How to Create Eco-friendly Cryptocurrencies
Digital currencies provide considerable potential transactions, security, and access to financial benefits. However, with no bank to regulate the currency, a system was designed to mandate Bitcoin miners to solve complex mathematical equations and algorithms using high-powered computers before verifying a transaction and then combine these verified transactions into blocks added to a blockchain for documentation. Miners, therefore, earn newly created bitcoins as well as transaction processing fees. But this concept is energy-intensive, and most of the energy used is generated from coal — a non-renewable energy source that poses a severe threat to the environment.
Bitcoin’s Growing Energy Consumption
According to research conducted by the University of Cambridge’s Centre for Alternative Finance (CCAF) of Cambridge University, it is estimated that the mining process to create bitcoins consumes approximately 116 terawatt-hours of electricity yearly, almost the same electricity consumption as Argentina and higher than that of countries like the Netherlands, Philippines, etc.
Bitcoin Energy Consumption Index — a platform established by Digiconomist, which provides real-time estimates of electricity consumed from bitcoin mining — estimates that the carbon footprint of bitcoin per year is 806.32kg CO2, which is equivalent to 134,837 hours of watching YouTube. This result is another strong indication that the computing power needed to solve complex mathematical equations consume enormous energy.
Aside from the concerns of the energy consumption of bitcoin mining, the bitcoin network generates 6.24 kilotons of electronic waste per year, which is comparable to the e-waste generation of the Western European country, Luxembourg.
In March 2021, Tesla Chief Executive, Elon Musk announced that the company would accept digital currency, Bitcoin, as payment for electric cars. However, in May 2021, Elon Musk reversed his decision, citing that Bitcoin is a major contributor to the planet’s climate crisis. “We are concerned about rapidly increasing use of fossil fuels for bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel,” Elon Musk stated in a viral tweet.
Bitcoin mining has a lot of environmental impacts. It poses a serious threat to the Paris Agreement — a treaty signed by 196 countries in 2015, intending to reduce climate change and reduce global warming to below 2 degrees Celsius to achieve a climate-neutral planet by 2050. Mining is not sustainable; hence, it is essential to minimize the carbon footprint of cryptocurrencies.
So, what do we do?
Proof of Stake System
Most cryptocurrencies consume lots of energy because they depend on the Proof of Work system, which involves solving complex mathematical calculations before verifying a transaction to produce a token. However, the Proof of Stake System, otherwise known as Proof of Storage, uses less energy — it randomly allots coins to users, who put up coins for collateral. Individuals partaking in cryptocurrency validations stake their coins and are rewarded more coins based on what is staked. This is a better way to safeguard the environment.
Clean Energy Blockchain Mining
An immediate solution towards salvaging the planet is mining through clean energy sources — hydro, solar, and wind energy. Server farms can use the aforementioned green energy sources to mine crypto instead of relying solely on fossil fuel. Companies have started embracing this method towards creating an environmental-friendly cryptocurrency. Genesis Mining, an Iceland-based cloud mining company, mines Bitcoin, Ethereum, and other popular coins using renewable energy sources. This method has proven effective as it reduces carbon footprint, reduces pollution and costs.
In March 2021, AKA ASA, a $6billion company owned by Norwegia’s second-richest person, Kjell Inge Roekke, established Seetee — a company focused on building projects around the cryptocurrency ecosystem using wind, solar and hydro for mining operations.
Aside from these examples, Greenidge Generations Holdings, located in Upstate New York, is transitioning towards achieving cryptocurrency mining using 100% renewable energy sources. The company bought a coal power plant in 2014 and converted it to a natural gas power station for mining. It has therefore morphed, and it now has a hybrid blockchain mining facility.
To discourage using fossil fuels to mine cryptocurrency, it is essential to incentivize green energy. Every organization that uses blockchain has its remuneration system for miners. New blockchains might offer miners more significant opportunities, such as more coins, to use clean energy, putting polluting miners out of operation. They might also demand that all miners demonstrate that they use green energy or refuse to pay those who fail to do so.
Finally…
To stop the growing energy consumption of mining cryptocurrencies, it is pertinent for organisations and governments to push for regulations and set an agenda towards mitigating greenhouse gas emissions. The Crypto Climate Accord led by the Energy Web and the Alliance for Innovation Regulation (AIR) and encouraged by the Paris Climate Agreement — a deal designed to ensure that the cryptocurrency industry solely runs on renewable energy by 2025.
It is believed that using green energy sources for mining is the best possible way to achieve net-zero emission in the industry. A Proof of Work system, where miners are mandated to solve puzzles before validating a transaction, is a significant threat to the environment. We need to employ Technology to put an end to endangering the planet.
Author: Adelowo Oguntola
Photo: blueandgreentomorrow.com
