How bad blockchain is for the environment?

You probably heard of bitcoin consuming electricity yearly at the same level as the whole Swedish nation. Or, according to another source, one bitcoin transaction is equal to the monthly usage of power that creates a typical household in America — and we know that Americans aren’t the greatest in lowering their carbon footprint. Without the change, Bitcoin alone could push the global temperature up to 2 degrees!

That doesn’t sound good, taking into consideration the climate crisis. Statistically, we are more bound to be climate refugees than billionaires, even if this is not what your favorite crypto influencer is telling you on TikTok. Does that mean we are all going to die and have to drop everything blockchain related?

I do work in the Web3 space, but the salary doesn’t cover my views. And my views aren’t fantasies of dying due to the planet burning down — although, I must say, without action from governments and corporations, that is not a fantasy.
But apart from that, I would like to know how much harm the development of Web3 will cause.

To understand it better, we need to go into boring tech details. Or, in other words, types of blockchain. Blockchain might look like a monolith, but there is a great difference between used technologies. The biggest difference is made by the “consensus mechanism”, which is a process that state if the transactions are valid or what is the order of them. It is also a security factor to protect transactions from hacking. And as today, they are predominantly 2 mechanisms used, called Proof of Work (PoW) and Proof of Stake (PoS). And those mechanisms are making the main difference for the environment.

Bitcoin and Proof of Work

Bitcoin, the OG, exposed Proof of Work, which was widely adopted since, again — Bitcoin, the first mysterious invention of Jane Doe aka Satoshi Nakamoto. The foundation of PoW are miners, that verify bitcoin transactions — with more power and hardware their use, there is a bigger chance that solving the puzzle to verify it, will acquire bitcoin for it. The competition is hard, but also the algorithm is designed in a way that the more computational power you have, the harder the puzzle is to solve.

This provides a lot of security, making hacking just too expensive to be worth a problem. It is also fairly decentralised this way. But with the growth of Web3, it is also slow, expensive to use, and, well, terrible for the environment due to the amount of electricity wasted during the process.

Projects that use PoW:

• Bitcoin
• Ethereum*
• Litecoin
• Dogecoin

*Ethereum pledges that in 2022 will change to Proof of Stake

The alternative — Proof of Stake

This method is the second most used in the space and it brings solutions to the PoW problems which are being slow, not scalable, inefficient and hard to enter. How?

In Proof of Stake, miners do not verify transactions, validators do. Wait, who? Validators are operating nodes that validate the data, but they don’t need to earn the power to validate through using an insane amount of power, like in Proof of Work. Validators don’t solve puzzles, like miners, but staking the native tokens, to be more likely to be chosen to validate. The validator is randomly picked, but the amount of stake tokens is increasing the chances. Once the block is verified, the validator gets a fee and the next block is ready to be validated.
Staking tokens is also a way to grant security, if validators are performing suspicious actions, their stakes are lost due to “slashing” or other methods designed to secure the process.

While miners need expensive hardware (yes, they are kind of to blame that you still can’t buy PS5) and create their own power plant to become supervillains from cartoons, validators just need money for staking tokens. As hardware, you can even use your phone.

PoS is not without a flaw, often criticised that offer power to the rich, those with the most staked tokens. Yet buying all the graphic cards and paying the electricity bill isn’t the cheapest, so the problem remains in both PoW and PoS.

Projects that use PoS:

• Algorand
• Cardano
• Flow
• Polkadot
• Solana

The choice is obvious

These are the two of the most popular consensus mechanisms that are used in blockchain projects. From the sustainability point of view, there is no doubt that Proof of Stake is better for the environment because of the much lower usage of electricity. That’s why we see that OGs like Ethereum are trying now to move away from PoW. With the growing market of projects that are focusing more and more on creating a sustainable blockchain, having as goals to be carbon neutral (Algorand) or even to be carbon negative (Celo).

Can blockchain do something good?

With fixing problems of terrible PoW, we can’t underestimate the power that blockchain has. South African startup Sun Exchange offers to buy and rent solar panels for companies and institutions, which lowered already electricity costs by 30%. Another company — Power Ledger, allows people in India who own solar panels to sell the energy to others on the grid — also through blockchain. Foodtrax is a company that tracks the goods from the manufacturers to the shelves, helping eliminate food waste. Recycling is another area to explore within the blockchain, The Plastic Bank that is trying to solve the problem of plastic in the ocean. An app called RecycleToCoin is rewarding people for recycling aluminum, plastic, and steel cans, which might be crucial to popularising recycling within countries without the proper infrastructure.

Overall, blockchain cannot save or destroy the planet on its own. But consumers have the power to move their development in the direction we wish. Seeing platforms willing to switch to more environmental methods and discovering new projects that have the environment in their core values — we might have a good tool to fight the climate crisis.