Climate change and risks are not new for Blockchain. Other than energy consumption, Blockchain’s climate impact has already been a major issue. Various articles and research papers have already mentioned the negative climate impact associated with blockchain technology. In the past, blockchain and bitcoin mining have been a concern for sustainability. The future aims Katalyst Professional services for Blockchain, however, are expanding to be climate-positive. Thanks to the technologies for unlocking many novel opportunities to begin with positive climatic conditions.
Firstly, not all blockchains function in a similar manner. At the same time, the blockchain community is very well aware of the environmental impact associated with it. The community is together moving forward to take action against it. An article published on Web-3 Climate stated that Ethereum blockchain’s cryptocurrency, Ether- the second largest cryptocurrency in the capitalization market, is a popular example of it. In the year 2022, this Blockchain transitioned to a mechanism called proof-of-stake over its energy-intense proof-of-work mechanism for new blocks’ mining and noticed a valuable reduction in their energy consumption by nearly 99%. There are more examples of companies that have initiated to contribute to better climatic outcomes. We have mentioned them in the article. But before that, let’s dive into certain challenges associated with the sustainability issues faced by the crypto industry.
Sustainability Challenges For Crypto Industry
The crypto industry has faced significant sustainability challenges so far. The prime focus for their community in the present time is to introduce effective initiatives for mitigating the footprint. And to mitigate the understanding of those sustainability issues is important. So, below, we have mentioned some of the major sustainability issues facing the crypto industry-
- E-waste- Every new and effective mining hardware generation leads to the discarding of older equipment. This contributes to e-waste.
- Energy Consumption- The significant energy required for mining cryptocurrency leads to carbon emissions.
- Centralization: The centralization of mining power within a few big mining pools jeopardizes the decentralization that is the foundation of blockchain technology.
- Energy Use Throughout Transactions: Besides mining, power is consumed during blockchain transactions.
How can blockchains become more sustainable?
To compensate for the emissions associated with Blockchain, the community is taking proper initiatives and launching movements to control current and future emissions and mitigate historic emissions. Certain published articles state that blockchain-centric firms, including ERM consulting, Microsoft, and others, are calculating and initiating to decrease the carbon footprint caused due to Blockchain under the Ethereum Climate Platform (ECP). Furthermore, Crypto Climate Accord is another initiative taken by the private sector to achieve a carbon-neutral sector by 2040. There are more organizations working and introducing programs to fully support the carbon-neutral era for Blockchain.
Achieving sustainable Blockchain seems to be possible in the future. However, below are some of the tech-driven climate actions associated with Blockchain.
Blockchain technology can help organize global climate action-
Managing international climate action is a highly complicated problem that requires managing the competing motivations of hundreds of distinct state players. The United Nations Development Program (UNDP) is in charge of helping more than 120 nations enhance their Nationally Determined Contributions (NDCs). It stated that the absence of unified data systems makes it difficult to establish ambitious climate objectives and reliably track global progress.
Blockchain technology may assist in overcoming these problems with coordination. Technologies such as decentralized IDs and verified credentials provide the data architecture and standards for interoperability required for collaborative work toward NDCs on a global scale. Blockchain-enabled climate accounting enables a common set of incentives amongst governmental parties who would not otherwise be unlikely to trust one another. It also offers a way to address basic responsibility and incentive challenges that plague global climate discussions.
Blockchains can be used with digital MRV technology to boost the legitimacy of carbon credit markets-
According to an article published by Emerging Market Alternative, the voluntary carbon market (VCM) is expected to increase rapidly, upsurging from $2 billion in 2021 to $50 billion by 2030. However, as the VCM has begun to grow to satisfy increasing business requests for carbon offsets in order to fulfill net-zero commitments, issues about integrity and openness have emerged.
Corporate customers must be confident in the reliability and accuracy of the carbon credits they purchase. Each credit must publicly establish a causal and long-term change in greenhouse gas concentrations, along with demonstrating that it is free of credibility issues such as duplicate counting or leakage.
Blockchains, with their public, readily available, and machine-readable structure, can serve as the cornerstone for a reliable and sustainable VCM. Carbon registries built on blockchain technology allow market players to see an accessible digital copy of every credit in the system. As a result, it is now possible to coordinate global prices and supplies. When combined with digital tools for measurement, reporting, and verification (dMRV), including smart meters and sensors, drone imaging, and data science, digital carbon accounting systems can enable continuous insight into the true efficacy of ongoing carbon absorption initiatives. Such openness eliminates risks for corporate customers who want to ensure that their net-zero resources are allocated to quantifiable, verifiable climate change mitigation initiatives.
Digital markets for carbon provide additional funding to project creators-
Digital assets related to the environment, such as tokenized environmental credits, enable asset identification and purchase. Developers of projects and purchasers require fewer middlemen to advise, broker, and manually gather and analyze data. This lowers the price of transactions across the environmental value chain and enables on-the-ground initiatives to obtain more funding.
Digital marketplaces can also assist with early-stage fundraising. Project owners commonly use pre-purchase agreements to secure funding for their projects. However, without clear pricing signals, they may be obliged to provide their credits at a significant discount. In a more transparent emissions market, project owners could benefit from more negotiating power. Buyers may also feel more at ease after comparing pricing. Smart contracts may also conduct pre-purchase agreements automatically when credits have been received.
