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Environmental Concerns Of Blockchain

Blockchain technology came into larger public awareness in 2008 with Bitcoin technology, which has since led to the rise of several other cryptocurrencies. While it is largely agreed that blockchain technology can have far reaching impacts on society and the economy, it’s effect on the environment has been a matter of deep concern. The Cambridge Bitcoin Electricity Consumption Index estimates that Bitcoin, used an estimated 26.73 Terawatt-hours of electricity per year and 167.72 Terawatt-hours of electricity more than the Netherlands, Argentina, or the United Arab Emirates in 2020.


So just why is blockchain technology so energy intensive and what can be done to address the problem.

Why is Blockchain so energy intensive?

Many leading cryptocurrencies such as Bitcoin and Ethereum use the mining method to validate cryptocurrency transactions. While mining isn’t the only method available to validate transactions it is one of the most popular and also most energy intensive.

Why exactly is mining so energy intensive?

Since cryptocurrencies aren’t regulated by a central authority, blockchains by nature are extremely difficult to tamper with. Which is why when changes need to be made to a blockchain, users have to validate their transactions. This is where proof of work becomes necessary. What is proof of work? Well proof of work is a consensus mechanism which requires the miners to solve complex mathematical problem using their computing power. The person who solves the problem first gets to update the blockchain and reap the rewards accordingly.

The greater the power of the user’s computer, the greater the chance they have of updating the blockchain, so plenty of computing power is used in this race to be the first to solve the problem.

Proof of work however isn’t the only way that cryptocurrency transactions are validated. There are other methods such as proof of stake, proof of burn, proof of capacity and proof of elapsed time.

Possible solutions to reduce adverse environmental impacts

Many feel that using proof of stake mechanism as an alternative to proof of work could be a possible solution. In proof of stake instead of miners trying to solve complex problems the authority to validate transactions is granted on how much cryptocurrency a user already has and how much he is willing to stake as a collateral of sorts. Some believe that using proof of stake as an alternative could reduce energy consumption by 99.5 per cent. Understandably others find this figure overly optimistic.

Proof of stake, however takes time to take over the popularity of proof of work, many are already trying to find solutions on how to make proof of work more scalable in the meantime.

The efforts to accomplish this include moving mining operations away from countries such as the U.S. where around 38 per cent of Bitcoin mining occurred in 2021 to countries which rely more on green energy.

After the Chinese government banned crypto mining in 2021, miners had to relocate to more fossil fuel dependent countries like the U.S. and Kazakhstan.

Efforts are also being made by individuals and companies in the crypto world to reduce their carbon footprint but perhaps the change will come about when the general public is more educated about cryptocurrency and can therefore choose only the platforms which they believe are the most environmentally friendly and conscious. For that education and awareness of the crypto world as a whole is the need of the hour.