Sustainable Crypto is NEAR: Illia Polosukhin at the Open Web Forum by CogX
Back in June, Illia Polosukhin (co-founder of NEAR Protocol), Áslaug Magnúsdóttir (Founder and CEO of Katla), and Alessandra Sollberger (Founder & CEO, Top Tier Impact), gathered in the “Open Web: Sustainability: Open Web innovations” panel at the Open Web Forum by CogX. Mike Butcher (Editor-at-large at TechCrunch) posed to the panelists the question,
Can the decentralized world of crypto and blockchain assist us in creating better sustainability? And what is it doing about its own sustainability?
Each panelist shared their perspective on their respective fields: Illia on the crypto and blockchain industry, Áslaug on the fashion industry, and Alessandra on impact tracing and investment. Here are some highlights from the conversation, specifically on sustainability in the blockchain sphere and NEAR Protocol. The full conversation can be watched here.
How Bad is Bitcoin?
Mike began by addressing the “elephant in the room”, by which he meant the controversy surrounding Bitcoin’s environmental impact reignited by a series of Elon Musk’s tweets.
When we discuss the subject of blockchain and sustainability, there is always a lot of controversy about whether it is sustainable or not, how much electricity it is using.
Bitcoin uses a Proof-of-Work consensus mechanism which makes it heavily energy-intensive. According to Digiconomist, the annualized carbon footprint of Bitcoin is 64.81Mt, which is comparable to the carbon footprint of Serbia and Montenegro.
To this, Alessandra replied firstly by contextualizing the significance of the Bitcoin mining controversy:
I feel that we manage to find the needle in the haystack with accusing the blockchain space and BTC of producing so many emissions. It does, that’s for sure, but there is a laundry list of other more important issues that need to be tackled in industries such as Áslaug’s space — the fashion industry — and the list is very long. […] Net zero targets for most countries are in a 9-year timeframe right now. So we don’t have time for needles in the haystack.
Alessandra further remarked on the potential for Bitcoin miners to efficiently adopt renewable energy sources. Though the numbers for 2021 are not yet available, University of Cambridge estimates that thus far 65% of Bitcoin network’s power originated from China, and the energy source can be either coal or hydropower. According to Alessandra, the incentive structure of Bitcoin makes it that “renewables come into the picture so much more naturally out of these incentives than in our industries.”
But more importantly, Alessandra warned that we should not conflate Bitcoin with the entirety of the blockchain space. She stated,
Proof-of-Work is just one of the ways we can validate transactions on protocols. I think that we are missing the bigger picture, both in terms of how the technology works, and in terms of what needs to be tackled as the top item on the sustainability agenda.
The New Kids on the Block are Greener
In fact, as Illia promptly noted, most of the recent generation of blockchain protocols have been Proof-of-Stake (PoS), not Proof-of-Work (PoW):
If we are talking specifically about crypto infrastructure, Proof-of-Stake is already here. […] NEAR is Proof-of-Stake, a bunch of other blockchains that launched the last two years are all Proof-of-Stake.
The “work” in Proof-of-Work refers to the math problem computers have to solve in order to form a new block. In a PoW chain, miners engage in a race to solve these math problems first, which encourages heavy energy use and investment in hardware. Conversely, in a PoS chain, a group of validators who have staked a significant amount of tokens in the network are randomly selected to produce blocks. The staked tokens act as a “security deposit” to incentivize non-malicious behavior by the validators. Hence, the difference between PoW and PoS comes down to the prerequisite for participation and security guarantee: computational work or stake of tokens.
The result, Illia concluded, is that PoS chains use “hundreds of, thousands of, times less energy than Bitcoin. 20 to 50,000 less than Ethereum.”
“NEAR, for instance, uses 200,000 times less energy than Bitcoin. From this perspective, that already reduces the impact pretty much to zero.”
