Crypto and blockchain have the potential to aid in the promotion of environmental sustainability. In this article, we explain how crypto and blockchain may promote environmental sustainability and encourage sustainable activities.
Cryptocurrency has gone from being a topic of little interest to being ubiquitous. Cryptocurrency mining, the means through which new coins are issued into circulation, has received more attention in the wake of the industry’s spectacular development.
Mining for cryptocurrencies and utilizing blockchain technology both have the potential to have an effect on the surrounding environment. The mining of cryptocurrencies requires a significant amount of electricity, which is one of the primary causes of concern.
In order to mine cryptocurrencies such as Bitcoin and Ethereum, one needs strong computers that can solve difficult mathematical equations. Additionally, mining demands a large amount of energy because of the nature of the process.
The energy usage of the Bitcoin network alone, according to some estimations, is similar to that of smaller countries. This energy is derived primarily from non-renewable sources such as coal and natural gas, both of which are known to contribute to the production of carbon dioxide and the progression of climate change.
Cryptocurrency and Blockchain: What are they?
Cryptocurrency
This is a digital or virtual currency that uses cryptography for security and operates independently of a central bank. Bitcoin, the first and most widely used cryptocurrency, was created in 2009. Since then, thousands of other cryptocurrencies have been created, each with its own unique features and characteristics.
Cryptocurrencies use decentralized systems, meaning they are not controlled by any government or institution. Instead, transactions are recorded and verified on a public digital ledger called a blockchain.
Blockchain
This is a digital ledger that is distributed across a network of computers. Each block on the chain contains a list of recent transactions, and once a block is added to the chain, the information it contains is considered to be unchangeable. This decentralization and immutability of the blockchain are what enable the trustless and direct transfer of digital assets without the need for intermediaries like a bank or a payment processor.
Blockchains are the underlying technology of cryptocurrency, but their use cases extend beyond digital currencies. Blockchain technology can be used for a wide range of applications, such as supply chain management, voting systems, and digital identity verification. They can be public (like Bitcoin’s blockchain) or private (like a company’s internal network), and they can be permissionless (like Bitcoin) or permission (like some enterprise-grade blockchains).
In summary, Cryptocurrency is a digital currency that uses blockchain technology for decentralization, security, and immutability of transaction records. While Blockchain is a digital ledger technology that can be used in a wide range of applications.
Crypto, Blockchain, and the Environment
Certain cryptocurrencies have extremely high energy consumption, need specialized equipment, and produce a significant amount of waste. In this sense, some are not environmentally friendly; however, it is essential to keep in mind the environmental costs associated with the collection of natural resources as well as the expenditure of energy and electricity in order to create and maintain fiat currency and our current banking system.
Concerns over environmental changes brought on by the release of greenhouse gases into the atmosphere have elevated the topic of climate change to prominence over the years. The topic has been discussed all the way into the cryptocurrency world, with some people even considering using blockchain technology as a means to cut down on greenhouse gas emissions.
Proof-of-work (PoW) cryptocurrencies like Bitcoin and Ethereum have been under fire for their purportedly high energy consumption while mining. To understand the rationale for this inspection, we must first learn how much power is required to mine PoW cryptocurrencies.
It is not possible to precisely quantify the amount of energy required to mine Bitcoin and other Proof-of-Work cryptocurrencies. In its place, it is possible to estimate it by monitoring the hash rate of the network and the energy consumption of mining rigs comprised of high-priced graphics cards.
The mining difficulty grew as the network matured, necessitating more processing power from nodes in order to mine a new block of Bitcoin. This is what causes PoW networks like Bitcoin and Ethereum to consume so much power.
It’s possible that there isn’t a unified opinion on how bitcoin mining on PoW networks affects the environment. There is still a push toward making use of blockchain technology to reduce energy use and help the planet.
It’s no surprise then that Bitcoin mining’s use of green energy has increased significantly this year. Removing carbon dioxide and other greenhouse gasses from the air is another application of blockchain technology. Carbon credits and blockchain technology are being used in some places to try to better the environment.
Potential of Crypto and Blockchain for Environmental Sustainability
Crypto and Blockchain over the years have proven useful and have influenced various spheres of human life and the environment won’t be an exception. Here are some of the potentials and ways blockchain and crypto can ensure environmental sustainability;
- Carbon offsetting
- Eco-friendly digital currencies
- Waste management
- Green finance
- Electric vehicles
Carbon offsetting
Using blockchain technology, we can record carbon offset transactions in a transparent, decentralized ledger, which can then be used to keep track of carbon credits and reduce emissions.
