How to create a green blockchain
Opinions expressed by Contractor the contributors are their own.
Blockchain storage is rapidly emerging as a credible competitor to the cloud. A clear advantage offered by blockchain is that its distributed form of storage makes it a more secure form of storage compared to storing your data on the cloud.
But blockchain technology has continuously been plagued by significant energy use and a large carbon footprint. Cryptocurrency in particular has been a sore point with environmentalists. Bitcoin, for example, is known to consume more electricity in a year than entire nations. At a time when a UN agency just reported that the past eight years had been the hottest ever recorded in modern times, the future of the energy-intensive blockchain technology may become inextricably linked to its ability to offset its carbon footprint.
Related: Blockchain is everywhere: How to understand it
What is hindering the environmental, social and governance (ESG) shift in blockchain companies?
With debates raging around responsible consumption, companies, including the historically ESG-resistant FAANG, have now turned around to commit to clear targets around their ESG goals. Morgan Stanley even declared that ESG-focused metrics can dictate the next decade of investments to understand a company’s growth potential.
But while investment choices are dictated by ESG metrics, we should remember that the ethical choice may be easier for some than others. While some of the largest multinationals such as Apple and Google can afford to pivot to ESG with relative ease, the same is not necessarily true for blockchain-focused companies, including even the more prominent players.
As institutional investors come under closer scrutiny for ESG reporting than ever, they remain inconveniently out of reach for most crypto projects. This in turn affects the entire momentum of widespread mainstream blockchain adoption. Companies with tens or hundreds of servers involved in blockchain in a fragmented ecosystem just don’t have the time to commit to ESG yet.
Related: How Blockchain Can Help Tackling Climate Change
The blockchain industry needs to focus on a wider audience
With its anti-establishment flavor, Blockchain, especially cryptocurrency, has found and developed a core niche that is 94 percent GenZ and younger millennials. But for the technology to see mass adoption and investment, it needs to appeal to a much wider audience.
It is well documented that younger investors are more likely to make riskier investments – such as cryptocurrency, which is known for its volatile price swings. This type of risk does not appeal to those who want to save for housing, family or retirement; therefore, many middle-aged and older consumers have no interest.
Even many Gen Z and Millennials, the generations identified as the most climate-concerned to date, are choosing not to get involved in blockchain technology because of the toll it could take on the environment.
Such a small audience does not lend itself well to large companies or those looking to make big money from investing in the technology, leading to a standstill in the development of greener initiatives as many companies in the area may just want to stay afloat.
There is a need for blockchain technology to prove its use cases beyond cryptocurrencies. This image makeover is likely to happen over time as blockchain storage slowly gains more market traction as a more secure alternative to the cloud.
Related: Solving the #1 issue of our time: Using blockchain technology to scale climate action
A greener blockchain is possible
The blockchain industry is in a phase where it is on the edge of global adoption. It can easily add thousands of users every month. But blockchain companies need funding to secure ESG initiatives and appeal to the widest possible audience for it to go beyond a new technology and become mainstream.
Solutions for building an inclusive and sustainable future for blockchain technology are already beginning to emerge in projects such as the Green Treasury Initiative by ClimateTrade, which is increasing the number of carbon-negative blockchain use cases. Ethereum plans to replace its energy-intensive equipment, which could reduce energy consumption by 99.95 percent. But offsetting the carbon impact of blockchain networks is likely to remain an ongoing challenge for the industry in its quest for mass adoption.
Smaller blockchain companies will require sufficient funding to find relevant solutions to remain environmentally positive. If we want to benefit from blockchain without harming the environment, we need to invest in blockchain and blockchain companies so that they can have money to find these solutions. If you want to appeal to a much larger audience, focus on ESG initiatives or partner with well-established cloud companies with ESG leadership.