As of April, NEAR is a South Pole certified “climate neutral product”. One way NEAR achieves this is precisely because, as a PoS chain, it is that much more energy efficient. In fact, Illia reports that when making the assessment with South Pole on NEAR’s overall ecological impact — not only of the chain itself but including the core team’s air travel, commutes, and so on — the NEAR chain’s energy consumption as a whole contributed to less than 1% of the entire NEAR collective’s carbon footprint.
To this, Illia said, “that is the reality already now.” While outside onlookers may ask whether blockchain is sustainable because they conflate the space with one chain — i.e. Bitcoin — the reality is that the industry has moved on. Illia elaborated:
[T]he reason why I never liked Proof-of-Work is because it is inefficient. Yes, it optimizes for security but it’s inefficient: the more energy the project uses, the more successful it becomes. This is by definition inefficient. This is not how humanity operates: we are always trying to optimize things, not waste more energy to do the same work.
Even Ethereum — they’ve been talking about Proof-of-Stake since they launched. Vitalik has mentioned the same point in 2014. I think in general all the technologists in the space agree that we need to go away from this.
As Mike summarized,
What we should be cognizant of is that blockchain, crypto didn’t just end with Bitcoin.
Especially when it comes to the question of environmental impact and sustainability in blockchain, it is important to look at how industry leaders are distancing themselves from their predecessors.
This is not to say green crypto is already here, but the tide is certainly shifting, and the momentum is building. Illia added,
[A] lot of people in the industry are concerned. You can see a lot more projects becoming aware of it, trying to consider their own impact as well as how they can start addressing this. […] I think investors are still too focused on technology and success. Blockchain is too nascent in a way. […] It’s still too new. I think people are still trying to focus on success versus longer-term liability and sustainability.
Ultimately, Illia believes that the shift to PoS and a greener blockchain future resides in the hands of consumers:
I think it’s useful for people to understand that by transacting on this network [Bitcoin], you are contributing to this [negative impact]. The more you transact, the more usage it is; the more usage it is, the more value needs to be secured; the more value needs to be secured, the higher hashpower; higher the hashpower, the more energy will be used. Every transaction you do, you directly contribute to use more energy by the network. The less people do it and the more they transition to cleaner alternatives that are already here, we can use market power to negate the impact.
How Can Crypto and Blockchain Contribute to Sustainability?
For Illia, blockchains certainly have to become greener, but more importantly, blockchains can enable a greener future.
Illia took an example from NEAR: the Green NFTs auction with Mintbase and Southpole.
We as a project and projects we partner with are definitely interested in this [sustainability]. One of the things we partnered with is this Swiss company called South Pole, which does green forestation to offset CO2. They recently launched a project called Green NFT, which allowed 30 artists to issue NFT tokens, and part of the proceeds — both from primary sale and secondary sale — go directly to South Pole to fund different forestation projects across Africa and the United States.
So more and more people are aware, and through blockchain they actually have power now to create this platform and opportunities to actually contribute back and become greener, and maybe even greenhouse gas negative. That’s where it starts and probably investors will be catching up as more of these projects showcase this is possible.
It begins with consumer demand, which leads to infrastructure/platform building on the blockchain, and finally companies and investors having to follow.
On the future of blockchain sustainability, Illia wrapped up on this note:
The most important part is creating incentives to be sustainable, either by incentivizing the consumer to care about it […], of taking the cleaner, sustainable option […]. That’s one big area that needs more focusing on.
And same for businesses: through that, if they see more clients, more users are incentivized, then they’ll start actually making a change. […] Even if there is government oversight, they may just find the minimal thing to do. So you want them to be pressured by their end user which then pays them to have direct incentives, one way or another. And that’s what blockchain is really good at — creating direct incentives.
The decentralized and P2P nature of blockchains make it so that the consumers are directly facing the businesses. Illia’s key insight is that blockchain can enable sustainability by utilizing the creation of direct incentives for it, both on the consumer end and the business end. In short, as long as enough people care about sustainability, blockchain can be a great tool to facilitate just that effort.
Rim Berjack is a writer for 4NTS Guild. You can check out their Medium for more content or follow them on Twitter.
