Can Crypto and Blockchain Tech Go Green?

The effects of climate change—record temperature increases, droughts, rising sea levels, the extinction of species, and elevated health risks—are getting harder to ignore. However, our actions now can define how we can develop a sustainable and eco-friendly environment for the next generation.  

Scientists have been raising the issue of how modern industry is causing environmental damage. But now, there are new concerns that Blockchain technology is making things much more difficult for those who monitor the climate. Although cryptocurrency’s potential financial danger may be its most well-known drawback, it is now coming under fire for another less-than-desirable issue: its detrimental effects on the environment. In a word, that effect is that as bitcoin trading grows, so does energy consumption as a result of it.

But is that the whole story?

The Cost of Mining Coins and Tracking Transactions 

Although estimating the energy required for cryptocurrency mining is a difficult endeavor, it is widely recognized to include both the energy required to process transactions and digitally mine cryptocurrency along with the power utilized by the hardware used to support these efforts.  

According to Columbia University’s Columbia Climate School, the yearly energy consumption associated with cryptocurrencies is comparable to that of Argentina, a country with a population of 45 million. Furthermore, according to Columbia (cited by the Electric Reliability Council of Texas), U.S. bitcoin miners might push up demand by as much as six gigawatts by mid-2023, which is equivalent to the energy consumption of Houston. 

How do companies try to compensate for Carbon emissions? 

Companies want to reduce the amount of carbon in their operations and value chain; however, the majority claim that improved technologies are still needed for them to be able to do so quickly and at scale. Better data openness, knowledge of possible decarbonization levers, and the capacity to develop an extensive, trackable plan are all essential components that enable leaders to select where to start and identify the actions that will be effective. 

Businesses focus on two categories of projects: 

  • Carbon-avoidance projects – initiatives including renewable energy, fuel switching, and water management
     
  • Removal projects – projects that reduce current carbon emissions, such as those in agriculture, forestry, and waste management.
     

The fact that many businesses adopt a carbon offset strategy even though they do not directly contribute to the creation of carbon emissions is one pointless fact. They achieve ESG (Environmental, Social, and Governance) certification in this manner. This includes social criteria, which looks at how a company manages relationships with its workers, suppliers, customers, and the communities where it operates, as well as environmental criteria, which looks at how a company protects the environment, including corporate policies addressing climate change. Leadership, executive compensation, audits, internal controls, and shareholder rights are all dealt by governance.

 

Crypto going green 

Is it possible for crypto to go green? 

Investors are placing greater importance on businesses that prioritize environmental, social, and governance principles (ESG), particularly the environmental component. 

In response, both new and ongoing blockchain projects are exploring various options, such as switching to less energy-intensive validation methods or exploring mining using renewable energy sources. One of the most well-known examples of a major cryptocurrency project making the switch from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) system is Ethereum, which aims to cut its overall energy consumption by 99.95%. 

The blockchain and cryptocurrency ecosystem is working to remain sustainable – thanks to the efforts of developers and supporters. For instance, groups like the Crypto Climate Accord have created a 32-page audit document to track the environmental impact of cryptocurrencies and are working toward a goal of having all blockchains powered by renewable energy by 2025. The Bitcoin Mining Council recently published a study that claimed its users were mining with a 67 percent renewable energy mix after polling 32% of its network. 

Some more recent cryptocurrencies combine renewable energy with different validation techniques to produce a token that consumes a lot less energy than its predecessors.

Examples of Environmentally Friendly Crypto Options 

  •  Cardano is a PoS cryptocurrency created by one of Ethereum’s co-founders that is based on a peer-reviewed blockchain. Cardano utilizes orders of magnitude less energy than Bitcoin because people buy units to join the network rather than mining new currencies. Cardano can scale – thanks to this structure without drastically increasing its power usage.

     

  • Stellar is a blockchain network that uses its lumen (XLM) coin to enable international payments. Its consensus algorithm relies on a network of reliable nodes to verify transactions, making it faster than proof-of-work or even proof-of-stake. Through the Stellar network, people can exchange fiat and digital currencies and use it to send things like remittance payments across borders without having to pay exorbitant fees or wait a long time for transactions to complete.

     

  • Nano is a low-energy cryptocurrency that has existed since 2015. By adopting “blockchain lattice” technology, which creates user blockchains for everyone on the Nano network, it does not rely on mining. Open Representative Voting (ORV), in which validators are representatives elected by network participants, confirms transactions. It saves time and energy by allowing users to conduct peer-to-peer transactions on their own blockchains instead of using the main network blockchain.

