Blockchain – a distributed, decentralized system that helps verify crypto transactions and record NFT ownership – requires massive amounts of computing power and electricity. And as the NFT market and other Web3 technologies continue to evolve, the environmental impact of blockchain is growing.
The incentive to create cryptocurrency “mines” or huge server farms is great. Bitcoin, the world’s largest cryptocurrency, consumes around 150 terawatt-hours of electricity annually – an amount equal to the entirety of Argentina. Producing this amount of energy emits about 65 megatons of carbon dioxide into the atmosphere every year.
However, as society’s demand for Web3 technologies increases, the industry will need to find ways to be more sustainable so that new technologies do not slow down our efforts to combat climate change.
Let’s take a look at some of the ways blockchain, cryptocurrencies and NFTs can transition to greener technologies and more sustainable energy sources.
How to limit the effects of Blockchain technology
Here are some ways to make blockchain, cryptocurrency mining and NFT technologies cleaner and more sustainable:
Including more energy-efficient blockchain systems
Many of the most popular cryptocurrencies rely on energy-inefficient problem solving systems known as “Proof of Work”. In POW systems, miners compete with each other to see who can solve a problem the fastest in exchange for crypto rewards. Such POW systems consume large amounts of energy.
Proof of Stake systems, on the other hand, are based on market incentives, with “validators” placing a stake (deposit) in exchange for the right to add blocks to the blockchain. Removing competition from the system with Proof of Stake (POS) reportedly uses 99.9% less energy than Proof of Work and therefore reduces carbon emissions. Ethereum, the second largest blockchain, recently successfully transitioned from POW to POS.
Adoption of renewable energy sources
One clear way to make the blockchain more sustainable is by mining solar and other sources of green energy.
Genesis Mining, based in Iceland, is one of the largest miners in the world and uses 100% renewable energy and enables Bitcoin and Ethereum mining in the cloud.
As each blockchain company defines its own reward systems for miners, new blockchains can offer incentives to use green energy.
While storing renewable energy can be challenging, some nations have a clear advantage. For example, Paraguay’s energy supply is almost 100% hydroelectric. Bitcoin mined in this country will have a lower carbon footprint than countries that depend on fossil fuels.
How Blockchain can be useful in the fight against climate change
Some experts predict that blockchain could be the key to sustainability innovations that could help us fight climate change. The technology can be useful in monitoring contamination and tracking the shelf life of products.
In addition, blockchain technology can actually help accelerate the adoption of renewable energy in developing countries.
Mark Radka, head of UNEP’s Energy and Climate Division, says: “The world needs to cut emissions by almost half over the next eight years to stay on track to 1.5°C global warming while increasing access to energy, to bring hundreds of millions of people online. Blockchain technology can play a role by enabling more accurate load monitoring, generation and distribution across the network through the efficient use of data.
The blockchain, NFT and Web3 spaces will face many challenges as scientists and developers try to go green and reduce their environmental footprint. Integrating renewable energy sources and shifting to truly sustainable mining practices are just a few of the ways that the fourth industrial revolution can become more sustainable.
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