Blockchain and Cryptocurrency Must Reduce Energy Consumption Despite Massive Growth
Some of cryptocurrency and blockchain's fiercest critics argue that the technology's massive energy consumption and giant carbon footprint make it unsustainable over the long haul. Even Elon Musk, who has been a cheerleader for Bitcoin and Dogecoin over the past few months, joined the bandwagon last week.
Musk announced that Tesla will no longer allow vehicle purchases using Bitcoin because of the major environmental impact of Bitcoin mining. Bitcoin prices have exploded over the past year and the cryptocurrency has a market cap of $1 trillion. That growth comes with a high price tag, however, and electricity consumption for Bitcoin mining increased by more than 163 percent in the second half of February alone. Researchers at Cambridge claim Bitcoin burns through more electricity in a year than the entire country of Argentina.
It is clear that cryptocurrency and blockchain have a major environmental problem to deal with, and the sooner the better. Some companies and groups are already on board, with the Crypto Climate Accord launching last month with more than 40 supporters. Based on the Paris Climate Accord, the initiative is designed to bring together fintech and crypto leaders with the goal of decarbonizing the crypto industry in record time.
The group claims that blockchains are the single biggest source of energy consumption in the crypto industry, and must be powered by 100 percent renewable energy by 2025. Ripple, CoinShares and ConsenSys have joined the group, which also has support from the World Economic Forum and Energy Web Foundation.
Other major crypto and blockchain companies are also working to change the way validation takes place to reduce energy consumption. Bitcoin uses the popular proof-of-work (PoW) consensus mechanism, which has miners using massive amounts of hardware and energy to validate the currency.
Ethereum, the second largest global cryptocurrency, has steadily been moving away from PoW to the proof-of-stake (PoS) concept, which enables individuals to validate block transactions based on how many coins they hold. The process consumes considerably less energy than PoW and is considered less risky when it comes to network attacks.
The company's Ethereum 2.0 initiative will slash its energy consumption by 99.95 percent. Ethereum expects the transition to happen within the coming months, although no specific timeframe has been announced.
Other companies like XRP also rely on low-carbon technologies instead of the costly PoW consensus. The XRP Ledger is carbon-neutral and uses the Federated Consensus mechanism for validation and security. The process isEdited by Luke Bellos
