The environmental impact of Blockchain and how it can be used to remove carbon

The environmental impact of Blockchain and how it can be used to remove carbon – Mail Bonus

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Climate change has become an important issue over the years due to concerns about environmental changes caused by the release of greenhouse gases into the atmosphere. Conversations have even reached the crypto space, and blockchain technology is seen as a potential tool to reduce carbon emissions.

Cryptocurrencies such as Bitcoin (BTC) and Ether (ETH) that use proof-of-work (PoW) mining algorithms have come under scrutiny for their alleged power consumption. To see where this observation comes from, one must first know how much energy is used in mining PoW cryptocurrencies.

Unfortunately, the amount of energy required to mine Bitcoin and other PoW cryptocurrencies cannot be directly calculated. Instead, it can be estimated by looking at the network’s hash rate and the power consumption of expensive graphics card mining setups.

Initially, Bitcoin could be mined with a basic computer, but as the network matured, the difficulty of mining increased, requiring nodes to use more computing power to mine a new block. Due to the increased power requirement, mining Bitcoin today would require multiple graphics cards along with a cooling system to prevent them from overheating. This is what has led to the high power consumption of PoW networks like Bitcoin and Ethereum.

According to the New York Times, the Bitcoin network uses about 91 terawatt hours (91 TWh) of electricity annually, which is more energy used than countries like Finland. Other sources put this number at 150 TWh per year, which is more energy than Argentina, a nation of 45 million people.

However, as mentioned above, calculating Bitcoin’s energy consumption is not a simple task, and there have been disputes about the actual energy consumption of the Bitcoin network. For example, Digiconomist claimed that Bitcoin uses 0.82% of the world’s power (204 TWh) while Ethereum uses 0.34% (85 TWh). Ethereum developer Josh Stark contested the accuracy of these claims, noting Digiconomist’s tendency to place estimates on the higher end, while pointing to data from the University of Cambridge that estimated Bitcoin’s actual usage to be 39% lower (125 TWh).

More sources have agreed that Bitcoin’s energy consumption is at a lower level. The Cambridge Bitcoin Electricity Consumption Index estimates that the Bitcoin network uses 92 TWh of energy per year. Michel Khazzaka’s research report also claims that traditional banking systems use 56 times more energy than Bitcoin.

RA Wilson, Chief Technology Officer at 1GCX – a global digital asset and carbon credit exchange – told Cointelegraph: “To say that Bitcoin is ‘bad’ for the environment leaves a number of nuances and important conversations unexplored. It is true that Bitcoin and other proof-of-work chains consume larger amounts of energy than blockchains that operate on a proof-of-stake consensus system.However, there are a number of other considerations that need to be taken into account when analyzing and understanding the energy consumption of Bitcoin and blockchain in general.

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“For example, a large amount of energy consumed does not directly equate to an environmental impact. It is also important to understand where this energy comes from. Currently, Bitcoin miners use around 55%–65% renewable energy, which is impressive for such a relatively young industry. By comparison, the sustainable energy mix in the United States is only 30%. Bitcoin can therefore continue to encourage the growth of renewable energy sources within the cryptomining industry and in the US more broadly.

There may be no clear consensus on the environmental impact of cryptocurrency mining on a PoW network. Still, there has been a push to use blockchain to become more energy efficient and improve the environment. As a result, sustainable energy sources for Bitcoin mining have also grown by almost 60% this year. Blockchain is also used to remove carbon dioxide and other greenhouse gases from the atmosphere. In some areas, blockchain technology is being used alongside carbon credits to try to improve the atmosphere.

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What are carbon units?

The terms “carbon offset” and “carbon credit” are commonly used interchangeably, but they have different meanings. Carbon offsetting refers to actions aimed at compensating the release of greenhouse gases into the atmosphere. Examples of carbon offsets include planting trees, afforestation and using renewable energy sources instead of fossil fuels.

Carbon credits allow an organization to produce a certain amount of greenhouse gases depending on how many units they own. One carbon credit represents one ton of carbon dioxide or other greenhouse gases. Organizations receive a certain amount of units, which means they can only produce a limited amount of greenhouse gases.

Entities producing emissions above the limit must buy more units, while entities producing emissions below the limit can sell any remaining units. The system works by giving polluters a financial incentive to produce fewer greenhouse gases. If their emissions stay below the limit, they can save or make money (by selling credits), while they lose money by producing emissions above the limit.

Wilson believes that blockchain technology can help the carbon offset industry: “The carbon offset industry has the potential to grow into a multi-billion dollar market in the coming years, but it currently suffers from a number of obstacles, including fraud and credit duplication. The immutability and security of blockchain technology can help to solve these challenges by ensuring that all carbon credit sales records are tracked responsibly and accurately.

“While blockchain technology alone cannot solve these problems in the market, the combination of blockchain and related infrastructure services such as digital exchanges, global registration and anti-money laundering/know the customer for purchase, creation and termination can help to significantly improve current. bottlenecks,” he continued.

How organizations use blockchain to reduce emissions

EarthFund is one platform where users can donate cryptocurrency, mainly Tether (USDT), to different environmental causes on the platform. The platform also has a decentralized autonomous organization (DAO) and hosts a treasury that allows DAO members to decide how the funds are used. Smaller communities within the ecosystem choose which causes will be highlighted for donations. Carbon capture and storage, as well as renewable technologies and conservation, are some of the areas being explored when it comes to improving the environment.

Toucan is another platform that has created tokenized carbon credits, which are cryptographic tokens backed by real carbon offset units. The carbon offset is represented on the chain as a base carbon tonne (BCT). In November 2021, Mark Cuban said he bought $50,000 worth of carbon offsets every 10 days and chained them as BCT.

Traditional organizations and governing bodies have also seen blockchain technology as a possible solution to reduce carbon emissions. Last year, for example, the United Nations Environment Program and other governments came together during the Middle East and North Africa Climate Week to examine the potential of blockchain to address climate change.

In April 2022, Algorand announced that its blockchain was completely carbon neutral. This is achieved through a pure proof-of-stake algorithm, which does not involve any mining but instead relies on a process where validators are randomly selected to validate the next block.

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Organizations in the crypto space are looking to improve the ecosystem with blockchain-enabled contributions to carbon removal projects, tokenized carbon credits, and carbon-neutral blockchains.

Finally, Ethereum 2.0 is on the horizon, which will see the blockchain network transition from a PoW consensus algorithm to proof-of-stake, as well as some additional changes. PoS does not require mining hardware to validate blocks, which significantly reduces its energy consumption. Because less energy is used to power the grid, less fossil fuel is burned, reducing the amount of carbon released into the atmosphere.

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