The popularity of cryptocurrencies is growing by leaps and bounds. Despite the current bearish trend, investors not only choose to hold digital assets but also build up their portfolios. Moreover, the venture investors' activity remains high: analysts estimate the total of attracted funds in 2022 at $30 billion. Unfortunately, nothing is perfect, and the mass adoption of crypto has raised several significant concerns for the global community. Those include a negative environmental impact, namely high energy consumption and carbon footprint. This article explores how the blockchain industry can go green and create sustainable non-harmful systems.
Ecological consequences of Bitcoin mining
Currently, mining serves as a means for the blockchains that run on the Proof-of-Work algorithm to function and issue new coins. Network participants, i.e., miners, use specialized computers to perform mathematical calculations and add a new block with transaction data to the chain. In return, they receive a reward in cryptocurrency. However, the discussion of Bitcoin mining's negative impacts on the ecology has been brought up by eco-activists, crypto enthusiasts, and government officials.
Out-of-Limit Electricity Consumption
Annual Energy Consumption |
Bitcoin Mining |
Argentina |
United Arab Emirates |
Norway |
|
121.05 TWh |
121 TWh |
113.20 TWh |
122.20 TWh |
The number-one concern regarding cryptocurrency mining is its electricity consumption levels. According to Cambridge University research, Bitcoin mining requires more energy annually than Argentina or the United Arab Emirates. It takes over 2,264 kWh to power one BTC transaction, which would be enough to boil 1,500 kettles. Considering numerous cryptocurrencies require mining, the issue is indeed a pressing one.
Growing Carbon Footprint
Another problem of digital assets worth paying attention to is carbon footprint which shows the total greenhouse gases generated by a particular action. Studies have proven that excessive energy consumption from mining leads to increased carbon emissions. Let’s crack some numbers: the carbon footprint of a single ETH transaction is equivalent to 290,009 VISA transactions, while one Bitcoin transaction is equivalent to 206,423 hours of watching Youtube.
Proof-of-Stake Blockchains: Eco-Friendly Alternative for Mining
No wonder governments worldwide started imposing restrictions on mining as the crypto market grew. For instance, in January 2022, Kosovo banned the mining of digital assets to save electricity. Clearly, a solution had to be found to make the cryptocurrency market sustainable and scalable. Several attempts have been made to replace electricity with:
- solar energy
- wind farms
- excess gas
- old power plants
Nevertheless, they have not been proven successful. Only changing the operating difference of cryptocurrencies could genuinely make a difference. Such a solution was found in 2012 when the Proof-of-Stake consensus was introduced. Unlike Proof-of-Work blockchains, the PoS algorithm doesn't require computational power to add new blocks and issue coins, instead using a network of validators, both small and major, such as Everstake. As a result, it drastically reduces electricity consumption levels and carbon footprint. The numbers speak for themselves: PoS cryptocurrencies require much less energy than traditional PoW coins. For example, the Polygon blockchain consumes 152 thousand times less electricity than Bitcoin.
|
Bitcoin |
Cardano |
Polygon |
|
|
Annual Energy Consumption |
121.05 TWh |
0,006 TWh |
0.00079 TWh |
|
Consensus Algorithm |
PoW |
PoS |
PoS |
Even though the PoS blockchains do not involve mining, they still offer ways of making passive income on crypto. This process is called staking: a participant needs to hold coins in their wallet and receive annual rewards in return. Staking does not require expensive equipment or technical skills, making it suitable for both beginners and experienced investors.
Environmental Initiatives of Crypto Companies
As the ecological problems mount up, the companies become more aware of this issue. Some even go out of their way to ensure that their systems are "clean" and sustainable in the long term. The NEAR Protocol, to which Everstake acts as a staking provider, is built on a third-generation PoS algorithm that allows it to process 1,000 transactions per second. For illustrative purposes, NEAR's annual carbon footprint is 174 tons of CO2, making it 200,000 times more carbon efficient than Bitcoin. Moreover, in 2021 NEAR partnered with the South Pole, a leader in global climate solutions, to reduce the company's carbon emissions and compensate for the remaining exhaust with CO2 offsetting projects.
Another example of an eco-aware crypto project is Polygon. It has set a goal of going carbon-negative in 2022, meaning that the environmental impact of each transaction is offset. The company has already dedicated $20 million to:
- offset its carbon footprint
- invest in eco-friendly initiatives
- donate to NGOs that fight climate change
As a result, Polygon's carbon footprint in 2021 amounted to 90,645 T/CO2e, making it 120 thousand times more efficient than Microsoft.
How Crypto Can Go Green
Naturally, there are limits to what can be achieved. The majority of our day-to-day activities, such as making a cup of coffee or taking a shower, negatively impact the environment. Nevertheless, digital assets can become more efficient and sustainable. The solution lies in switching to the Proof-of-Stake consensus algorithm, as it has already proven its effectiveness. Blockchain companies, such as NEAR and Polygon, constantly work on new PoS versions to increase the transaction speed and lower the energy consumption. We urge you to be environmentally aware and support "green" and sustainable projects that take on the ecology issue with due diligence.
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