How Blockchain Can Help the Environment
Preserving the environment, green practices, eco-friendliness, and sustainable practices make major news headlines these days. Concerns for how human activities impact the environment, either directly or indirectly, have led to conferences between world leaders and global bodies, and announcements of a global energy crisis.
Some of the biggest environmental problems we face today are directly related to energy production and consumption. According to the UN Environmental Program (UNEP), the energy sector accounts for about two-thirds of global greenhouse gas emissions attributed to human activity. Energy used in heating, electricity, transport, and industry involves the combustion of fossil fuels. When fossil fuels are burned they release large amounts of carbon dioxide (CO2), which is a greenhouse gas. The Intergovernmental Panel on Climate Change (IPCC) warns that fossil fuel emissions must be halved within years if global warming is to be limited. IPCC aims to halve global emissions by 2030.
Cryptocurrencies and the Environment
Cryptocurrencies have had their share of backlash related to greenhouse emissions because of the amount of energy required to mine some cryptocurrencies. Earlier cryptocurrencies, like Bitcoin, use a Proof-of-Work (PoW) consensus mechanism which requires large amounts of energy – larger than the total energy consumption of some countries. Data from Digiconomist shows the annualized Bitcoin electricity consumption to be 132.82 terawatt-hours (TWh) which is comparable to the power consumption of Argentina; Bitcoin leaves an annualized carbon footprint of 74.08 metric tons of carbon dioxide (MTCO2). Data from Cambridge Bitcoin Energy Consumption Index (CBECI) estimates the current Bitcoin annualized power consumption to be between 97 TWh and 149 Twh.
The energy concerns of mining PoW cryptocurrencies have led to the invention of more energy-efficient consensus algorithms. Certain existing PoW blockchains are moving to Proof-of-Stake systems (PoS) – Ethereum recently migrated from PoW to PoS. Newer Layer-1 blockchain projects now add words like green, eco-friendly, and sustainable in their whitepaper when describing their consensus mechanism and cryptocurrency. The yearning for green cryptocurrencies and improvements to the current environmentally destructive methods of mining cryptocurrency is apparent. In April 2021, the Crypto Climate Accord (CCA) was formed. CCA is an open-source environmental initiative aimed at making cryptocurrencies green. The formation of CCA was inspired by the Paris Climate Accord. CCA comprises more than 250 companies and individuals spanning the crypto and finance, technology, NGO, and energy and climate sectors.
The quest for sustainable cryptocurrency mining has gained attention and several green initiatives have commenced. One such initiative is the use of waste energy to mine cryptocurrencies. Existing and new mining companies have been exploring ways to source different types of waste energy that will not add to the carbon footprint when used in mining operations.
Blockchain mining companies looking to use zero-carbon electricity to mine cryptocurrencies have started exploring ways in which “stranded” methane (CH4) could generate zero-carbon electricity. Methane, one of the greenhouse gases, is emitted during the production and transportation of coal, natural gas, and oil. Methane accounts for about 20% of global emissions. A company called EZ Blockchain works with oil and gas producers to put their wasted energy, including Methane, to use by mining cryptocurrency with such energy. By converting wasted gas being burned into the air into electricity to mine crypto, the emission of methane is mitigated, thereby reducing the carbon footprint of the environment while going about the business of mining cryptocurrencies – an absolute win-win.
Autonomous, a crypto mining company focused on clean energy, only uses wind- and solar-generated power to mine cryptocurrency. Stronghold Digital Mining, a company based in Pennsylvania, converts coal waste from abandoned mines into power to make crypto mining more environmentally friendly. The company clears decades-old coal wastes and uses them to power Bitcoin mining. Some of the coal refuse is close to residential homes and can leach into the waterways, thereby disrupting the livelihood of residents. By clearing these coal wastes for mining Bitcoin, the environment gets cleaned up. Though this process of waste-to-energy generation emits some greenhouse gases, Stronghold Digital claims it uses a carbon capture technology to reduce CO2 emissions. The company claims it removes up to 95% of emitted gases.
How Blockchain Technology Could Incentivize Green Practices
To encourage behavioral change, incentive schemes are often set up. A good example is the recycling incentive scheme introduced in different parts of the world to encourage households and waste producers to reuse and recycle plastic and its derivatives. In a survey, conducted by ResearchGate in Finland, on the role of financial incentives in promoting recycling, 62.6% of respondents agree that financial incentives are necessary in cases of behavioral change.
Blockchain has proven to be one of the best technologies to use in implementing incentive schemes. With blockchain technology incentives could be tokenized; this way, incentive rewards could be paid out instantly and automatically. Blockchain technology’s immutability also eliminates room for manipulation therefore incentives are genuinely earned. A slew of Web3 lifestyle applications have emerged; leveraging tokenized incentives, these apps reward users who meet a particular lifestyle goal with cryptocurrency tokens, which are mostly instantly tradeable and convertible to fiat. Move-to-earn and learn-to-earn are some of the incentives-driven concepts that have been implemented using blockchain technology. STEPN, a move-to-earn NFT app, pays its users in its native cryptocurrency GST when they meet exercise and fitness goals laid out in the app.
Drivn, a sustainability behavioral change ecosystem, rewards its users for engaging in travel behavior with low carbon footprints. Drivn aims to make the environment cleaner by giving tokenized rewards to users who make use of greener means of transportation. With this incentive system, users will be encouraged to ride a bicycle more, drive an electric car, and choose travel options with a low carbon footprint.
Based on the success rate of other incentive-driven apps and concepts that are powered by blockchain technology, the encouragement of green practices could also get a boost by leveraging blockchain technology’s tokenized incentives.