Fintech in a finite world: The price of protecting our planet
Fintech, the field which uses the latest technology to advance how money is dealt with, has endless potential to make everyday life more efficient. However, technological advancements that replace older alternatives can often consume more energy and Earth does not have unlimited resources. In this article, I discuss the future of Fintech in light of the environmental trade-offs as well as the opportunities it has to make real sustainable change.
Technology has, without a doubt, empowered people to manage their finances more sustainably. Mobile banking avoids the need for paper statements or car trips to the bank. Apps can now track an individuals carbon footprint through their spending. Yayzy, founded in 2019, is an example of this. The app also gives the option to offset carbon using Ecosphere Plus, a climate solutions company that allows individuals to invest in projects that prevent damage to threatened forests and help develop sustainable practices within communities. By putting users in the ‘driving seat’ as stated by Yayzy’s co-founder and CEO, Mankaran Ahluwalia, Fintech is likely to be crucial in bridging the separation between international climate solutions and everyday consumers.
For other Fintech innovations, the relationship with sustainability is more complex. Significant amounts of energy are needed to enable cryptocurrencies, which have a negative environmental impact through the emissions released as a by-product of energy production. The mining of bitcoins into circulation alone requires powerful computers to solve the intricate blockchain algorithms. As a result, this energy input is estimated to exceed the requirements of a number of countries, including the Netherlands and Kazakhstan.
The energy requirement does not end at mining. Each Bitcoin transaction uses 980 kWh, compared to the mere 0.0006 kWh of a Mastercard transaction. The huge energy requirement necessitates more fossil fuels, such as gas, coal or oil, to be burnt. The reaction upon burning these fuels produces carbon dioxide. This appropriately called ‘greenhouse gas’ absorbs and reflects heat, altering the climate.
Can cryptocurrency be integrated into the sustainable future required to prevent a climate crisis? One solution is to account for the damaging externalities by creating bitcoins that are carbon-neutral upon minting. Bitcoin Zero (BTCO) does just this. The Universal Carbon (UPCO2) token is the first tradeable REDD+ carbon credit, with each unit equal to one tonne of carbon dioxide emissions avoided through the prevention of forest loss. Each BTCO is made carbon neutral upon release with the acquiring of 10 UPCO2 tokens. This means that the carbon emissions produced from the energy generation required for the mining are balanced out by the carbon retained in the ground. The unification of the stimulation within cryptocurrency and the ecological necessity to reduce carbon will likely be crucial for the future of both Bitcoin as a sustainable practice and biodiversity on Earth through the mitigation of climate change.
In summary, Fintech not only has a place in the sustainable world we will need to create but is likely integral to making it both easier for the public to make ecologically favourable lifestyle choices and in linking investors and their money to regions of Earth that critically require protection.
