Many people criticize blockchain-based projects using Bitcoin (BTC). It is understandable, since Bitcoin is the most well-known and largest cryptocurrency market cap.
Because most people associate Bitcoin with blockchain, the first part of this article will be based on Bitcoin. Any positive environmental statement about Bitcoin will double for the vast majority (mostly) of the newer blockchain-based projects, since Bitcoin uses the oldest version blockchain technology.
Blockchain energy consumption
High energy consumption has been a major criticism of Bitcoin. Popular criticism is that Bitcoin’s electricity consumption is comparable to the country’s total. While comparisons can be useful, they can also have deceiving framing effects. The CCAF has the most popular statistics, which are cited in headlines that grab attention. This same organization also pointed out that the transmission and distribution electricity loss in the United States could provide enough power to power the entire Bitcoin network by 2.2 times. The electricity used by electrical devices that are always on in America is 12.1x greater than the Bitcoin network.
The Bitcoin network consumes as much electricity in a small country as it does in America, or less than 1% of America’s total energy budget. Is this a lot? It all depends on how you view it.
Related: Is Bitcoin wasteful of energy? The pros and cons of Bitcoin mining
Another criticism is that Bitcoin’s electricity use is increasing so fast that it could cause global warming to exceed 2 degrees Celsius or even consume all the world’s energy by 2020. This was not the case. Why? Bitcoin, like many network-based technologies is following an adoption curve that is governed by the theory and diffusion of innovations, an “S curve.”
The exponential growth that is so rapid in the first half slows down in the second half. Second, large and predictable improvements to computer efficiency will continue lowering the cost of computing, even though Bitcoin’s growth slows. These predictions do not take into consideration the changing energy mix of Bitcoin.
Blockchain energy mixture
The majority of energy used by blockchain projects comes from electricity generated by the computers that protect the network. These are what Bitcoin refers to as “miners,” however, newer blockchain projects have the ability to use more efficient “validators.” Electricity can be produced from many sources including coal, natural gas, and renewables such as solar and hydroelectric. These sources can produce very different levels carbon emissions which greatly affects their environmental impact. These are the two most important estimates of Bitcoin’s renewable energy. They range from 39% to 74%. These estimates are “cleaner than America’s energy mix, which is only 12% from renewables.
Evidence suggests that Bitcoin’s public scrutiny has ensured that renewable energy will continue to grow in the future.
Blockchain is worth it
Bitcoin’s energy composition and consumption are not perfect. It is also not as bad as it is often reported. The question of whether Bitcoin’s energy use is worth it is often overlooked in the debate about Bitcoin’s energy consumption. While many industries use energy or produce large amounts of waste, most people consider the environmental benefits to be worth it. The agricultural industry is dependent on fossil fuels to produce fertilizers and power equipment. Despite the negative environmental effects, we still recognize the importance of food production. We don’t want to abandon agriculture. Instead, we work to improve agriculture’s environmental impact.
Related: Green Bitcoin: The importance and impact of energy use in PoW
It doesn’t matter if Bitcoin allows the 1.7 billion unbanked to become financially integrated or offers an alternative to international remittances services that are predatory, it seems to me that the energy consumption of Bitcoin is worthwhile. Even more clear is the fact that enterprise blockchain can be a public unmitigated benefit.
Alternative blockchain technology is more energy efficient than older versions. Enterprise blockchain is able to be customized for specific uses, making it even more energy-efficient. Enterprise blockchain helps organizations reach sustainability goals by using significantly less energy.
Blockchain is a key driver of renewable energy
The cost of solar and wind is now lower than that of fossil fuels like coal and natural gas. The cost of solar and wind is now comparable to hydroelectric and geothermal. Renewables are not widely adopted due to their high cost. Geopolitical limitations make hydroelectric and geothermal inaccessible. Intermittency and grid congestion are common problems for solar, wind, and, to a lesser degree, hydroelectric. They are too unstable at the moment because of intermittency. There is no sun at night, there are intermittent wind stops and rainy seasons. Grid congestion is similar in nature to car traffic. Because of geographic constraints, renewable energy is often built in rural areas. Most energy is required in dense cities and towns. The electricity can take longer to reach its destination than a car stuck in traffic.
Although there are some solutions, such building battery storage or increasing transmission capacity, these infrastructure projects are costly. This is where Bitcoin and blockchain can be of help. Blockchain projects, unlike Bitcoin miners, can be built anywhere. Because they are profitable businesses, they can essentially subvention the construction of renewable infrastructure by using any excess energy.
Related: Musk is wrong to blame Bitcoin for dirty energy. The problem is deeper
Person-to-person (P2P), electricity trading is another promising technology that can be adapted to blockchain. These energy sharing programs allow electricity consumers and suppliers to trade energy with each other without any intermediaries. They also increase the availability of renewable energy. Blockchain-based projects, similar to renewable infrastructure will encourage the development of P2P electricity grids.
Blockchain allows material procurement and provenance
The demand from consumers for ethically sourced products continues to rise. Companies must prove that the product they produce is ethical and that it is safe for the environment and human health. Companies have to provide information that consumers can trust, as they are not able to greenwash. This dynamic is being changed by blockchain-based projects.
Everledger created tools that increase enterprise and consumer insight into the origin of an object. Everledger digitally simplifies compliance and allows companies to prove the true origin of their products by combining AI, blockchain and IoT.
Transparency will be key to building consumer trust in food supply chain chains. Carrefour, the supermarket giant, and AB InBev, the largest brewer in the world, teamed up with SettleMint, an enterprise blockchain developer, to provide a digital traceability solution using dynamic QR codes that are attached to products during packaging.
Green financing refers to loans that are used to support sustainable businesses and finance the projects and investments they make. It is crucial to close the $2.5 trillion annual SDG financing gap. This gap is expected to grow. The green bond (GB), market, is a good example of green finance. According to the Climate Bonds Initiative in 2020, $269.5 billion worth of GBs was issued.
However, GBs can have problems. For example, they may not be able to verify that sustainability metrics are true or that funds were used for sustainability. This data can be stored in blockchain and can be used to verify that projects meet sustainability requirements. Other ways blockchain can be of assistance include tokenization.
Related: How can blockchain technology be used to combat climate change? Experts have the answer
Oi Yee Choo is chief commercial officer of iSTOX (a Singapore-based digital securities exchange). In this interview, Oi Yee Choo said: “Even though there is high demand for green bonds due to investors being motivated by ESG considerations,” tokenization allows investors to diversify their portfolio through different bonds, because they have smaller subscription sizes.
The current state of the blockchain industry in terms environmental sustainability is not ideal. If it continues its current trajectory, however, the blockchain industry can be an example and an enabler for environmental sustainability.
These views, thoughts, and opinions are solely the author’s and do not necessarily reflect the views or opinions of Cointelegraph.
Matthew Van Niekerk, a co-founder of SettleMint and Databroker, is the CEO. SettleMint is a low-code platform to develop enterprise blockchains. He has a Bachelor of Arts in Computer Science from the University of Western Ontario, Canada. He also holds an International MBA from Vlerick Business School, Belgium. Matthew has been involved in fintech innovation ever since 2006.
Eileen Wilson –Technology and Energy
My Name is Eileen Wilson with more than 5 years of experience in the Stock market industry, I am energetic about Technology news, started my career as an author then, later climbing my way up towards success into senior positions. I can consider myself as the backbone behind the success and growth of topmagazinewire.com with a dream to expand the reach out of the industry on a global scale. I am also a contributor and an editor of the Technology and Energy category. I experienced a critical analysis of companies and extracted the most noteworthy information for our vibrant investor network.