The Truth About Blockchain’s Impact on the Environment

In recent years, blockchain technology has become increasingly prevalent across a wide range of industries and applications, from food and beverage to manufacturing to border patrol operations. It’s is being implemented in supply chain monitoring, financial services, Big Data storage, payment processing, and smart contracts. It’s attracted attention from several major companies, including IBM, Walmart, and FedEx, and it’s being touted as one of the biggest tech disruptions of the 21st century.

However, there are some detractors who say that blockchain, partly due to its relationship to the cryptocurrency Bitcoin, has a massively negative impact on the environment. Because of the high energy use involved, for instance, blockchain can have a surprisingly high carbon footprint. But on the other side of the spectrum, there are many proponents who say that blockchain is actually a boon for environmental causes.

The History of Blockchain and Cryptocurrency

In order to dissect this issue, it’s important to first understand what blockchain is and how it relates to cryptocurrency, specifically Bitcoin.

The concept of blockchain technology was invented in 2008 by an incognito person (or persons) known as Satoshi Nakamoto, who authored a whitepaper entitled “Bitcoin: A Peer to Peer Electronic Cash System.” Shortly after the white paper’s publication, Nakamoto introduced the first Bitcoins, along with the first implementation of a blockchain database.

This database, an accurate, immutable transactional ledger, brought about a sense of trust to the shadowy realm of early digital currency. Transparent, decentralized, and featuring real-time logging, the database was accessible to anyone who needed to access it — and it could not be altered.

Eventually, blockchain started being used in other capacities beyond cryptocurrency transactions. In the mid-2010s, companies started to recognize the intrinsic value of blockchain and its ability to streamline communications and transactions.

Blockchain, Cryptocurrency, and the Environment

While blockchain does require a fair amount of electricity, most of the environmental arguments against the technology center on its use in cryptocurrencies. Some cryptocurrencies, such as Bitcoin, are extracted from the digital ecosystem through a process called mining, a type of cryptography that involves recording transactional data in a public ledger — the blockchain.

The cryptography is framed within a “proof-of-work” protocol, which rewards miners for solving complex equations — the reward being digital coins. This process requires a huge amount of computing power, which translates to a massive amount of energy consumption.

“The easiest way to understand this on a simple level is as a guess-the-number game,” explains Jay ‘TechAdept’ Laurence, COO of Reddcoin, a cryptocurrency that is not extracted via a mining process.

“Suppose I, the Bitcoin network, choose a random number between one and 100. And then [I] ask each of my friends — the miners — to submit their guesses as to what the number is. If they get it right, they win a coin. If they don’t, they just get to try again. Each guess costs a bit of effort and energy to calculate a number, write it down, and check with the network.

“In this example, some of my more enterprising friends might realize that being able to guess more often would win more coins. So they invest real money and electricity into specially engineered guessing machines so that they can make thousands and millions of guesses per second.

“The mathematical formula underlying these guesses lends itself nicely to specialized hardware … machines very capable of doing these special calculations extremely quickly. … These machines are housed in warehouses and data centers, and do indeed devour an increasingly large amount of energy.”

However, in response to Bitcoin’s excessive use of energy, a new model, dubbed “proof-of-stake,” has emerged. Using his guessing-game analogy, Laurence explains that with a proof-of-stake system, “my stake would allow me to simply hold pieces of paper with a whole bunch of numbers. Each time the network chooses a number on one of my pieces of paper, I get a little reward.

“There is no intensive calculating necessary for this to happen as in Bitcoin, so no wasted computational energy and electricity, or at least far, far less. A PC instead of a data center full of servers, by comparison.”

How Blockchain Can Help the Environment

Although blockchain’s Bitcoin origins have given it a not-so-eco-friendly reputation, there are some businesses, such as the startup company Nori, that see blockchain as an environmentally conscious tool — with the potential for use in reversing climate change.

Nori uses blockchain to power the company’s carbon dioxide removal marketplace, which connects altruists across the globe directly with carbon-removal suppliers in order to fund the removal of excess carbon emissions from the atmosphere.

Paul Gambill, CEO of Nori, says, “Some blockchains run in a manner that consumes excessive amounts of energy, and others operate in a way that has a negligible energy impact. In my company’s case, we are building a blockchain-based application that makes it simple for people to pay for removing carbon dioxide from the atmosphere. That’s a direct benefit to environmental concerns … utilizing the blockchain to provide transparency and credibility to how the removed CO2 is measured and verified.”

Closing Thoughts

Although its roots stem from controversial origins, blockchain has evolved far beyond its original application in cryptocurrency. And when considering energy use, it’s important to make the distinction between Bitcoin and blockchain, keeping in mind that Bitcoin requires a digital-labor intensive process with excessive energy demands, while blockchain doesn’t necessarily.

Blockchain is already starting to be used for environmental applications, and, as the technology continues to evolve, industry players across the world will be keeping an eye on its wide-ranging uses.

Image Credit: KC Jan /Shutterstock.com

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