Building Blocks — Can Blockchain Really Be The Future Of Climate Action?

A World On Edge:

Climate change and the impact we as a species have on the environment have been a hot topic in recent years. With excessive consumption of non-renewable resources, global warming and other environmental problems forcing the world to wake up and advocate climate action, it is no surprise that mankind has turned to technology to help reduce our carbon footprint.

Modern innovations feature sustainability as one of the main goals behind new products, developing, implementing and fine-tuning solutions to the ever-present threat of climate change. Take Tesla, for instance. The company’s work in bringing mass-produced electric cars to the consumer market is unparalleled. Or Sony, who specifically designed the latest iteration of their popular PlayStation console to  consume significantly less power than previous models.

It would be impossible to discuss today’s tech industry without at least a passing mention of blockchain technology. The newest innovation to emerge from the industry, blockchain technology, has seen various use cases across various sectors. NFTs, cryptocurrencies, decentralized finance or Defi, and many others are among the technology applications.

However, despite the many frontiers that the technology can possibly open up for humans to explore, there are also valid concerns about blockchain’s energy consumption and the subsequent impact that the technology can have on the planet Earth.

It is undoubtedly true that blockchain energy consumption patterns in the technology’s current form leave a lot to be desired. Yet, the technology has opened up interesting new patterns and applications that may indeed benefit the cause of climate action. It could potentially help address many key issues as far as sustainability and the environment is concerned!

Understanding Blockchain’s Energy Consumption:

A look at the underlying mechanisms of blockchain technology can help shed light on its energy consumption patterns. Examining these mechanisms is also key to understanding how the technology has already begun to address concerns regarding its energy usage and mining energy consumption.

Essentially, blockchain technology breaks up a decentralized network into “blocks” of data aggregated using a consensus mechanism and smart contracts to present real-time data to users of the network.

Each block carries value and must therefore be “minted” by users, either by using computational power or purchasing cryptocurrencies with real-world money. The former of these two methods carry weight as far as the environment is concerned, chiefly due to a consensus mechanism known as Proof of Work (PoW).

Using PoW, network users, seeking to gain block rewards or incentives from it, devote computational power towards “mining” either cryptocurrency or other rewards on the network. Each additional block comes with a cost in terms of power consumption, which  many argue is too high and therefore risky.

For instance, some reports suggest the power needed to mine a single Bitcoin, a popular cryptocurrency, is about 90 Terawatts annually. To put this in perspective, that is the same amount of electricity used annually by Finland, a country with 5.5 million people in it! Furthermore, evidence suggests that each Bitcoin transaction takes up a  similar volume of electricity that is needed to power the typical American home for 6 weeks!

A key piece of information to remember in this regard is the decentralized nature of blockchain platforms. This means that the ledger or data regarding previous blocks on the chain is stored across many systems. Each individual change or new update to the network requires the authentication algorithms to run across all systems on the network, leading to increased energy consumption.

Essentially, while every system on the network consumes energy to run the algorithm, only the system that can solve the puzzle or task assigned to that particular block reward can claim it. This means that all the other systems have  consumed a lot of energy for no reward, making it wasted. When the sheer volume of blockchain transactions that are currently occurring is considered, these small amounts definitely stack up!

Blockchain and Climate Action:

Despite legitimate questions about the sustainability of blockchain technology through the lens of climate change, it is essential to consider how the technology might be improved for future use. In this regard, current trends and innovations point to blockchain being an integral part of future climate action endeavors!

Significant among these innovations are developing alternative forms of authentication for blockchain networks. Among these, Proof of Stake (PoS) and Proof of Authority (PoA) are noteworthy due to their significant drops in energy consumption.

PoS, for example, shifts the requirements to earn rewards or blocks on a network away from computational power, ensuring that networks are more environmentally sustainable. The popular platform Ethereum, for instance, is already transitioning away from PoW to PoS for its authentication requirements, claiming a  99.5% drop in the network’s total energy consumption!

It is because this mechanism rewards incentives based on trading instead of computational power, as users can exchange cryptocurrency or other rewards on a network. The applications of PoS are already being extended, with NFTs being a viable example of how the mechanisms can elevate user experiences on blockchain platforms while also reducing energy consumption.

While such mechanisms may represent direct innovations in blockchain technology to minimize its carbon footprint, there are other indirect ways to help fight climate change.

For instance, while the shift to alternative authentication methods may be underway, PoW remains a key part of blockchain networks around the world. However, the beauty of blockchain, owing to its decentralized nature, is that the end-user needs only an internet connection to access their accounts and can do so from anywhere in the world.

The result is a migration of blockchain users to areas where there is more access to renewable energy sources. When users switch to such references to power their devices and mine rewards through PoW, existing concerns regarding sustainability are already addressed by using renewable sources of energy.

The advent of electric cars is another indirect application of blockchain technology in terms of environmental conservation. Currently, the lack of infrastructure and charging stations may be a limiting factor for a consumer looking to purchase an electric car.

However, Share & Charge is an app based on blockchain technology that connects drivers with owners of charging stations, allowing for seamless charging and travel using electric cars. This is an obvious  extension of blockchain that can have a significant, meaningful impact on global warming by reducing automobiles’ consumption of fossil fuels!

Blockchain networks, such as  5ire, focus specifically on energy-efficient and sustainable use of the technology with an eye on its future and its environmental impact.

Endless Possibilities:

It is simply too early to gauge the impact of blockchain technology on the environment. The technology remains relatively new and is in the early stages of mass adoption. Yet, the current scenario and indicators point to further innovations and improvisations to the original concept that could extend it beyond its current scope.

However, in light of the attention being given to the technology’s environmental impact and the quality of existing solutions designed to address those concerns, it is evident that the future holds a lot of potential benefits and challenges, both for blockchain and the environment!

Surprised about how blockchain could be an asset to climate action? Test your retention skills with this little quiz below!

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