Bitcoin (BTC) is often used to criticize all blockchain-based projects. This is understandable as Bitcoin was the first project to use a blockchain, arguably the best known and largest cryptocurrency by market capitalization.
In the first half of this article, I’ll be using Bitcoin as a proxy for all blockchain-based projects, as most people associate blockchain with Bitcoin. Anything that can be said environmentally positive about Bitcoin is doubly true for the vast majority of newer blockchain-based projects, as Bitcoin uses the oldest version of blockchain technology.
Blockchain energy consumption
Bitcoin was attacked because of the high energy consumption. Headlines indicating that Bitcoin’s electricity consumption comparable to the total consumption of a country is a popular review. Comparisons are useful, but they can create a framing effect that is misleading. For example, the statistics cited most frequently in these attention-grabbing headlines come from the Cambridge Center for Alternative Finance (CCAF). Same organization too Points found that the power losses in transmission and distribution in the United States could power the entire Bitcoin network 2.2 times. Always-on electrical devices in America consume 12.1x more energy than the Bitcoin network.
So the Bitcoin network uses as much electricity as a small country or far less than a sliver of the American energy budget. Is that much? It depends how you look at it.
Related: Is Bitcoin a waste of energy? Pros and cons of Bitcoin mining
Another criticism that is often made is that Bitcoin’s electricity consumption is growing so fast that Bitcoin emissions alone could fuel global warming above 2 ° C, or consume all energy in the world by 2020. The latter did not happen. Why? First, like most network-based technologies, Bitcoin follows an acceptance curve defined by the theory of diffusion of innovations – an “S-curve”.
The explosive, exponential growth in the first half of the curve slows down significantly in the second half. Second, large and predictable improvements in computer efficiency will continue to lower computers’ energy costs even as Bitcoin’s growth slows. Third, such predictions do not take into account Bitcoin’s evolving energy mix.
Blockchain energy mix
Almost all of the energy used by blockchain projects comes from electricity used by computers that secure the network. Bitcoin calls these “miners”, but newer blockchain projects can use much more efficient “validators”. Electricity is generated from many different sources such as coal, natural gas, and renewables such as solar and hydropower. These sources can cause very different CO2 emissions, which largely determine their environmental impact. The two most prominent estimates of Bitcoin’s energy from renewable energies range from 39% report 74% there report. Each of these estimates are “cleaner” than the American energy mix, the is only 12% from renewable energies.
There is evidence that the public scrutiny Bitcoin has been subjected to has most likely ensured that only energy from renewable sources increase in the future.
Blockchain is worth it
Bitcoin’s energy consumption and composition are not perfect, nor are they as terrible as is often reported. What is often lost in talking about Bitcoin’s energy consumption is whether Bitcoin’s energy consumption is worth it. Many industries use energy or generate huge amounts of waste, but most people consider the environmental cost to be worthwhile. The agribusiness needs massive fossil fuel spending, not to mention the fertilizer and powering of field devices to produce harmful drainage. However, despite the negative environmental impact, we recognize the overwhelming importance of growing food. Instead of abandoning agriculture, we strive to improve the environment in agriculture.
Related: Green Bitcoin: The Impact And Importance Of Energy Use For PoW
Whether it will be possible for the 1.7 billion non-banks to win financial inclusion or offer As an alternative to predatory international remittance services, it seems clear to me that Bitcoin is worth the energy it consumes. It is even clearer that enterprise blockchain is an unrestricted public good.
Newer, alternative blockchain technology Used at least 99.95% less energy than older ones. Enterprise blockchain can use even less energy as it can be tailored to specific use cases. Aside from using significantly less energy, enterprise blockchain helps organizations achieve sustainability goals.
Blockchain as an important driver for renewable energies
Sun and wind are now cheaper than fossil fuels like coal and natural gas. Today, sun and wind are comparable to geothermal and hydropower. Despite the solution to the cost problem, renewable energies have several problems that prevent mass adoption. Geothermal energy and hydropower are geographically bound. Solar, wind and, to a lesser extent, hydropower suffer from interruptions and network overloads. Intermittent means they are currently too unreliable. There is no sun at night, the wind sometimes stops and there are rainy and dry seasons. Network congestion is similar to car traffic. Renewable energies are typically built in rural areas due to geographic restrictions. Most of the energy, however, is needed in densely populated cities. Like a car in a traffic jam, the electricity arrives late at its destination.
There are solutions such as building battery storage systems and increasing the transmission capacity, but these are expensive infrastructure projects. This is where Bitcoin and blockchain in general can help. Unlike Bitcoin, miners and other blockchain projects can be built anywhere. They are profitable businesses and can essentially subsidize the construction of renewable infrastructure by always using excess energy produced.
Related: No, Musk, don’t blame Bitcoin for dirty energy – the problem lies deeper
Another promising energy technology that works well for blockchain is Person-to-person electricity trading (P2P). These energy-sharing systems offer electricity providers and consumers the opportunity to trade energy without the need for existing third-party intermediaries and at the same time to increase the share of renewable energies. Similar to renewable infrastructures, blockchain-based projects will provide incentives for the development of P2P energy networks.
Blockchain enables material procurement and origin
Consumer demand for ethically sound products is growing steadily. Companies have to prove that their product has been manufactured in an environmentally friendly, health-friendly and ethical manner. Consumers who were wary of greenwashing had to trust to information from companies. Blockchain-based projects are already changing this dynamic.
Everledger has developed tools to educate consumers and businesses more about the origin of a particular item. By combining blockchain, AI and IoT, Everledger digitally streamlines compliance processes and enables companies to prove the true origin of their products.
Transparency and traceability will be critical to building consumer confidence in the food supply chains. Supermarket giant Carrefour and the world’s largest brewery AB InBev have partnered with blockchain developer SettleMint to provide a digital traceability solution that uses dynamic QR codes that are attached to a product during the packaging process.
Green finance
Green finance is the use of credit to support sustainable businesses and to fund their projects and investments. Closing the $ 2.5 trillion annual SDG funding gap will be critical estimated to get bigger. A good example of green finance is the UK green bond market. It was $ 269.5 billion in the UK, according to the Climate Bonds Initiative issued in 2020.
Unfortunately, GBs are not without problems, such as confirming that sustainability metrics are authentic or that funds have been used to support sustainability. Blockchain can immutably store this data so that projects can be verified to meet sustainability requirements. Blockchain can also help in other ways, such as B. by tokenization.
Related: How will blockchain technology help fight climate change? Experts answer
Oi Yee Choo, Chief Commercial Officer at iSTOX, a Singapore-based digital stock exchange, said In this interview: “Even in markets where the demand for green bonds is high because investors are motivated by ESG considerations, tokenization helps investors to diversify their portfolio through smaller subscription sizes across different bonds.”
The blockchain industry is far from ideal when it comes to environmental sustainability. However, if it stays on its current course, the blockchain industry will be not only a role model, but also a trailblazer for environmental sustainability.
The views, thoughts, and opinions expressed herein are solely those of the author and do not necessarily reflect the views and opinions of Cointelegraph.
Matthew Van Niekerk is co-founder and CEO of SettleMint – a low-code platform for the development of enterprise blockchains – and Databroker – a decentralized marketplace for data. He holds a BA with Honors from the University of Western Ontario in Canada and an international MBA from Vlerick Business School in Belgium. Matthew has been working in fintech innovation since 2006.
