It’s no surprise that the market for eco-friendly blockchain solutions, especially in sustainable supply chains, is actually growing. In fact, according to Allied Market Research, the global blockchain market size for sustainable supply chains reached $76.5 million in 2023. Surprisingly, according to the institution, this figure could reach as high as $4,946 million in the next few years, resulting in a CAGR of more than 50%.
Remember, blockchain itself is already beneficial, encouraging more businesses to adopt it. And as they continue to do so, demand could increase, leading to an increase in the price of Ethereum and other digital currencies. But it’s not just about adopting this technology to improve life experiences – the adoption should also be sustainable. So, if you want to learn more about why this is a growing discussion, you will do well hanging around.
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Does traditional crypto have any challenges?
Well, even before we proceed with this discussion further, we may want to first understand whether traditional crypto has any environmental challenges. As you may know, transactions on a blockchain network are usually validated and included through crypto mining. Unfortunately, this process often consumes considerable computing power, which might not be sustainable. In fact, Cambridge University released a study claiming that Bitcoin’s annual electricity consumption was more than what countries like Finland use.
As if that’s not enough, a 2023 study noted that mining companies could use up to 155,000kWh of electricity to mine just one Bitcoin. The energy-intensive Proof of Work (PoW) process often uses a significant amount of computational power to solve complex mathematical problems involved in validating and adding transactions.
Plus, digital currencies are usually decentralized, meaning that more miners would want to solve these problems, resulting in more energy usage. And it follows that as more miners join the chains, the challenge only continues to scale. Realizing this, recent developers have been switching to more efficient consensus mechanisms. For instance, about three years ago, Ethereum switched to PoS, which is a more energy-efficient mechanism than Bitcoin’s PoW.
Addressing the challenges
Well, with Bitcoin’s PoW proving to be energy-intensive, questions like whether it will eventually transition to an eco-friendlier consensus mechanism do not cease to arise. But remember one thing: PoW is deep-rooted in Bitcoin, which is actually one of the reasons why the currency is unique. Plus, its complexity makes it more resilient against attacks, implying that the currency might be less likely to shift its consensus mechanism.
But that does not mean nothing is happening to address this challenge of energy consumption. Actually, a recent study by ESG analyst Daniel Batten noted that about half of Bitcoin mining was already being done using renewable energy. To break down the findings of the study:
- 23.12% of miners have adopted hydropower
- Wind energy accounted for 13.98%
- Solar energy generated 7.94%
- Other sources accounted for about 2.4%
Another option that could help make Bitcoin more environmentally friendly is carbon offsetting. Burning oil and coal to generate energy yields huge amounts of carbon emissions. And sadly, this can really affect air quality and climate, which actually is the reason for the continued discussions about climate change. But thankfully, carbon credits and offsets like capturing carbon through planting trees can help address this challenge.
Examples of case scenarios
Have you heard about the efforts of the Swiss-based blockchain startup Fedrok AG, which is making waves in the carbon credits market? Using its ‘Proof of Green’ mechanism ensures you view the real-world environmental impact of your blockchain activity by linking its native token to the price of carbon credits. That way, you can mine cryptocurrencies without operational disruption.
And have we even highlighted its infrastructure, which allows integration with Ethereum Virtual Machine? This ensures compatibility with existing DApps, which is good news for sectors requiring standardized environmental metrics.
Another crypto project that you may have heard about is Tezos, which is designed to use PoS to minimize its environmental impact. In fact, some experts claim that this project could actually use two million times less energy than Bitcoin’s PoW. Algorand, with its aim to be carbon-negative, is also not left behind. By partnering with ClimateTrade to reduce its carbon footprint, this project cements its position in discussions surrounding sustainable blockchain solutions.
We can’t fail to mention Cardano ADA. Launched in 2017, this blockchain solution also uses PoS to improve its sustainability measures. It emphasizes scalability and environmental responsibility by allowing a research-based approach to network efficiency and sustainability. Polkadot also comes in handy with its nominated PoS that supports a sustainable ecosystem of connected blockchain networks – this minimizes the need for burdensome computations.
What does the future look like?
There’s such an increasing interest in sustainability in the world. In fact, according to BusinessDasher, more than six in ten consumers are willing to adjust their purchasing behaviors to help minimize environmental impact. On top of that, another 22% confirm that they have already made significant adjustments to be more eco-friendly. This is without mentioning 66% who claim that they are willing to spend more on sustainable brands.
Ignoring such statistics only harms the company seeking long-term relevance. Don’t forget that this is not just a popular trend among consumers but institutions as well. And if you’re seeking to collaborate with such, you must align to their preferences. As a result, we may actually see more green crypto projects emerge alongside their adoption. That may put more pressure on major platforms to adopt sustainable practices.
Good enough, companies like the Crypto Climate Accord are playing a crucial role in making the industry more sustainable by pushing for net-zero emissions in blockchain by 2040. And who knows? Maybe such initiatives will increase in the coming days. Blockchain developers and investors may also adopt technologies like artificial intelligence to improve their sustainability efforts.
What is our last word?
The world has become more sustainability-conscious, and the importance for blockchain enthusiasts to align with this trend can’t overemphasized. Of course, just like any other technology, blockchain has both its downsides and advantages. Especially at a time when elements like speed, privacy and transparency are highly sought after, this technology appeals to many individuals.
But that comes with its challenges. Bitcoin, for instance, uses a consensus mechanism whose yearly energy consumption can equate to that of countries like Finland. And for a world that’s gravitating towards sustainable living, this poses a great challenge. Thankfully, miners have been adopting renewable energy sources, while others have been turning to less energy-intensive mechanisms like PoS. Looking ahead into the future, we may see collaborations of blockchain with other technologies like AI, as developers seek to be more environmentally friendly.