The energy consumed to produce new digital tokens via a process known as “proof of work” accounts for a large portion of crypto’s environmental effect. This necessitates a significant amount of processing power: according to some estimates, the server farms competing to produce new Bitcoins consume as much electricity yearly as a small nation like Chile.
Bitcoin mining has two purposes: it generates new coins and keeps a record of all transactions involving current digital tokens.
It takes a lot of energy to log these trades, but these energy buyers also provide something that the industry urgently needs right now: a flexible consumer prepared to purchase when supply is plentiful and shut down when it isn’t. That flexibility is extremely beneficial when it comes to stabilizing a grid that is quickly integrating inherently unstable sources of energy such as wind and solar.
Recently, the Intergovernmental Panel on Climate Change, or IPCC, a United Nations had this to say :
“The energy requirements of cryptocurrencies is also a growing concern, although considerable uncertainty exists surrounding the energy use of their underlying blockchain infrastructure……..While it is clear that the energy requirements of global Bitcoin mining have grown significantly since 2017, recent literature indicates a wide range of estimates for 2020 (47 TWh to 125 TWh) due to data gaps and differences in modelling approaches.”
Questions raised on carbon emissions are legit and understandable since a sustainable environment is in everyone’s benefit, for us as species and for the survival of our planet. But the challenges turn into criticism at one point and we seem to lose focus of the matter and start blaming the entire industry like its tar (a residue of tobacco consumption) for the planet..
Carbon emissions are a challenge but that doesn’t take away the fact that the industry is looking at the solutions and it’s time we took it with all seriousness that blockchain is now playing a critical role in the world economy and it would be unfair to negate the entire industry.
Carbon emissions are not proportional to energy use. While calculating the amount of energy utilized by the bitcoin network is very simple, calculating its carbon footprint is significantly more difficult.
An accurate estimate of bitcoin’s carbon footprint would need precise knowledge about the energy mix used to generate power for every bitcoin mining operation. One unit of hydropower, for example, has a lower environmental effect than the same quantity of coal-fired electricity.
In the past, the first electricity plant in the U.S., Pearl Street Station, was a DC power plant located in Manhattan. Westinghouse created a competing AC power model that would later become the most prevalent type of electricity production for years to come. Through this technique, centralized power plants transmit high voltage electricity via a power grid to the substations and disperse it to residential and corporate clients.
Power stations using coal, natural gas, hydro, or nuclear are expensive and require a top-to-bottom structure. This model has operated satisfactorily for more than a century.
With the transition to alternative fuel sources, we have a new challenge ahead. These could be in the form of renewable energy like wind or solar generators or alternative fuel sources like battery storage and hydrogen.
Bitcoin emissions — overhyped or myth
One of the most environmentally conscious assets is Bitcoin, where the carbon footprint is less than 2% and shrinking every year. A clear comparison between other pollutants and bitcoin emissions can be seen in this graph (source: bitcoin magazine).
Many initiatives have already been taken and heavy investments have been poured to focus more on renewable energy sources.
One of the very important quotes on the energy consumption debate came from Lancium CEO Michael McNamara after raising $150 million to build bitcoin mines across Texas that will run on renewable energy. He said, ``I think the fact that it’s all energy companies investing suggests that we have a shared vision of the role bitcoin mining should play in the grid.”
The company is launching 2,000 megawatts of capacity across multiple sites and he is not alone in taking innovative route for a sustainable output.
Proof of work v/s Proof of stake :
Proof of work is an early system that exists with Bitcoin but has subsequently been adopted by the vast majority of blockchains, including the original Ethereum.
Crypto miners compete to solve complex puzzles in a proof of work system. Those quicker to the answer than others gets to verify the block of transactions and in return get rewarded in crypto.
Proof of work is the tried and tested method and as cryptocurrency increases in popularity, more individuals are encouraged to mine it, resulting in a stronger and more secure system.
The increased financial gains through mining has resulted in a significant growth in the size of mining. As a result, energy usage is fast growing. According to the Bitcoin/Ethereum Energy Consumption Index, which examines the environmental effect of a blockchain transaction, Bitcoin has the most energy-intensive mining process.
In comparison, blockchains will include a system of validators that stake their own crypto to validate transactions, update the blockchain, and get a reward for either making changes or double-checking others’ modifications.
