Blockchain – the distributed, decentralized system that helps verify crypto transactions and record ownership of NFTs – requires a massive amount of computing power and electricity. And as the NFT marketplace and other Web3 technologies continue to expand, the environmental impact of blockchain has been growing.
The incentive to create cryptocurrency “mines” or huge server farms, is high. Bitcoin, which is the world’s largest cryptocurrency, consumes an estimated 150 terawatt-hours of electricity every year – an amount equal to the entire country of Argentina. Producing that much energy emits approximately 65 megatons of carbon dioxide into the atmosphere on an annual basis.
But as society’s thirst for Web3 technologies continues to grow, the industry will need to find ways to be more sustainable, so new tech doesn’t slow down our efforts to combat climate change.
Let’s look at some of the ways blockchain, cryptocurrency, and NFTs might transition to greener technologies and more sustainable energy sources.
How to Curtail the Effects of Blockchain Technology
Here are some ways of making blockchain technologies, cryptocurrency mining, and NFTs cleaner and more sustainable:
Embracing more energy-efficient blockchain systems
Many of the most popular cryptocurrencies depend on energy-inefficient problem-solving systems known as “Proof of Work.” In POW systems, miners compete with one another to see who can problem-solve the fastest in exchange for crypto rewards. POW systems like this take up a large amount of energy.
“Proof of Stake” systems, on the other hand, rely on market incentives, and “validators” put down a stake (a deposit) in exchange for the right to add blocks to the blockchain. Removing competition from the system by using Proof of Stake (POS) reportedly uses 99.9% less energy than Proof of Work, and therefore decreases carbon emissions. Ethereum, the second biggest blockchain, has recently successfully transitioned from POW to a POS system.
Adoption of renewable energy sources
One clear way to make blockchain more sustainable is to mine with solar power and other green energy sources.
Genesis Mining, which is based in Iceland, is one of the largest miners in the world, and it uses 100% renewable energy and enables mining for Bitcoin and Ethereum in the cloud.
Because every company that uses blockchain defines its own miner compensation systems, new blockchains could conceivably offer incentives for using green energy.
Although renewable energy can be difficult to store, some nations have a clear advantage. For example, Paraguay’s energy supply is based almost 100% on hydroelectric sources. Bitcoin mined in this country will have a lower carbon footprint than in nations dependent on fossil fuels.
How Blockchain Might Be Useful in the Fight Against Climate Change
Some experts predict that blockchain might be the key to sustainability innovations that can help us fight climate change. The technology could be useful in pollution monitoring and tracking the sustainability of products.
Additionally, blockchain tech could actually help accelerate the deployment of renewable energy in developing countries.
Mark Radka, Chief of UNEP’s Energy and Climate Branch, says, “The world needs to almost halve emissions over the next eight years to stay on track for a 1.5°C world, while at the same time expanding access to energy to bring hundreds of millions of people onto the grid. Blockchain technology can play a part by making possible more accurate load monitoring, generation, and distribution in the grid through efficient use of data.”
The Greening of Blockchain
The blockchain, NFT, and Web3 spaces will face many challenges as researchers and developers attempt to go green and reduce their environmental impact. Integrating renewable energy sources and switching to truly sustainable mining practices are just a few ways the fourth industrial revolution can become more sustainable.