With recent concerns over blockchain's impact on the environment, we explore the possibilities and opportunities to create more sustainable blockchain tech.
According to Digiconomist, a popular energy consumption index, the carbon footprints of Bitcoin and other digital currencies, for example, is close to that of entire countries.
The energy Bitcoin mining and other Proof of Work (PoW) blockchains consume go into facilitating the nodes on a peer-to-peer network to find consensus while updating the shared ledger—mining.
And because the energy cost determines the profitability of engaging in mining cryptocurrencies, often miners (nodes on the P2P network) look for the cheapest sources of energy, which often turn out to be fossil fuels.
With that stated, innovation has progressed over the years to the point where we can have 100% green blockchains and eco-friendly cryptocurrencies.
A green blockchain is a blockchain whose consensus mechanism does not contribute significantly to climate change through greenhouse emissions.
For a blockchain not to contribute to greenhouse emissions, it has to either not require a significant amount of energy to process transactions, or its users must make a conscious decision to only use green energy.
Reducing the amount of energy needed is the most feasible, especially given that it is fixed at the protocol level. That means stakeholders do not have the responsibility at the individual level to manage the carbon footprint. The major challenge to this option is that some inherent security aspects must be foregone.
On the other hand, limiting the energy use for the network to only what comes from specific sources can be challenging. It is not a measure that can be included in the protocol.
Instead, each miner will have to decide to use green energy. Given most miners are profit incentivized, they might decide to use the cheapest energy they can get notwithstanding their environmental impact.
Blockchain technology has hugely overcome challenges and has the potential to become green. The reasons to make blockchain green have always been more critical than the obstacles that stood in the way.
The process of computers on a peer-to-peer network finding consensus in updating a shared ledger (mining) makes blockchain a unique technology. Before it came along, the only way computers on a peer-to-peer network could collaborate was by the facilitation of a central authority.
With the initial blockchains, in particular, Bitcoin and Ethereum, the way the computers on their networks formed consensus was by competing in hashing data, an energy-intensive process. The winning computer updates the ledger on behalf of the rest.
Since the winning computer earns a reward, mining has become a business enterprise. From NFT's (non-fungible tokens) to crypto and other digital assets, this new technology has become a worldwide phenomenon. However, the energy consumption is the cost, and the reward is the revenue.
Like any other business enterprise, the miners are incentivized to keep their costs low, and one of the ways they do that is to use the cheapest energy they can get.
Often the cheapest energy comes from fossil fuels, which produce a significant amount of greenhouse gases. Meanwhile, even when the blockchain networks use green energy sources, they can put pressure on generators and take away energy from other critical facilities. In the long term, this might slow down the entire economy's transition to energy efficiency.
Solving the energy problem has been the concern of the crypto community for a while. Meanwhile, the most skeptical have always suggested that it is not worthwhile to brace blockchain.
Meanwhile, many others have deployed several approaches to turn blockchain applications into green technology. If the latter group succeeds, the world benefits from the unique qualities, such as digital immutability with little cost to the environment.
The following two seem to be the most pursued:
The majority of the crypto community acknowledges that networks, such as that of Bitcoin, consuming a high amount of energy could hurt the environment in the long term. On the other hand, they understand that the proof of work consensus mechanism makes the cryptocurrency unique and highly valuable.
For unique projects, in particular, Bitcoin, the most accepted solution has been to push for the transition by the miners from using fossil fuel sourced energy into energy from green sources.
For this to succeed, however, regulations on mining might have to be applied. Indeed, some jurisdictions, such as the European Union, are considering guidelines on energy-intensive crypto mining.
Meanwhile, members of the Bitcoin community are exploring green energy sources such as volcanic activity in El Salvador and Geothermal power in East Africa.
The most sustainable solution to the problem of high energy consumption by blockchains is designing consensus mechanisms that don't require significant hash computations.
One such consensus mechanism is Proof of Stake (PoS). With this consensus protocol, computers are picked to maintain the shared ledger on behalf of the rest of the peer-to-peer network based on the tokens they stake and not how fast they can hash data. This process requires a negligible amount of electricity and does not put a strain on the energy market.
Up to 60% of all active blockchains use the PoS protocol. Meanwhile, the others use one of nearly 20 other consensus protocols, most of which don't need a significant amount of energy. Indeed, of all the consensus protocols, proof of work is the only one based on energy consumption.
With proof of work blockchains transitioning to green energy sources such as solar, geothermal, hydroelectric, and volcanic, and most blockchains using consensus mechanism that is not energy intensive such as PoS, the blockchain industry can achieve net-zero carbon emissions.
Most cryptocurrencies available today exist on what can be described as green or eco-friendly blockchains. The following are some of the cryptocurrencies that fall into this category:
Casper Network is designed and maintained by a team of developers who aim to make the new technologies and use cases easy for businesses to integrate.
In particular, Casper offers highly dynamic and upgradeable smart contracts. This is achieved through oracle networks and making the smart contract easy to tweak without making it non-immutable.
The Casper Network is a PoS blockchain, making it a green blockchain. That means every smart contract or application deployed on it will contribute a negligible amount of greenhouse gases.
Image courtesy of Pixabay.
