Going Green! Climate change has become central to modern activities. It is a long-term challenge of the modern era compelling organizations to realign their business models to accommodate the new way of environmental thinking.
Cryptocurrencies and other digital assets are pushing to become mainstream industries and must follow environmental and sustainability standards. Crypto mining has become a potential environmental disaster with a single BTC transaction consuming more than 2,264 kWh worth of electricity. Investors place more value on companies that emphasize environmental, social, and governance principles (ESG). Organizations have signed the Crypto Climate Accord to achieve net-zero emissions by 2030. Several factors affect the sustainability and environmental impact of a cryptocurrency and blockchain project including energy sources powering mining operations, the validation system in use, and how much physical equipment is required.
New and existing blockchain projects are exploring options such as migrating to less energy-intensive validation systems and migrating to renewable energy-based mining to address sustainability and environmental goals.
Adopting Newer Crypto Mining Models
Crypto mining refers to the process by which cryptocurrencies are accepted into circulation. It’s also how a network confirms new transactions on the distributed blockchain ledger. Sophisticated hardware is used for mining by solving complex computations. The miner earns new tokens and gets paid.
One major disadvantage of mining is the massive amount of energy that is used and the resulting carbon footprint and environmental impact. The traditional method is called “proof of work (#PoW)” in which miners compete to solve complex mathematical computations. The consensus requires huge computational power hence increased energy use and emissions.
Green crypto mining uses a new model called “proof of stake (#PoS)” and has a new set of rules used to validate crypto transactions. It has been a redefinition of how blockchain nodes agree on the accuracy of transactions. The nodes commit “stakes” of tokens in exchange for a chance to be chosen to produce the next block of transactions. Ethereum is perhaps one of the most prominent examples of a leading cryptocurrency project that is transitioning from PoW to a PoS system, intending to reduce its overall energy consumption by 99.95%. The advantage of the POS model includes a lower barrier of entry due to simple hardware requirements and energy efficiency.
Green Energy Sources
Environmental policies continue to weigh heavier on investors’ decision-making processes. Additionally, regulators are increasing their focus on crypto energy use. It has led to a major push toward the use of greener energy sources for the mining process.
There are increasing financial incentives to improve the carbon footprint of blockchain and the cryptocurrency ecosystem. Crypto miners are finding solutions by using 100% renewable energy sources or a mix that has a greater amount of renewable energy to reduce their carbon footprint.
Solar, geothermal, and wind power are excellent renewable energy sources used to power crypto mining. A few companies are planning to invest huge sums in renewable energy plants dedicated to mining albeit the risk of some cryptocurrencies not justifying the financial outlays.
Repurposed power raises heated debates on whether it qualifies as renewable energy. Companies such as Crusoe Energy and Equinor have renovated unused conventional power plants or used excess gas from drilling that would have been burned off. Critics believe that it does get rid of harmful emissions but transfers them to a different industry.
Blockchain networks present the big challenge of e-waste from legacy mining operations. The industry grapples with what to do with all the equipment, specialized or not, used for crypto mining. However, alternative validation methods reduce the demand for newer and larger mining rigs in the future reducing the amount of waste produced.
Examples of Green Cryptocurrencies
Some of the newer cryptocurrencies are mined using renewable energy and alternative validation methods to reduce carbon footprint and environmental impact.
- #Takamaka is the Blockchain for everyone. A native Blockchain PoS with two tokens, one of which is stable and guaranteed at the Swiss bank and one from Governance: $TKG. #TKG is called a Green Token, a modern system of sustaining the network, low energy consumption.
- #Cardano is a PoS cryptocurrency built on a peer-reviewed blockchain. People buy units of Cardano to become members of the network instead of mining new coins reducing energy consumption massively.
- #Stellar is an energy-efficient blockchain network associated with the cryptocurrency lumen (XLM). Stellar utilizes a consensus mechanism – a group of trusted nodes to authenticate transactions – that operates faster than proof-of-work and proof-of-stake. The network allows people to trade fiat and cryptocurrencies as well as send remittance payments without high fees and lengthy transaction times.
- #Nano is another low-energy crypto that is based on “blockchain lattice” technology that creates user blockchains for everyone on the Nano network. Nano uses Open Representative Voting (ORV) where representatives voted in by members of the network act as validators reducing energy consumption.
- #Hedera Hashgraph processes transactions in parallel instead of linearly making it comparatively faster than Bitcoin and other legacy cryptocurrencies. With the ability to process up to 100,000 transactions per second, it can rival payment processors like Visa. The Hedera network supports other sustainability projects like their Power Transition energy tracking software.
- #Gridcoin utilizes power from idle computers connected to its network for scientific research under the Berkeley Open Infrastructure for Network Computing (BOINC). It uses PoS with validators rewarded with a proof-of-research algorithm.
Blockchain is here to stay implying that ethical choices must be made to ensure a sustainable future. The next generation of blockchain-based solutions will be greener and more sustainable. It calls for creativity from developers in delivering green blockchain solutions based on new operation and business models, energy efficiency, and the use of renewable energy sources. We can already see new initiatives that are geared toward improving the industry’s environmental credentials. Achieving sustainability goals will make cryptocurrencies and blockchain projects more attractive to a wide range of users.