This method has shown to be far less consumptive and wasteful. Proof of stake is much more scalable to high numbers of transactions without slowing the network or consuming extra energy.
Solana coin is a prime eco-friendly example. Since Solana is a decentralized Proof-of-Stake cryptocurrency, it doesn’t depend on energy to validate transactions.
Instead of energy-intensive mining that harms the environment, the proof-of-stake model keeps the Solana network secure and environmentally efficient at the same time.
Even with the current low energy consumption by the Solana network, the Solana Foundation is still working to make this network more carbon neutral.
Solana coin is an excellent example of an eco-friendly coin. Solana does not require energy to validate transactions because it is a decentralised Proof-of-Stake cryptocurrency.
Instead of energy-intensive mining that hurts the environment, the proof-of-stake methodology renders the Solana network ecologically friendly.
Despite the Solana network’s present low energy use, the company is further trying to make it even more carbon neutral.
Investments for Renewable Energy Sources
Opponents of Bitcoin energy sure may have a point, but the research carried out by ARK Invest and Square suggests that the opportunity to incentivize more renewable energy could mitigate the energy disadvantages.
Ripple, a leading blockchain and cryptocurrency provider, made a strategic investment in solar energy. They invested $44 million into one of Nelnet’s solar funds. Ripple is the majority investor and plans to increase its renewable energy production in support of the transition to cleaner and more stable energy sources.
Other major investments are also coming up to stabilize the energy concern of Bitcoin. Many other projects are running globally, few of them are worth discussing in order to throw light on how innovators are working day and night to address the concern.
A decentralized energy market, designed for high-frequency helps drive the transition
Rotterdam, the largest port in the world, studies power consumption for an AI-based trading platform. Blocklab.nl partnered with S&P Global Commodity Insights to work on a solar power microgrid that provides clean energy from rooftops within the port complex.
The success of this pilot project has developed an interest in imitating it in different locations. For example, driving down costs by 11%, producing returns up 14%, and reducing CO2 emissions by using high-frequency trading and blockchain accounting. According to an S&P Global Commodity Insights analysis released on October 5, 2021, the widespread use of these metrics will dramatically change how commodities are traded worldwide.
Powerledger is a company that is working on storing and buying renewable energy for cheaper costs. It provides a solution for taking advantage of microgrids and maximizing renewable generation without grid instability.
One project, the Sun Exchange, has a sustainable micro-leasing marketplace in South Africa where individuals and corporations finance microgrid development using tokens. Instead of going down the route of borrowing conventional capital, projects can use tokens to finance their projects with no wait time.
An app called MyCarbon allows individuals to track and trade their carbon emission data as a voluntary effort to help the environment. The app only launched in November 2019, but it already has over 500,000 active users on the platform. They’ve traded over 100,000 tons of carbon credit through the app.
In order to trade renewable energy, it is necessary to use Renewable Energy Certificates (REC). These can track the production, trading, distribution, and consumption of renewable energy. Because RECs are so vital to the operation of a market for renewable energy, they are regulated in some developed countries. In developing countries, which often leave it up to voluntary REC trades, these certificates have issues with transparency and fraud.
Swiss-based Energy Web Foundation is developing software tools for the renewable energy sector. The tools are designed specifically for the energy sector and will be open source and fully customizable, allowing for efficient and simple sourcing of renewable energies in line with existing standards and regulations.
MERELEC is developing a pilot platform to assess blockchain-based carbon credit trading. The project started in 2019 and was not without challenges present. The process of data acquisition has been difficult due to the diversity of devices. This is detrimental because it indirectly contributes to a lack of understanding of blockchain. However, it is proposed that credit tokens are voluntary, meaning that there is little interest from consumers. However, as good projects overcome early difficulties, success will be possible.
Blockchain in environmental conservation has immense potential; its application can be used towards social economic activities, including conservation planning and efficient wildlife protection programme implementation. Contracted performance verification and efficient compensation distribution can greatly enhance the effectiveness of environmental conservation initiatives, thereby maximizing the social return on investment.
However, pollution is a concern and it will have to be tackled head on. That said, the measures which are taken aggressively in the renewable energy sector are very promising.
Blockchain is still in its early stages, but it is on its way to bringing the best. For widespread usage, computing power must be ecologically benign. Blockchain firms are aware that they cannot avoid this, and we will see more advancements in this field in the future. After all, the blockchain notion is a disruptive innovation in itself.