Understanding Blockchain's Eco-Friendly Shift: Five Steps to Clarify Energy Concerns
Binance published a blog post on Monday teaching readers how to dispel commonly cited blockchain FUD related to the industry’s energy footprint and supposed environmental harm.
As the company points out, most of the industry’s energy footprint is related to mining on the Bitcoin network, which uses a proof of work (POW) consensus mechanism.
Most modern blockchains, however, use alternative consensus mechanisms like proof of stake (POS), which do not focus on energy consumption to keep the network decentralized.
“The Crypto Carbon Ratings Institute (CCRI) has examined the impact of Ethereum’s transition from PoW to PoS and found that its annualized electricity consumption went down by more than 99.9% as a result of the upgrade,” wrote Binance. “Accordingly, Ethereum’s carbon footprint also decreased by 99.9%.”
Not only do these blockchains consume little energy, but many are using their unique features to help enable green energy initiatives.
Peer-to-peer energy trading, for example, lets traders buy and sell excess renewable energy. Blockchains can also be used for transparent carbon footprint tracking in the context of supply chains, which can further encourage businesses to reduce their environmental impact.
Bitcoin’s Energy Footprint
The “elephant in the room,” however, remains the Bitcoin mining industry, which has been subject to major scrutiny from activist groups and the White House alike. While estimates of Bitcoin’s energy consumption vary widely, it’s often compared to that of small countries, including Norway or Finland.
Thankfully, a substantial portion of the mining sector’s activity appears to be powered by either renewable or sustainable energy sources, such as wind, solar, and hydroelectric power.
Again, estimates of the exact share can vary depending on time and the methodologies used to measure the figure. More conservative estimates based on miner geolocation data estimate Bitcoin’s green energy mix to be around 38%. Meanwhile, more optimistic estimates based on direct surveys of Bitcoin mining companies estimate this figure as high as 63%.
According to blockchain researcher Juan Ignacio Ibanez – who recently co-authored a research paper on the subject – the real answer is likely somewhere in between these figures. Nevertheless, he expects the figure to rise over time.
“Both sides of this debate have legitimate arguments,” concluded Binance. “Here, it’s best to encourage a balanced view of blockchain technology, acknowledging both its challenges and its potential to drive positive change.”