Blockchains can cut both ways in their impact on global warming
PremiumCryptocurrencies are power hogs but their underlying technology can aid our climate action agenda
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PremiumSearing heatwaves and wildfires across the world are bringing home the harsh impact of global warming and the Anthropocene era. However, one of the purported reasons for the warming, cryptocurrencies, have been plunging in value. The top causes of global warming are very much real-life ones and not crypto related—cement construction, deforestation, fossil fuel use, etc. However, there has been a disproportionate amount of noise on how Bitcoin and other cryptocurrencies are fuelling climate change. One key trigger was a report, Cambridge Bitcoin Electricity Consumption Index, by the Centre for Alternative Finance at the University of Cambridge. It shocked crypto fans and delighted cryptosceptics by calculating that Bitcoin mining alone used up more energy than Belgium and Finland (bit.ly/3cpu86E). According to Digiconomist, Ethereum gobbled up as much power as Switzerland. There is more: the Bitcoin network generates huge amounts of carbon dioxide, as much as Turkmenistan, and Ethereum’s CO2 emissions rival New Zealand’s. As if this was not enough, the obsolete ASIC (Application Specific Integrated Circuit) mining equipment that crypto miners use produces a colossal 36,000 tonnes of electronic waste every year.
Unfortunately, this disproportionate energy use in crypto is a feature, not a bug. The ‘proof of work’ algorithms that make crypto and blockchain what they are—decentralized, secure and open—are the ones that consume vast amounts of energy. ‘Proof of work’ is a consensus mechanism that allows miners to validate cryptocurrency transactions by deciphering increasingly complicated mathematical puzzles. Whoever solves a puzzle validates that transaction and gets the mined crypto; solving these arcane problems requires heavy computing power and therefore uses tremendous energy. The crypto industry is aware of this and has resolved to go carbon neutral by 2030. Many blockchains, like Ethereum, are moving from proof-of-work to proof-of-stake—a mechanism that uses far less energy, but compromises on some other properties of the chain. Other technologies like sharding and non-tech methods like carbon offsets are being used to create green crypto or green blockchains.
So, is there a way that blockchains can actually help alleviate global warming and climate change? It turns out that there are several. Blockchains can be effectively used to decentralize the system by creating peer-to-peer electricity sharing mechanisms for local communities. This helps reduce transmission losses and encourages an economic model to produce and consume clean power through solar, wind, biogas and other sources. An example of this is the Brooklyn Microgrid Project that uses smart contracts to trade solar electricity with neighbours over a blockchain. This kind of electricity can be tokenized, allowing an incentive mechanism to be set up for power trading and donations to poorer areas.
Tokenization can also help us reward and encourage recycling of industrial and electronic waste, as well as help incentivize regenerative agriculture. Smart contracts, a core feature of many blockchains, can be used to propel this incentive mechanism, whereby people get rewarded for using ecologically sustainable practices. The ‘track-and-trace’ or provenance property of blockchains has several use cases around climate action. It enables us to track environmental treaties so as to enforce action, decrease fraud and prevent manipulation. Blockchains can also be effectively used to track where donations are going and how they are being used by non-profit entities working in the environmental area; startups liked Bitgive and Bithope are working in this space.
The greenhouse gases spewed out by producers, as well as carbon credits and carbon tax mechanisms, can be tracked, traced and audited much more effectively using blockchains. Blockchains are being used in global supply chains to build efficiency and resilience, but they can also be used to measure and reduce the carbon footprint caused by them.
Technologies, much like their human creators, are double-edged swords; they cut both ways. Artificial Intelligence, for example, can be of benefit to humankind, but it has an undeniable dark side, with war and surveillance uses, apart from biases. Social networks are an amazing way to connect people, but are also creating havoc with our health, self-esteem and politics. Blockchains are also double-edged. Depending on how we humans use them, they can either help destroy our planet or aid us in saving it from annihilation.
Jaspreet Bindra is the founder of Tech Whisperer Ltd, a digital transformation and technology advisory practice
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