     

  • Hedera Hashgraph is a cryptocurrency that uses substantially less energy than bitcoin and competes with large payment processors like Visa in terms of transactions per second. Hedera is faster than traditional cryptocurrencies like Bitcoin since transactions are handled in parallel rather than linearly – the company claims that its network can process up to 100,000 transactions per second. Hedera’s creators also use its network to develop green initiatives like their Power Transition energy tracking program.

     

  • Gridcoin utilizes the Berkeley Open Infrastructure for Network Computing to conduct a scientific study using the power of idle computers connected to its network (BOINC). Users are compensated with a proof-of-research algorithm. Since its launch in 2013, Gridcoin has supported several initiatives, among them MilkyWay@Home’s mapping of the Milky Way galaxy. 

With widespread adoption, improvements in consensus algorithms and a focus on using renewable energy sources would reduce the overall environmental cost of cryptocurrencies and blockchain networks. Legacy mining operations’ e-waste is still a problem that must be addressed; however, non-PoW cryptocurrencies might make it less necessary to construct bigger and newer mining rigs in the future which could help to lessen the waste.

All ethical businesses must integrate a carbon offset strategy into their overall business strategy as there are many actors in this ecosystem and it will take a lot of work to reduce the negative externalities, particularly carbon emissions. 

Ideas to adopt for Offset Strategies 

Companies utilizing the blockchain environment might implement the following carbon offsetting techniques: 

  1. Include eco-friendly cryptocurrency: and participate in decarbonization movements and agreements: The environmental credentials of the business are continually being improved as concerns about the amount of energy utilized in cryptocurrency mining grow. These include increasing the use of renewable energy sources, implementing more energy-efficient processes, and offsetting carbon emissions. Several initiatives, including the Crypto Climate Accord, were motivated by the Paris Climate Agreement (CCA). CCA is a project for the global crypto community, led by the private sector to decarbonize the cryptocurrency and blockchain sector. The CCA urges all crypto communities to collaborate urgently to prevent crypto from worsening global warming and to make a net contribution to the crucial shift to a low-carbon global economy. There wouldn’t be a centralized authority mandating answers; instead, this process will be cooperative and based on shared interests and co-investment.

     

  2. Purchase carbon credits: Although some trading exchanges support offset credit purchases, most transactions take place “off-exchange,” making it challenging to determine prices. An offset credit can cost anywhere between one dollar and well over thirty-five dollars. Prices often vary only a little between offset credit labels, depending largely on the type of project. Offset credit buyers should have a fundamental understanding of how carbon offset credits are created, transferred, and used, even though they are not required to be familiar with every rule and procedure of the carbon offset program – where a buyer participates in this “lifecycle” can affect their purchasing alternatives.

     

  3. Use an API to integrate with a solution provider: Include a percentage of the contribution in each transaction is one of the most popular strategies, particularly for financial institutions. Every transaction that occurs on the platform, for instance, can be used to plant a tree. The company then connects this plantation to a verified project via which it obtains carbon credits to earn ESG designation. Several businesses have also emerged that provide software solutions that integrate into the online apps used by your financial institution. These software solution providers have solid collaborations and agreements for initiatives that decarbonize the environment on the back end.

Nielson reports that 66 percent of people worldwide believe they would be ready to pay more for goods and services if they were more sustainable, while 73 percent of Millennials agree with this statement. Web 3.0 is the foundation for future technology, and it is well known that it uses a lot of energy. However, this generation’s commitment and desire to create a sustainable and ecologically friendly environment inspires faith that sectors like blockchain will act in a far more responsible manner.

Conclusion  

Reducing net greenhouse gas emissions quickly and drastically will be necessary to keep the increase in global temperatures to 1.5 degrees Celsius. While businesses and other organizations can implement new technologies, energy sources, and operational procedures to reduce emissions to a significant extent, many will need to buy carbon credits to augment their own abatement efforts to reach net-zero emissions. Companies would find it simpler to explore reliable sources of carbon credits and execute the transactions for them if there were a strong, efficient voluntary market for carbon credits. The ability of such a market to communicate indications of consumer demand, which would in turn urge creditors to raise their supply, is equally crucial. A voluntary carbon market would also aid in the transition to a low-carbon future by encouraging more carbon offsetting.