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Written by Alan Vey, Chairman & Founder, Aventus
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The general purpose technology behind blockchain means that its applications are relevant for countless industries, from financial services to creative sectors. Companies of all sizes are drawn to the security found in the decentralised technology to make transactions and transfers safe, seamless, and cost-effective. Still, it’s no secret that blockchain – especially cryptocurrency – has traditionally used a huge amount of energy.
Bitcoin, the world’s largest cryptocurrency, consumes an estimated 97.1 terawatt-hours of electricity every year – more than the entire country of the Philippines, which has a population of 112 million people. This could satisfy the total electricity needs of the University of Cambridge for 709 years, or power all tea kettles used to boil water in the UK for 22 years. As the climate crisis continues and people and businesses face soaring energy prices, something must change.
Blockchains like Bitcoin and Ethereum 1.0 have mostly operated using what is known as ‘Proof-of-Work’, a process whereby miners must prove the accuracy of their transactions to enter their ‘block’ into the ‘chain’. Sounds simple, right? The issue is that, without a centralised gatekeeper, this process comes with an inherent energy penalty; an enormous amount of digital power is required for this model to operate due to its sheer complexity.
Laying the foundations for a green Web3 world.
These findings have not been ignored by blockchain giants. In Q3 2022, Ethereum announced a merge to a ‘Proof-of-Stake’ model, a less energy-intensive option, suiting smaller-sized organisations due to its cost-efficiency. Europe is leading the charge, with swathes of new startups using blockchain for good, bolstered by a wave of carbon-neutral status certifications. This has sparked hope that the future of digital assets is a green one – but there’s more to be done.
There’s no use opening up access to Web3 (and the metaverse branding that comes with some of it) if it burns the world. Beyond this, the global chipmaker shortage threatens the infrastructure of Web3, highlighting the importance of efficiency from the ground up. The more founders can move away from big chips that take up a lot of fabrication capacity, the better.
How to build a sustainable Web3 future.
To truly separate Web3 from the physical world, future-facing founders and business leaders must look at their foundations. They must adapt to support the demands for renewable methods and guarantee that the expansion of blockchain technologies does not run a deficit against sustainable energy.
This democratisation of the power industry has already begun. For example, Energy Web is committed to decarbonising the grid by working with clients such as Shell, responding to the changing needs of customers with real-time insights on renewable electricity consumption.
This shows how vital it is to go green from the ground up. The technical foundations blockchain founders install must reflect a desire to be environmentally conscious. From here, this leadership will trickle down to more people using blockchain. Just as consumers shifted their attitudes to physical recycling and alternative diets, they will need to be conscientious of how things like cryptocurrencies eat up energy stores and adjust their activity accordingly.
How blockchain could boost business globally.
There are also some more niche and creative ways that blockchain can contribute to a greener world. Within the NFT sector, artists have been producing digital projects that raise awareness of climate issues such as global water shortages. With NFTs finding their home on social media, this represents a unique way for businesses to showcase causes close to their heart. This is one of many small yet encouraging instances of how blockchain can help minimise harm to the environment.
Another key area is greener supply chains. Sustainable trade is not easy; from backlogs to high costs, the processes for getting products to where they need to be are not as advanced as they should be. Now, blockchain-powered initiatives can optimise supply-chain management by tracking products from the very beginning of their manufacturing journey – optimising efficiency and reducing wastage. Converting from conventional supply chain methods to blockchain technology could improve the trade volume of the U.S. by as much as 15%.
IBM Food Trust, built on blockchain, is one striking case where these technologies have benefited supply chains. The digitisation of transactions and data enables growers, processors, shippers, retailers, and regulators to work together more efficiently across the whole supply chain. Moreover, this increased visibility of products helps consumers make more informed and environmentally conscious decisions, as they can learn more about where their products originated.
Consumer decisions can have a profound impact on pollution. Storing relevant data using blockchain technology would help lower carbon footprints, as it fosters greater transparency for customers. Historically, the transparency of product life cycles is low, making it difficult for consumers to know how much energy consumption they are contributing to through their spending habits.
Helping governments achieve their targets.
Finally, as the health and decisions of governments impact staffing, finance, and growth for all businesses, it’s in everyone’s interest for the public sector to share the benefits of Web3. For example, blockchain can be implemented into air monitoring equipment that adopts linked data ledgers, alerting government environmental agencies when inordinate levels of pollution are present. One day, we may even reach the point where technology directly extracts carbon dioxide from the air.
Web3 could also help with issues such as the exclusion of citizens from accessing goods and services because of a lack of national identification. Governments around the world are persisting with ‘fingerprint’ systems, despite knowing that there will be margins of error of up to 15% because of their technological limitations. Blockchain will ensure proper management of digital identities using interoperable infrastructures that don’t rely upon costly and unsustainable processes.
We are standing at a pivotal moment. Harnessed wisely, blockchain could fulfil its sustainability mandate, helping businesses and governments achieve their respective goals. Web3 founders, investors, and wider business leaders have the power to create a more sustainable future – but there’s no more time to waste. Action must be taken now for a brave new world.
