The US government raised concerns over the environmental impacts of crypto technology in a recent hearingand how ethical blockchain plays a role in the equation.
The main issue mentioned by the Energy and Commerce house committee was the increasing trajectory of energy consumption as a result of the dramatic demand in blockchains.
This comes after investors and companies flocked to niche markets like cryptocurrencies, decentralized finance (DeFi), and non-fungible tokens (NFTs), which are largely based on the Ethereum blockchain.
DeFi is a financial technology that allows users to carry out transactions without a central mediator. NFTs, on the other hand, are unique pieces of digital assets which are stored to designate ownership and monetary value.
Below, we expound on the problem and list the steps being taken to make blockchain sustainable.
Ethical Blockchain: On Energy Consumption
Blockchains consumes a lot of energy because the process of coming up with the right nonce for every transaction takes about trillions of trial and error.
Also, the computers spend additional energy to cool their systems and keep themselves from overheating.
With millions of computers churning out energy simultaneously, the University of Cambridge reported that Bitcoin lets out 707 kilowatts of energy per transaction and 121.36 terawatt hours annually.
This estimate is more than the country of Argentina consumes in energy, and well above the consumption of Google, Apple, Facebook, and Microsoft combined.
The energy needed for just one bitcoin transaction could power the average home for about two months.
And with the unstoppable rise of the blockchain, these figures are only set to skyrocket in the coming years.
Although DeFi was only introduced in 2017, it already hit $97 billion in total sale value.
On the other hand, NFT’s grew to $85 billion in 2021. Bitcoin, which is currently the most popular crypto, increased its energy consumption to almost 62-fold in just six years.
Total crypto market cap at $1.925 trillion in the daily chart | Source: TradingView.com
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The Role Of Renewable Energy
The first step to a green future led by blockchain systems is the complete switch to renewable energy.
Currently, around 39% of proof-of-work crypto mining is done using renewable energy, according to a report.
While this requires more financial resources, it is definitely worth the environmental benefits.
As a matter of fact, several start-up companies have been campaigning for ethical blockchain and other related endeavors.
For instance, Hong Kong-based company LiquidStack intends to efficiently decrease the temperature of mining rigs. In Iceland, Genesis Mining has completely turned to using renewable energy resources.
Turning To Proof-Of-Stake Systems
Companies are also looking from proof-of-work systems to “proof-of-stake” systems which expend less energy relatively to solve complex puzzles.
Simon Peters, eToro cryptocurrency market analyst, explains that proof-of-stake mining requires a small amount of cryptocurrency to be entered into a lottery for the chance to verify transactions.
In other words: the fewer amount of money that you put out as collateral, the less your transactions become vulnerable to fraud and other unscrupulous activities.
Looking Into The Future
While there is no perfect solution, blockchain analysts are hopeful that the future of the market will eventually become environment-friendly.
In the long term prediction is that it could allow the automation of many transactions, from physical payment systems, transportation services, and other technological innovations.
One thing now is for sure: users and miners are becoming more conscious and coming up with ways to make blockchain ethical, green and sustainable.
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Featured image from IntelligentHQ, chart from TradingView.com