Janine Grainger - Co-Founder and CEO, Easy Crypto
Given a societal shift towards more sustainable business practices in recent years, the environmental impact of crypto -
in particular Bitcoin - has sparked intense debates. Critics often point out the energy-intensive process of mining,
which (traditionally) requires vast amounts of computational power and electricity. Beneath the surface of these very
valid concerns, however, lies a rapidly evolving landscape driving the crypto industry towards a more sustainable future
in which crypto could be as green as your dollar bill.
In a convergence of advances in technology and ideology, crypto is poised to become greener. This piece expands on four
of the key developments bringing this transformative shift to life:The rise of renewables in mining operations
One of the most significant criticisms aimed at crypto is its energy consumption, largely attributed to the mining
process. (Crypto mining involves powerful computers solving complex mathematical puzzles to verify and add transactions
to the blockchain, while earning rewards in the form of newly minted crypto tokens.)
Traditionally, many mining operations relied on fossil fuels, producing large amounts of carbon emissions. Recently, the
crypto industry has taken significant strides towards sustainability through embracing renewable energy sources to power
its mining, including solar, wind and hydropower, reducing its reliance on non-renewable resources and carbon footprint.
A growing number of mining farms are now located in regions with abundant renewable energy - such as ‘GreenMine’ in
northern Iceland, where geothermal energy is readily available - turning previously untapped energy sources into a force
for positive change.
Encouragingly, it’s widely accepted that this transition to renewables is not just a ‘public relations’ stunt; but a
fundamental shift towards a greener future. As renewable technology continues to advance in terms of affordability, the
cost benefits of harnessing cleaner energy for mining will become even more apparent. Realistically, Bitcoin mining
could move on from an energy-consuming practice; to one that contributes to a more sustainable global energy matrix.More energy-efficient consensus mechanisms
Crypto’s proof-of-work consensus mechanism has also been widely criticised. In simple terms, consensus mechanisms are
simply the rules and processes that enable participants in a blockchain network to agree on the validity / accuracy of
transactions.
Consensus currently demands substantial computational power and energy consumption, but the industry is innovating to
address these issues through brand new validation mechanisms including proof-of-stake (PoS) and proof-of-authority
(PoA).
PoS doesn't rely on energy-intensive computations. Instead, validators are chosen based on the number of coins they hold
(and are willing to ‘stake’). Similarly, PoA relies on approved computers to validate transactions, eliminating
energy-hungry competition among miners.
As these energy-efficient mechanisms gain traction, the environmental impact of crypto will decrease naturally.
Ethereum, one of the leading blockchain platforms, has transitioned from proof-of-work to proof-of-stake, and is a
powerful example of this wholesale transition.Carbon offsetting and environmental initiatives
Mirroring a broader trend in the corporate world, crypto projects are increasingly adopting carbon offsetting
initiatives with the aim of neutralising their carbon emissions. In addition, some crypto companies are using a portion
of their profits to fund reforestation programs or renewable energy projects.
There are also innovative projects exploring ways to directly integrate environmental conservation into their
operations. One example of this is ‘green tokens’ tied to specific environmental goals. When users transact using these
tokens, a portion of the transaction fees is allocated to fund projects that benefit the environment.
These unique fusions of sustainability and finance demonstrate the potential of crypto to catalyse positive change.Technology optimisations and ‘Layer 2’ solutions
Scalability is a major challenge faced by most blockchain networks, and Bitcoin is no exception. The network’s energy
consumption has come under fire as it attempts to accommodate an increasing number of transactions.
The industry is, however, responding with innovative solutions that enhance scalability and simultaneously reduce energy
usage. Called ‘Layer 2 solutions’, these solutions aim to alleviate the load on the main blockchain by facilitating
‘off-chain transactions’. These solutions enable transactions to occur more quickly using significantly lower energy
requirements. Layer 2 solutions also enhance user experience by facilitating faster transactions.
While challenges remain, the industry’s commitment to addressing these issues signifies a genuine intent to balance
innovation with responsible practice.
The adoption of renewable energy; a shift towards energy-efficient consensus mechanisms; the integration of carbon
offsetting and environmental initiatives; and the implementation of technological optimisations all point towards a
greener future for crypto.
Disclaimer: Crypto is volatile, carries risk and the value can go up and down. Past performance is not an indicator of
future returns. Please do your own research.