Why Blockchain, NFTs, And Web3 Have A Sustainability Problem

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Blockchain – the dis­trib­uted, decen­tral­ized sys­tem that helps ver­i­fy cryp­to trans­ac­tions and record own­er­ship of NFTs – requires a mas­sive amount of com­put­ing pow­er and elec­tric­i­ty. And as the NFT mar­ket­place and oth­er Web3 tech­nolo­gies con­tin­ue to expand, the envi­ron­men­tal impact of blockchain has been growing.

The incen­tive to cre­ate cryp­tocur­ren­cy “mines” or huge serv­er farms, is high. Bit­coin, which is the world’s largest cryp­tocur­ren­cy, con­sumes an esti­mat­ed 150 ter­awatt-hours of elec­tric­i­ty every year – an amount equal to the entire coun­try of Argenti­na. Pro­duc­ing that much ener­gy emits approx­i­mate­ly 65 mega­tons of car­bon diox­ide into the atmos­phere on an annu­al basis.

But as society’s thirst for Web3 tech­nolo­gies con­tin­ues to grow, the indus­try will need to find ways to be more sus­tain­able, so new tech doesn’t slow down our efforts to com­bat cli­mate change.

Let’s look at some of the ways blockchain, cryp­tocur­ren­cy, and NFTs might tran­si­tion to green­er tech­nolo­gies and more sus­tain­able ener­gy sources.

How to Curtail the Effects of Blockchain Technology

Here are some ways of mak­ing blockchain tech­nolo­gies, cryp­tocur­ren­cy min­ing, and NFTs clean­er and more sustainable:

Embracing more energy-efficient blockchain systems

Many of the most pop­u­lar cryp­tocur­ren­cies depend on ener­gy-inef­fi­cient prob­lem-solv­ing sys­tems known as “Proof of Work.” In POW sys­tems, min­ers com­pete with one anoth­er to see who can prob­lem-solve the fastest in exchange for cryp­to rewards. POW sys­tems like this take up a large amount 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 by using Proof of Stake (POS) report­ed­ly uses 99.9% less ener­gy than Proof of Work, and there­fore decreas­es car­bon emis­sions. Ethereum, the sec­ond biggest blockchain, has recent­ly suc­cess­ful­ly tran­si­tioned from POW to a POS system.

Adoption of renewable energy sources

One clear way to make blockchain more sus­tain­able is to mine with solar pow­er and oth­er green ener­gy sources.

Gen­e­sis Min­ing, which is based in Ice­land, is one of the largest min­ers in the world, and it uses 100% renew­able ener­gy and enables min­ing for Bit­coin and Ethereum in the cloud.

Because every com­pa­ny that uses blockchain defines its own min­er com­pen­sa­tion sys­tems, new blockchains could con­ceiv­ably offer incen­tives for using 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 hydro­elec­tric sources. Bit­coin mined in this coun­try will have a low­er car­bon foot­print than in nations depen­dent on fos­sil fuels.

How Blockchain Might Be Useful in the Fight Against Climate Change

Some experts pre­dict that blockchain might be the key to sus­tain­abil­i­ty inno­va­tions that can help us fight cli­mate change. The tech­nol­o­gy could be use­ful in pol­lu­tion mon­i­tor­ing and track­ing the sus­tain­abil­i­ty of products.

Addi­tion­al­ly, blockchain tech could actu­al­ly help accel­er­ate the deploy­ment of renew­able ener­gy in devel­op­ing countries.

Mark Rad­ka, Chief of UNEP’s Ener­gy and Cli­mate Branch, says, “The world needs to almost halve emis­sions over the next eight years to stay on track for a 1.5°C world, while at the same time expand­ing access to ener­gy to bring hun­dreds of mil­lions of peo­ple onto the grid. Blockchain tech­nol­o­gy can play a part by mak­ing pos­si­ble more accu­rate load mon­i­tor­ing, gen­er­a­tion, and dis­tri­b­u­tion in the grid through effi­cient use of data.”

The Greening of Blockchain

The blockchain, NFT, and Web3 spaces will face many chal­lenges as researchers and devel­op­ers attempt to go green and reduce their envi­ron­men­tal impact. Inte­grat­ing renew­able ener­gy sources and switch­ing to tru­ly sus­tain­able min­ing prac­tices are just a few ways the fourth indus­tri­al rev­o­lu­tion can become more sustainable.

To stay on top of the lat­est on new and emerg­ing busi­ness and tech trends, make sure to sub­scribe to my newslet­ter, fol­low me on Twit­ter, LinkedIn, and YouTube, and check out my books ‘Tech Trends in Prac­tice’ and ‘Busi­ness Trends in Prac­tice, which won the 2022 Busi­ness Book of the Year award.



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