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As concerns rise Hearings are held in the US about the cryptocurrency industry’s effect on the environment, it’s time to address blockchain’s poor sustainability record. The first port of call should be changing how transactions on the blockchain operate – a move which could cut its energy usage by 99.99%.
A cryptocurrency is a digital representation of value that, unlike traditional money, isn’t issued by any central bank or agency. The cryptocurrency currency is powered by Blockchain technology, which allows for the exchange of virtual currencies like bitcoin and other cryptocurrencies.
Cryptocurrency miningThe process of creating new coins through solving complex mathematical problems. Mining is also known as Validated transactions on the cryptocurrency’s network, proving that they’re genuine.
Crypto transactions are valid in There are two main ways: using either a “proof of work” or “proof of stake” mechanism.
Proof of work requires miners to compete around the world to solve a maths problem. The winner receives a predetermined amount in cryptocurrency and the ability of validating their transaction.
Proof of stake is a method by which cryptocurrency owners can validate blockchain transactions based upon the amount of coins they stake. In other words, to be able to approve transactions successfully, cryptocurrency owners will need to stake their own cryptocurrency.
Proof of work is more secure than proof of stake, but it’s slower and consumes more energy. The pioneering blockchains use mining to generate their currency. BitcoinThese transactions are based upon proof of work and therefore require huge amounts of energy. However, switching to proof of stake can dramatically change the outcome. Reduce emissions.
However renewable energyWhile cryptocurrency activities are currently being powered by this energy, it could be used to power other activities such as homes or businesses. Instead, if blockchain transactions were verified through proof of stake – a move that Ethereum is planning to make – their energy consumption could be reduced to 0.01% of its Original value.
Emissions
The EstimateThe power required to run the Bitcoin network around the globe is 7.46 gigawatts per year. In comparison, an average-sized nuclear reactor produced approximately 1GW of power in 2020. Electrical powerIn one year. Just one bitcoin transaction could generate enough energy to power the entire nation. Average US homeFor more than 70 days.
Roman Ranniew/Flickr, CC BY – SA
As the US Committee HeardA bitcoin transaction adds around 400kg of CO² to the atmosphere (assuming it’s powered by an energy mix typical of the UK, of which around two-thirds comes from fossil fuel).
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Together, the Bitcoin and Ethereum mining operations produce more than 70 Million Tonnes of CO² into the atmosphere. That’s the same as the annual exhaust emissions of over 15.5 million cars. One cryptocurrency mining company is even looking to Restart operationsTo generate more energy, there are two Pennsylvania coal-fired power stations.
Crypto futures
The main concern raised by the US committee was that, given the potential for a dramatic increase in cryptocurrencies’ value, their required energy consumption – and environmental impact – is likely to keep growing.
This is partly due to the boom in similar markets like Decentralised finance(DeFi) non-fungible tokens(NFTs), which are largely built on the Ethereum blockchain.
DeFi, a financial system that uses blockchain technology, allows users to make investments and transactions without the need for a central intermediary. NFTs are unique digital media pieces that are stored on blockchain.
Scott Beale/Flickr, CC BY -NC-ND
However DeFi only launched in 2017, its value already hit £85 billion in November 2021. And NFTs’ total sale value grew from £74 million in 2020 to £29.6 billion in 2021.
Also, since NFTs are most commonly created on the Ethereum blockchain – which uses proof of work to verify transactions – it takes a lot of energy to create one. NFTs are prominently featured in the growing metaTheir energy needs are only going to rise.
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Although it may sound contradictory at first, adopting blockchain technology could lead to a number of benefits. positive effectLong-term environmental impact. It could be used by companies to automate complex payment systems, which could reduce the commute time for employees and result in fewer transport-related emission.
While the extent of this transformation is very hard to predict, it’s becoming clear that as blockchain technology grows, its benefitsWe will, too. For example, as developments in blockchain continue to break new ground in business and finance, we’re seeing cryptocurrency accelerate financial inclusion for those who’ve historically been excluded from participating in formal financial systems.
As More businessesTo enter the metaverse governments and regulators need to ensure that there are no environmental ramifications. A good start would be to require blockchains adopt proof of stake.
