The fundamental technology that drives cryptocurrencies, known as blockchain, has been around for more than ten years. It was developed to address the crucial issue of confidence in online interactions. Blockchain technology enables autonomous, tamper-proof validation, authentication, and recording of transactions. However, blockchain is currently experiencing a fresh problem that is unrelated to adoption or scalability. It’s about environmental sustainability.
Blockchain’s impact on the environment
An agreement mechanism known as “proof-of-work” underpins blockchain technology. (PoW). The first server to answer the issue successfully gets to add the subsequent batch of transactions to the blockchain in the procedure known as proof-of-work (PoW). This procedure has a significant energy usage footprint because it needs a great deal of computational capacity. According to a new study by the Cambridge Center for Alternative Finance, the Bitcoin network alone uses as much energy as Argentina as a whole. According to the study, the yearly energy consumption of the Bitcoin network is roughly 121.36 TWh, which is comparable to the energy consumption of small nations like Malaysia or Sweden.
According to the study, the carbon footprint of the Bitcoin network is also estimated to be around 59.53 Mt CO2 annually, which is comparable to the nation of Denmark or Belarus’ yearly carbon emissions. Blockchain has environmental costs outside of just Bitcoin. The ecosystem is also significantly impacted by other coins like Ethereum, Litecoin, and Bitcoin Cash that employ the PoW consensus method. The projected total yearly energy use of these cryptocurrencies is 93.15 TWh, which is comparable to the annual energy use of modestly sized nations like Chile or Austria.
The impact on climate change
Carbon pollution and energy use are only two aspects of blockchain’s environmental effect. Climate change’s effects are another important factor. The buildup of greenhouse gasses in the atmosphere is the primary cause of climate change, one of the greatest problems confronting humankind today. When fossil fuels like coal, oil, and gas are burned, carbon dioxide (CO2), the primary greenhouse gas, is discharged into the atmosphere. Fossil fuel use is the main factor in the energy usage of blockchain. China, which hosts the majority of the world’s Bitcoin mining operations, provides the majority of the electricity used to run the network. In terms of CO2 emissions per unit of energy generated, coal is the harshest fossil fuel. Coal is used to fuel the blockchain, which adds to the buildup of greenhouse gasses in the sky and exacerbates the issue of climate change.
The fix: Proof-of-stake
By abandoning the PoW agreement algorithm and switching to the proof-of-stake consensus algorithm, blockchain’s environmental catastrophe can be resolved. (PoS). PoS is a consensus method that enables peers in the network to verify transactions and add blocks to the blockchain based on the amount of cryptocurrency they possess, rather than the amount of computing power they can offer. The PoS consensus algorithm uses a lot less energy than the PoW consensus algorithm. The Ethereum network uses about 6.5 TWh of electricity annually, which is less than 1% of what the Bitcoin network uses annually, according to a new report by the Ethereum Foundation. A further assessment in the study places the carbon footprint of the Ethereum network at 3.85 Mt CO2 annually, or less than 7% of that of the Bitcoin network.
Blockchain would be more environmentally friendly and viable if the PoS consensus method were to be adopted. Several coins, including Cardano, Algorand, and Polkadot, already employ the proof-of-stake (PoS) algorithm. But there are difficulties with the switch to PoS. Only a few major players would have the ability to verify transactions and add blocks to the blockchain because the PoS consensus algorithm needs a substantial quantity of cryptocurrency to engage in the network. A hybrid consensus method that mixes PoW and PoS is being adopted by several coins to solve this issue. Due to the hybrid consensus method, nodes can verify transactions and add blocks to the blockchain based on their processing capacity and coin holdings.
For Web 3DApps, which are growing in popularity and demand more processing power and energy to function, PoS and hybrid agreement methods are especially crucial. These eco-friendly agreement methods can guarantee that Web 3dApps run smoothly and effectively without endangering the environment. Furthermore, some blockchain platforms, like Ethereum, are built from the ground up to support the creation and implementation of Web 3DApps, giving developers the resources and tools they require to build inventive and resilient applications.
The function of regulations
All parties, including developers, miners, investors, and authorities, must work together to make the switch to more environmentally friendly blockchain technology. In order to encourage environmental stewardship in the blockchain business, regulators, in particular, are essential. Regulators can encourage the use of PoS or hybrid consensus algorithms through tax rebates, subsidies, or other financial benefits. Additionally, regulators have the power to place sanctions or fees on cryptocurrencies that continue to use the PoW consensus algorithm or do not lessen their carbon impact.
Regulators can also encourage environmental sustainability by encouraging responsibility and openness in the blockchain sector. Regulators can impose reporting standards that allow investors to make knowledgeable choices based on the environmental effect of their investments and mandate that cryptocurrencies reveal their energy usage and carbon pollution.
Conclusion
In conclusion, the blockchain sector is experiencing a serious crisis that necessitates quick action to address the negative economic and environmental effects of blockchain technology. We can make blockchain more environmentally friendly just by implementing sustainable design principles, switching to PoS and hybrid consensus methods, and utilizing off-chain alternatives. All stakeholders must cooperate to make sure that the advantages of blockchain are achieved without endangering the condition of our world, including developers, investors, and lawmakers.
