Why Blockchain, NFTs and Web3 have a sustainability problem
Blockchain – the distributed, decentralized system that helps verify crypto transactions and record ownership of NFTs – requires an enormous amount of computing power and electricity. And as the NFT market and other Web3 technologies continue to expand, the environmental impact of blockchain has grown.
The incentive to create cryptocurrency “mines” or large server farms is high. Bitcoin, which is the world’s largest cryptocurrency, consumes an estimated 150 terawatt hours of electricity each year – an amount equivalent to the entire country of Argentina. Producing this much energy releases about 65 megatons of carbon dioxide into the atmosphere annually.
But as society’s thirst for Web3 technologies continues to grow, the industry will need to find ways to become more sustainable, so new technology doesn’t slow down our efforts to combat climate change.
Let’s look at some of the ways blockchain, cryptocurrency and NFTs can transition to greener technologies and more sustainable energy sources.
How to reduce the impact of blockchain technology
Here are some ways to make blockchain technologies, cryptocurrency mining and NFTs cleaner and more sustainable:
Embracing 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 problems the fastest in exchange for crypto rewards. POW systems like this absorb large amounts of energy.
“Proof of Stake” systems, on the other hand, rely on market incentives, and “validators” put down a stake (a deposit) in exchange for the right to add blocks to the blockchain. Removing competition from the system using Proof of Stake (POS) reportedly uses 99.9% less energy than Proof of Work, therefore reducing carbon emissions. Ethereum, the second largest blockchain, has recently transitioned from POW to a POS system.
Adoption of renewable energy sources
A clear way to make blockchain more sustainable is to mine with solar energy and other green energy sources.
Genesis Mining, which is based in Iceland, is one of the largest miners in the world, using 100% renewable energy and enabling Bitcoin and Ethereum mining in the cloud.
Because each company that uses blockchain defines its own compensation systems for miners, new blockchains can be envisioned to offer incentives to use green energy.
Although renewable energy can be difficult to store, some nations have a clear advantage. For example, Paraguay’s energy supply is based almost 100% on hydropower sources. Bitcoin mined in this country will have a lower carbon footprint than in nations that rely 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 pollution monitoring and tracking the sustainability of products.
In addition, blockchain technology can actually help accelerate the deployment of renewable energy in developing countries.
Mark Radka, Head of UNEP’s Energy and Climate Branch, says: “The world must almost halve emissions over the next eight years to stay on track for a 1.5°C world, while expanding access to energy to bringing hundreds of millions of people online. Blockchain technology can play a role by enabling more accurate load monitoring, generation and distribution in the grid through the efficient use of data.”
Greening of Blockchain
The Blockchain, NFT and Web3 spaces will face many challenges as researchers and developers try to go green and reduce environmental impact. Integrating renewable energy sources and transitioning to truly sustainable mining are just a few ways in which the Fourth Industrial Revolution can become more sustainable.
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