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Blockchain storage is fast emerging as a credible competitor to the cloud. One definite advantage offered by blockchain is that its distributed nature of storage makes it a more secure form of storage compared to storing your data on the cloud.
But blockchain technology has been continuously plagued by significant energy usage and a large carbon footprint. Cryptocurrency, in particular, has been a sore point with environmentalists. Bitcoin, for instance, is famed for consuming more electricity in a year than entire nations. At a time when a United Nations agency just reported that the last eight years had been the warmest ever recorded in modern times, the future of the energy-intensive blockchain technology may get inextricably linked with its ability to offset its carbon footprint.
Related: The Blockchain Is Everywhere: Here’s How to Understand It
What’s preventing the environmental, social and governance (ESG) shift in blockchain companies?
With debates raging around responsible consumption, companies, including the historically ESG-resistant FAANG, have now turned around to commit to definite targets around their ESG goals. Morgan Stanley even declared that ESG-focused metrics might dictate the next decade of investment to understand a company’s growth potential.
But while investment choices get dictated by ESG metrics, it behooves us to remember that the ethical choice may be easier for some than others. While some of the largest multinational companies like Apple and Google can afford to pivot to ESG with relative ease, the same is not necessarily true for companies focused on blockchain, including even the more prominent players.
As institutional investors become subject to closer scrutiny for ESG reporting than ever, they remain inconveniently out of reach for most crypto projects. This, in turn, affects the entire momentum of widespread mainstream blockchain adoption. Companies with tens or hundreds of servers involved in blockchain in a fragmented ecosystem just do not yet have the latency to commit to ESG.
Related: How Blockchain Can Help Tackle Climate Change
The blockchain industry needs to focus on a wider audience
With its anti-establishment flavor, Blockchain, especially cryptocurrency, has found and developed a core niche that’s 94 percent GenZ and younger millennials. But for the technology to see mass adoption and investment, it needs to appeal to a much wider audience.
It’s well documented that younger investors are more likely to make riskier investments — like cryptocurrency, which is known for its volatile price fluctuations. This type of risk does not appeal to those looking to save for a home, family or retirement; therefore, many middle-aged and older consumers have no interest.
Even many Gen Z and Millennials, the generations identified as the most climate-concerned yet, choose not to involve themselves with blockchain technology due to the toll it can take on the environment.
Such a small audience doesn’t lend itself well to large companies or those looking to make large profits investing in the technology, leading to a standstill in developing greener initiatives since many companies in the space may just be looking to stay afloat.
There is a need for blockchain technology to prove its use cases beyond cryptocurrencies. This image makeover will likely happen over time as blockchain storage slowly gains wider market traction as a more secure alternative to the cloud.
Related: Solving the No. 1 Issue of Our Time: Using Blockchain Technology to Scale Climate Action
A greener blockchain is possible
The blockchain industry is at a phase where it is perched at the edge of global adoption. It can easily add thousands of users each month. But blockchain companies need funding to secure ESG initiatives and appeal to the widest possible audience for it to move beyond an emerging technology and become mainstream.
Solutions to build an inclusive and sustainable future for blockchain technology are already starting to emerge in projects such as the Green Treasury Initiative by ClimateTrade, which adds to the number of carbon-negative blockchain use cases. Ethereum plans to replace its energy-intensive equipment, which could cut down its energy consumption by 99.95 percent. But offsetting the carbon impact of blockchain networks is likely to remain a persistent challenge for the industry in its quest for mass adoption.
Smaller blockchain companies will require adequate funding to find relevant solutions to remain environmentally positive. If we want to benefit from the blockchain without hurting the environment, we need to invest in blockchain and blockchain companies so they can have the money to find these solutions. If you want to appeal to a much larger audience, you must focus on ESG initiatives or join hands with well-established cloud companies with leadership in ESG.
