Imagine, in our current climate emergency, that a whole new country emerged from our burgeoning oceans with energy consumption exceeding that of the Netherlands. Unthinkable, right? Turns out it’s not, but it’s also not a country. It’s the energy footprint of Bitcoin, a single cryptocurrency (of thousands) that uses the blockchain and it’s the way blockchain technologies are used that has a high environmental impact.
Cryptocurrencies aren’t alone in the blockchain environmental debate: Non-fungible tokens (NFTs) also rely on the technology (often through the Ethereum blockchain) with similarly concerning levels of energy consumption. The evidence linking fossil-fuelled electricity usage to climate change is so large it can no longer be ignored.
Some advocates claim that blockchain could mitigate the energy-intensive processes involved in global logistics. What’s more, it could increase the visibility of supply chains for eco-conscious consumers. We break down the ‘Need-to-knows’ of cryptocurrency environmental impact, what solutions are out there and what business owners can do to reduce their own energy footprint.
Digital currencies
We’ll save you some time if you’re already familiar with the concept of cryptocurrencies but we’ve also linked to this helpful source if you need a refresher. The element that has environmentalists talking is the energy consumed and waste produced as a result of blockchain transactions that use so-called Proof of Work.
Bitcoin’s energy consumption is currently 121.9 TWh (just over the annual electricity consumption of Argentina) and it’s not the only cryptocurrency out there. Ethereum is the world’s second-largest cryptocurrency and it’s estimated that a single transaction requires more kWh than 160,000 VISA transactions. While VISA is far more widely used than Ethereum, there are some 8000+ cryptocurrencies in the market, which saw growth of +10% in 2020 alone and a forecast of triple-digit growth (100%+) over the next 6 years. Increased demand requires more energy.
Energy consumption aside, there are concerns about the e-waste legacy of cryptocurrencies, with those ‘mining’ the currency’s blockchain requiring frequent upgrades to the hardware they use in order to compete with other ‘miners’. Some research places the total annual e-waste of Bitcoin at 30.7 metric kilotons, comparable to small IT equipment waste produced by a country like the Netherlands. It’s worth emphasising again that although Bitcoin is the largest player in the cryptocurrency market, it’s got plenty of company.
In order to fully understand just why some cryptocurrencies guzzle so much energy and spit out so much waste, and also what can be done about it, it’s helpful to grasp ‘mining’ and ‘Proof of Work’. We’ve explained it in brief right here.
It’s not a complete climate write-off: some newer crypto networks like Polygon, Flow, Cardano and Polkadot use other consensus mechanisms like ‘Proof of Stake’ which uses considerably less energy. This is achieved by reducing the computational complexity of the validation process. Secondly, opportunities to mine are randomised and limited to those who stake their own crypto against their validation efforts. Ethereum estimates that when it moves to a ‘Proof of Stake’ consensus mechanism it will reduce its energy consumption by 99.5%, but ‘Proof of Work’ prevails at Bitcoin, which remains the world’s largest cryptocurrency.
NFTs
NFTs haven’t been buzzing around the zeitgeist for as long as cryptocurrency, so if you need a breakdown of the basics, check out our article on Blockchain, Cryptocurrencies + NFTs 101.
The majority of NFTs are created and purchased on the Ethereum blockchain, which means they’re implicated in the same mining processes that are used for cryptocurrencies when they’re created, sold and resold. NFTs are still relatively new on the blockchain scene, so there isn’t as much data available, but the now shuttered site CryptoArt.WTF estimated the initial sale of one artist’s six-token collection to have consumed 8.7 MWh of energy, equivalent to two years of energy usage in his physical studio.
Blockchain
If you’re starting to understand the gravity of the e-situation, but you’re still a little hazy on the blockchain, we can help there too. Due to its meteoric rise in popularity and use-value, there are plenty of in-depth guides to blockchain, but is it only good for shifting money around and making a living as a pixel art creator? Not even close. Because blockchain decentralises data and uses encryption and validation to protect that data as it’s transmitted and added to, it serves as an incredibly valuable technology for communicating evolving data sets in a highly secure way that resists manipulation. IBM Food Trust uses blockchain to ensure environmental and safety standards across whole supply chains for clients such as Walmart, and there’s research suggesting that blockchain could be used to help support quicker decision-making on issues such as pollution and environmental degradation.
What does this mean for my business?
Monumental moves from leviathan crypto networks like Ethereum to more energy-efficient practices demonstrate just how important these measures are. It follows that 43% of all UK consumers who chose brands with environmentally sustainable or ethical practices said they value carbon footprint reductions. There are more environmentally considerate cryptocurrency and NFT solutions, but if you’re not in the business of blockchain or Bitcoin, where does that leave you as a business owner? Here are some things to consider:
How green is your website? You can get a quick gauge on your website’s carbon footprint with free tools like Website Carbon – this tool and its results are available to anyone and any site, so put yourself in a potential customer’s shoes and see how much CO2 can be traced back to your online presence.
Bigger isn’t always better: images and videos are often the biggest culprits for increased page load and therefore energy consumption. The bigger it is, the more it consumes. Evaluating asset quality against industry benchmarks and customer experience could help identify unnecessarily large media that can be modified for efficiency. In short, reduce uploaded image sizes for a greener website (and a better user experience!)
Work with a sustainability-focused development agency: by working with Monogram, you could reduce your website load times and thus carbon footprint using our static deployment technology. If that’s not green enough, we also ensure a tree is planted for every new website we host thanks to our hosting partners.