How to Make Cryptocurrency Sustainable
Cryptocurrencies and The Environment
More than 15,000 cryptocurrencies exist worldwide and a large number use the proof-of-work consensus mechanism. This refers to a form of cryptographic proof in which a certain amount of computational power is proven to have been expended. As a consensus mechanism, it is used for validating transactions, preventing fraud, and mining new bitcoins. It is used by cryptocurrencies like Bitcoin, Ethereum, Litecoin, and Dash among others.
The mining of Cryptocurrencies through proof-of-work was designed to be energy-intensive and thus prevent security breaches but this is not without downsides. Because of the dependence on high amounts of energy, mining is now responsible for 0.6% of global electricity consumption.
Mining itself isn’t an environmental hazard because computers can use power from any source. However, fossil fuels are responsible for about 80% of the global energy supply and therefore powers the majority of mining activities.
Apart from the carbon emissions of fossil fuels, the waste generated yearly by miners raises concerns. An estimated 30.7 kilotons of e-waste are generated from Bitcoin mining alone and the numbers continue to grow with increased adoption of the cryptocurrency.
Many environmentalists see mining as a climate threat and clamor for regulations and restrictions annually.
There is however a larger movement towards sustainable cryptocurrencies.
How Can We Make Cryptocurrencies Sustainable?
With Bitcoin labeled the ‘dirty currency’ and many currencies detested for their alarming carbon footprints, a cardinal shift is required in the industry. Below are some ways to create a sustainable industry:
- ALTERNATIVE CONSENSUS MECHANISM:
Unlike the Proof of Work consensus mechanism designed to be energy-intensive, many alternatives are far more efficient.
By transitioning to mechanisms that consume less energy, the cryptocurrency industry will release fewer greenhouse gasses thus becoming more sustainable and joining the fight against climate change. Some energy-efficient consensus algorithms are:
- Proof of Stake:
Touted as the second most-used consensus algorithm, proof of stake is gaining ground. This mechanism involves the allocation of responsibility in proportion to the number of tokens held/ owned. It does not require specialized equipment and uses 99.9% less energy. Although considered less secure than PoW, it is far more sustainable. It is currently adopted by blockchains such as Polkadot, Cardano, and EOSIO.
- Proof of Capacity:
This authentication system employs spare space on a device’s hard drive to store solutions to a cryptocurrency hashing problem. It is a two-step protocol involving plotting and mining. Though not widely accepted, it is reportedly 30x more efficient than the ASIC Bitcoin mining rig. Blockchains that run on proof of capacity include Storj, Burst, Chia, and SpaceMint.
- Proof of History:
Developed by the Solana project, this mechanism encodes the passage of time itself cryptographically to achieve consensus without expending many resources. Humans are not involved in its validation process, making it several times faster than other algorithms. Its energy consumption per transaction is negligible as opposed to the 707KWh used for Bitcoin.
- Proof of Elapsed Time:
In this consensus algorithm, each node in the blockchain network generates a random wait time and goes to sleep for that specified duration. The one with the shortest wait time then commits a new block to the blockchain, broadcasting the necessary information to the whole peer network. It is similar to the PoW mechanism but more efficient because the miner’s processor goes to sleep. It is used mostly in permissioned blockchains like Hyperledger Sawtooth.
By using any of these alternatives, the industry consumes at least 50% less energy, reduces carbon footprints, slashes e-waste generated, and becomes more sustainable.
2. ADOPTION OF RENEWABLE ENERGY:
Cryptocurrencies are infamous for wasting enough electricity to add at least 40 million tons of carbon dioxide to the atmosphere a year. Owing to this fact, the industry has a notoriously high carbon footprint. In a bid to reduce this, many miners are now using clean energy such as solar, geothermal, or wind.
Bitcoin is rapidly becoming more efficient and 56% of its energy use is now powered by renewable energy. Organizations like the Bitcoin Mining Council are promoting energy usage transparency and accelerating sustainable mining worldwide.
Other advantages generated from the adoption of renewable energy include increased air quality, minimal land pollution, and improved profit from mining.
3. FAVORABLE REGULATIONS:
With adequate support from governments, the Cryptocurrency industry can move towards a sustainable future. Some laws favoring sustainability in cryptocurrencies are:
- The federal solar tax credit allows a 30% deduction from the installation costs of a solar energy system. This law incentivizes miners in transitioning from fossil-generated electricity to green, sustainable energy.
- Excess solar energy can be sold back to the grid to generate more income. This is another incentive provided in the solar tax credit.
Also, individuals are bolstering the journey to sustainability by offering rewards. Elon Musk promises that Tesla will resume Bitcoin transactions once 50% clean energy usage by miners is achieved.
4. BITCOIN AS A BATTERY:
This refers to the use of Bitcoin as a store of value for renewable energy by converting intermittently-available local solar and wind power into a globally traded digital asset with unlimited shelf life.
Also, Bitcoin mining can be made more sustainable by using “stranded” or wasted energy such as flared gas in energy production. Here, Bitcoin acts as a recycler and uses otherwise wasted energy to mine new tokens.
In acting as either a recycler or a battery, Cryptocurrency becomes more sustainable.
Other than Bitcoin’s mining regulations, Ethereum is also transitioning to a more energy-efficient consensus with the promised Ethereum 2.0. The PoW algorithm has not been used in 5 years and carbon footprint is dropping yearly.
To bolster the forward movement, the prices for renewable energy drop yearly with increased availability. The reduced cost will incentivize miners to switch to clean energy.
New research indicates cryptocurrencies are not as bad for the environment as they used to be and if channeled right may become weapons against climate change.
The transition to clean energy might not be easy but is definitely necessary and daily steps to this goal must be taken. Incentives are being provided as the world starts a forward motion to renewable power. It is vital to join this movement and contribute to the sustainable future of Cryptocurrencies.
Our mission at EZ Blockchain is to breach the gap between the energy sector and the blockchain ecosystem. We believe in the utilization of waste energy and that solving problems associated with gas flaring and stranded gas problems is a true win-win for both the energy and crypto industries. We also provide solar and wind crypto mining services as well.
EZ Blockchain is an innovative company on a quest to solve global waste energy problems with the help of crypto mining. We understand the problem and its environmental implications and are driven to create a gas flaring mitigation solution. This solution is eco-friendly, economical, profitable for both producers and landowners while meeting environmental protection regulations.
We believe this is achievable through the strategic implementation of our innovative and revolutionary solutions.