryptocurrency and the ability to authenticate their transactions..
Using proof of stake, cryptocurrency owners use their staked coins to verify blockchain transactions. Bitcoin owners must put up their own currency as collateral for the chance to get their transactions approved, in other words.
This method is more secure than proof of stake, which is slower and uses more energy. Prominent blockchains like Bitcoin, which use proof-of-work to power their mining operations, consume a tremendous amount of energy. However, the use of proof of stake could significantly reduce emissions.
Even though some cryptocurrency activities are now powered by renewable energy, this energy could surely be better used elsewhere: for example, to power homes or businesses. When transactions are verified through proof of stake, which Ethereum plans to implement, the energy consumption of blockchains can be reduced to 0.01 percent of their original value.
7.46 gigawatts (GW) of electricity are required to run the Bitcoin network every year, according to estimates. As a point of reference, in 2020, a nuclear power plant of average size will generate about 1GW of electrical power per year. More than 70 days’ worth of electricity could be generated by a single bitcoin transaction.
A smoke-belching power station
Transactions involving cryptocurrencies use a significant amount of electricity. There’s an estimated 400 kilogrammes of CO2 emitted into the atmosphere when a bitcoin transaction is powered by a typical British energy mix, in which about two-thirds is derived from fossil fuel.
Interested in learning more about crypto countries?
Check out this podcast about Nigeria and El Salvador’s differing approaches to digital currency adoption. More than 70 million tonnes of CO2 are released into the atmosphere by mining Bitcoin and Ethereum. A million cars’ worth of emissions are emitted each year, so that’s a lot of pollution. In an effort to generate more power, a cryptocurrency mining company is even considering restarting two coal-fired power plants in Pennsylvania..
Futures in crypto
According to a US committee, cryptocurrencies’ value is expected to continue to rise, which means that their energy consumption and environmental impact will continue to rise as well.
Decentralized finance (DeFi) and non-fungible tokens (NFTs), both of which are built on the Ethereum blockchain, have seen significant growth in recent years.
Financial transactions can be made without the need for a third-party intermediary using DeFi, while NFTs are digital assets stored on the blockchain that can only be used for one transaction.
A wall has been decorated with two characters
Artwork depicting a Bored Ape NFT, which has become one of the most popular images available. Scott Beale/Flickr, Creative Commons BY-NC-ND 2.0
DeFi was only founded in 2017, but by November 2021 its market capitalization had already reached £85 billion. NFT sales increased from £74 million in 2020 to £29.6 billion by 2021, according to the latest figures.
It’s also a lot of work to create an NFT on the Ethereum blockchain, which uses proof of work to verify transactions. In addition, as NFTs become more prominent in the metaverse, their energy consumption will only rise.
Read on to learn how AI and blockchain can repair supply chains that have been shattered by Covid.
Adopting blockchain technology may seem counterintuitive, but in the long run, it may have a beneficial effect on the environment. As a result, companies could automate many of their complex payment systems, reducing the number of commuters and reducing transportation-related emissions.
In spite of this uncertainty, it is becoming increasingly clear that blockchain technology’s benefits will grow as it matures. To illustrate this, we’re seeing an increase in the number of people who have previously been excluded from the formal financial system participating in cryptocurrency as a result of new developments in blockchain technology.
When businesses begin to enter the metaverse, governments and regulators should work to minimise environmental impacts while not stifling innovation. It would be a good start to require blockchains to use proof of stake.