In addition to providing an immutable record of carbon offset transactions, this can also help to assure the integrity and correctness of carbon offset data.
Tokens based on the blockchain could be used to represent carbon credits as a means to this end. Carbon offset credits can be tracked and traded thanks to the tokens’ availability on a blockchain network for purchase and sale.
As an added bonus, Smart contracts can be utilized to streamline and reduce the cost of trading carbon offset credits with one another. Carbon offsetting restrictions, such as restricting the use of offset credits to finance only officially sanctioned projects, can be enforced with the help of smart contracts.
Using blockchain technology, businesses, governments, and people may offset their carbon footprints in a trustworthy and verifiable manner, with the confidence that the carbon credits they are purchasing are genuine and will be used for actual emission reduction programs.
Eco-friendly digital currencies
By employing consensus methods that are more energy-efficient than conventional proof-of-work (PoW) techniques, cryptography and blockchain technology can deliver environmentally friendly digital currency.
The proof-of-space-time (PoST) algorithm is an example of this type of protocol since it relies on the capacity of a hard disk to secure a network rather than on computational power. The PoST method utilized by the Chia Network is more eco-friendly than Bitcoin’s proof-of-work mechanism.
Instead of using miners to solve complicated mathematical problems in order to validate transactions, the proof-of-stake (PoS) method selects validators based on the number of coins they own and are prepared to “stake” as collateral. As a result, the network requires less processing power to function optimally, saving energy.
Waste management
Tokens based on blockchain technology might be used to stand in for real-world waste products like plastic or electronic debris. Waste products may be tracked and traded thanks to these tokens, which can be purchased and sold on a blockchain-based network.
Automatic waste management is possible with the help of smart contracts, which can be used to do things like release money when a shipment of trash has been processed and recycled. This can aid in ensuring that garbage is being discarded in a timely and effective manner.
Another use for blockchain technology is the development of a decentralized and transparent system for monitoring the disposal and recycling of garbage. This can verify that trash is being disposed of in an eco-friendly manner and lessen the likelihood of fraud or mismanagement.
Green finance
When applied to green finance, crypto and blockchain can facilitate environmentally responsible investing and financing in novel and effective ways.
Tokens based on blockchain technology can be used to represent shares in renewable energy projects like solar and wind farms. In order to trade and invest in green energy projects, these tokens can be bought and sold on a blockchain network.
Automating the delivery of funds upon a green energy project’s completion and electricity generation is just one example of how smart contracts may be used to streamline the finance and investment process, this can streamline the procedure of investing in environmentally friendly initiatives and make it more accessible to individuals and businesses.
Crowdfunding green projects via blockchain-based platforms is another option, as it enables individuals to pool their resources to support environmentally conscious endeavors. To put it another way, this might be a method for individual investors to get in on green finance and aid in the cause of sustainable growth.
Electric Vehicles
When it comes to building environmentally sustainable electric vehicles (EVs), crypto and blockchain can be helpful since they introduce novel approaches to managing and financing the charging and sharing of EVs, both of which are essential to reducing their environmental impact.
Tokens based on the Ethereum blockchain might be used to track the use and cost of charging stations for electric vehicles. Purchasing and selling these tokens on a blockchain-based exchange facilitates monitoring and trading in EV charging services.
The charging and payment for electric vehicles (EVs) can be automated with the help of smart contracts, which can do things like release payment for charging after an EV is fully charged. This has the potential to simplify and speed up the EV charging and driving procedure.
Another option is for EV owners to develop P2P car-sharing networks using blockchain-based platforms so that their vehicles can be used by others when they are not in use.
This has the potential to increase the number of EVs in use, lower the cost of EV ownership and operation, and lessen the demand for new vehicle manufacturing.
Final Thought
Crypto and blockchain may help promote environmental sustainability, but they are not a panacea. It can encourage sustainable activities but not guarantee environmental sustainability.
Blockchain technology provides transparency and traceability, which can help enforce environmental legislation and sustainable practices.
It can track and verify carbon offset credits and sustainably sourced products. Crypto and blockchain can help encourage sustainable practices by trading and investing in renewable energy projects.
However, blockchain and crypto technologies’ environmental impact, such as mining energy use, should be considered. Eco-friendly digital currency and consensus algorithms reduce technology’s environmental impact.
