The ecological cost of blockchain technologies. Or is it the hidden benefit?
Blockchain technology — and its most famous application Bitcoin — has benefited from the recent support of firms such as Microstrategy, PayPal, or even Tesla. It is now accepted as a working technology with added value in different sectors such as finance, gaming, art, or healthcare & retail tracking. As a disruptive technology that may be rapidly scaling over the coming years, an inherent question anyone should be asking is how much it will impact our environment? Is it aligned with the ecological challenges that may lie ahead of us?
The debate about Bitcoin
How much does the Bitcoin blockchain consume?
The University of Cambridge ran a reasonable estimation about Bitcoin’s current annual consumption. They came up with 136 TWh which compares with the annual consumption of Ukraine or Argentina. Other estimates place Ethereum at 26 TWh which is the annual energy consumption of Slovakia.
I want to point out the delicate work of coming up with these numbers. Calculating the consumption of a decentralized network is very hard. In the past, the dot com bubble has taught us that the expected energy consumption from the internet was far less than any scenario released. I’m pretty sure opponents, at that time, did not factor in the savings in greenhouse gases from remote jobs. It is exactly what Bitcoin is undergoing right now, and by extension, all the blockchain technologies.
Why does it consume?
To exist. If you’re reading this article, you are consuming electricity. The same goes when doing a google search, sending an email, or uploading a picture on the cloud. Google, in 2019, also consumed in the same range of electricity, close to 15 TWh, also the size of a country.
But Google has undeniably brought more value to society than Bitcoin, so what makes Bitcoin consume almost 10x more than Google?
The so-called consensus mechanism. I will not elaborate on that topic, many sources explain very well how it works. It’s the step where miners compete to solve an algorithm to validate a block and secure the blockchain. Therefore, this step requires some computational power. This step is more or less difficult, according to the computational power at use in the network, as it needs to stay around a block every 10 minutes.
What’s interesting is to think about it this way: if hardware and electricity are widely available, there is an increase in competition, leading to more computational power, which in turn leads to an increase in the difficulty to solve the consensus mechanism as it has to stay around a block every 10 minutes. However, if for external reasons some miners have to stop, the computational power of the network is reduced and the consensus becomes easier to solve, to keep the target.
In both cases, the blockchain works well but the energy consumed is not the same.
According to a Cambridge study, at least 39% of the computational power in the network comes from renewable energy. Worldwide, only 18% of the energy consumed comes from renewables. It’s almost twice as good as France or Germany and will grow as the price of renewables goes down. Miners choose their electricity sources only based on the economic incentive. Bitcoin farms can be in remote places if it’s cheaper to use hydroelectricity or biomass.
In Canada for instance, Bitcoin mining enables to leverage wasted hydroelectric energy production of State-owned Hydro-Quebec. Energy bought by Bitcoin miners is energy that used to yield zero dollar in the past and that requires no additional investment from Hydro-Québec.
In a utopian world, fossil-fuel sources would be restricted or have a high price to be constrained to specific high-value industries (or totally removed from the energy mix) which would force other industries to compete on cleaner energies. Most would crash, not Bitcoin as we saw that:
- Bitcoin can run with fewer miners and/or with smaller miners;
- It is likely to be able to run 100% on renewable energies.
Some miners would have to change supply or shut down as they would not be competitive anymore but the network would adapt after 15 days (the time required to adjust the consensus difficulty), making it viable for the remaining or for new smaller players to enter. In that case, less energy would be needed to be a Bitcoin miner.
Introducing Tezos: a proof-of-stake blockchain
Proof-of-work vs proof-of-stake
Roughly, while a proof-of-work-based consensus such as Bitcoin or Ethereum ensures security by counting the computational power of each member of the network, a proof-of-stake-based consensus such as Tezos uses secured delegation of each member’s votes to reward the “validators” (the ones validating the transactions and adding new blocks to the chain).
Proof-of-stake makes the consensus mechanism completely virtual, and to simplify, you could become a trusted validator only with your computer if you collect enough votes.
By design, there is no need for heavy equipment (unlike mining), which translates into much less energy consumed.
Again, we should bear in mind the difficulty to come up with those estimations. But the order of magnitude speaks for itself. It should also be noticed that all applications and features are taken into account. When we say the Ethereum technology is estimated to consume 26 TWh, it includes the Ethereum cryptocurrency — naturally- but also other applications on the blockchain such as NFTs.
Tezos, the choice of the heart
At PlayTiX, we chose to run on the Tezos blockchain for over a year and a half now. When we develop ethical games empowering players to accomplish actions they may not otherwise, we do consider greatly the impact of the technologies we are using.
We want our games and our partners’ games to offer a new gaming experience. One where a game is fair with its players (giving them ownership of parts of the games) and where spending time can have a deep meaning such as saving the environment or improving society.
With an energy consumption between six and seven orders of magnitude less than Bitcoin or Ethereum, Tezos was an obvious challenger for us.
In another post, I will probably detail the other reasons that pushed us to select Tezos, i.e. the security and the democratic approach of the blockchain.
Follow us on LinkedIn, Twitter, or Facebook for more insights and updates or contact us at play@jwalab.com, we’d love to hear your views.
Writter : Jérôme Wurster, PlayTiX Co-founder & CEO
