Sustainability solution or climate calamity? dangers and promise of cryptocurrency technology
A “wasteful way to use energy”?
The amount of energy required to power the Bitcoin network is staggering: Tim Berners-Lee, credited as the inventor of the World Wide Web, has gone so far as to describe “bitcoin mining” as “one of the means of ‘most fundamentally unnecessary use’. energy.”
Bitcoins don’t exist as physical objects, but new coins are “mined” or put into circulation, through a process that involves the use of powerful computers to solve complex mathematical problems. This process requires so much energy that the Bitcoin network is estimated to consume more energy than several countries, including Kazakhstan and the Netherlands. And, as fossil-fueled power plants still represent a significant part of the global energy mix, it can be said that Bitcoin mining is partly responsible for producing the greenhouse gases that cause climate change (although , so far the impact on the climate is much lower than that of heavy goods vehicles such as agriculture, construction, energy and transport).
Another problem is the amount of energy required for each transaction, which is huge compared to traditional credit cards: for example, each Mastercard transaction is estimated at only 0.0006 kWh (kilowatt hour), while each Bitcoin transaction consumes 980 kWh, enough to power an average Canadian household for more than three weeks, according to some commentators.
Garbage collectors collect in municipal landfills in Zambia.
An important driver of sustainable development?
Despite these problems, UN experts believe that cryptocurrencies and the technology that powers them (blockchain) can play an important role in sustainable development and in fact improve our environmental stewardship.
One of the most useful aspects of cryptocurrencies, as far as the UN is concerned, is transparency.
Because the technology is resistant to forgery and fraud, it can provide reliable and transparent record of transactions. This is especially important in regions where institutions are weak and levels of corruption high.
The World Food Program (WFP), the United Nations’ largest agency providing humanitarian money, has found that blockchain can help ensure that the money gets to those who need it most.
A pilot program in Pakistan has shown that it is possible for WFP to deliver money directly to beneficiaries, safely and quickly, without needing to go through a local bank. The project, Building Blocks, was also successfully tested in refugee camps in Jordan, ensuring that WFP could create a reliable online record of every transaction.
While it can work for refugees, it can also work for other disadvantaged and vulnerable groups. The authors of a report from the United Nations environment agency, UNEP, suggest that the technology could improve the livelihoods of waste pickers, who make a living in the informal economy.
A transparent monitoring system, the report says, could accurately track where and how collected waste is used, as well as identify who picked it up, ensuring the right people are rewarded for their efforts.
Air pollution harms our health, but there is often a lack of local data made available to identify solutions.
Block environmental degradation
The potential of blockchain in protecting the environment has been tested in a number of other projects, by the UN and other organizations. These range from a tool to eliminate illegal fishing in the tuna industry, developed for the World Wide Fund for Nature (WWF), to a platform (CarbonX) that turns reductions in gas emissions to greenhouse effect into a cryptocurrency that can be bought and sold, providing manufacturers and consumers with a financial incentive to make more sustainable choices.
For UNEP’s DTU partnership (a collaboration between UNEP, the Technical University of Denmark and the Danish Ministry of Foreign Affairs), there are three main areas where blockchain can accelerate climate action: transparency, climate finance and clean energy markets.
According to the Partnership, data on harmful greenhouse gas emissions in many countries are incomplete and unreliable. Blockchain solutions could provide a transparent and reliable way to show how nations are taking action to reduce their impact on the climate.
Climate finance – investments that help slow the pace of climate change – could be boosted if carbon markets are stepped up, allowing businesses and industries to switch to low-carbon technologies.
And blockchain could be an important part of accelerating the adoption of renewable energy sources such as wind and solar. As these sources are inherently intermittent and decentralized, new forms of energy markets are needed.
Tools using blockchain technology can help create these markets and end our reliance on fossil fuels.
Find solutions with low energy consumption
Despite all of these potential benefits, the huge power consumption associated with the technology is one of the biggest hurdles to overcome, and many in the industry are working on ways to address the issue.
For example, the Ethereum Foundation, the organization behind the Ethereum cryptocurrency, is working on a new way to verify transactions. By switching to a different method (called Proof of Stake, or PoS), the Foundation claims that the energy cost of each transaction could be reduced by 99.95%.
At the same time, many industry players want to ensure that any energy consumed by industry is fully carbon-free.
In April 2021, three prominent organizations (the Energy Web Foundation, the Rocky Mountain Institute and the Alliance for Innovative Regulations) formed the Crypto Climate Accord, which is supported by organizations spanning the climate, finance, NGOs and energy.
The Accord’s goal is to “decarbonize the industry in record time” and achieve zero net emissions in the global crypto industry by 2030.
Gold has always played an important role in the international monetary system.
The ups and downs of cryptocurrency
Cryptocurrencies are still in their infancy, and there are still many technical and political challenges to overcome, as evidenced by the volatile nature of some of the more well-known versions.
A single Tweet from tech billionaire Elon Musk can raise or lower the value of Bitcoin; El Salvador announced its intention to make Bitcoin legal tender in June, a month after Beijing announced a crackdown on Bitcoin mining; while another cryptocurrency, Dogecoin, has also been traded widely, with huge and widely reported jumps and drops in its value (again, in part thanks to Mr. Musk’s statements), despite the fact that ‘it was created as a joke.