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Cryptocurrency’s Place In A Green Future

Cryptocurrency is getting greener in the future of blockchain technology. This summer’s soaring temperatures in Texas forced cryptocurrency ...

Cryptocurrency is getting greener in the future of blockchain technology.
This summer’s soaring temperatures in Texas forced cryptocurrency mining operations to cease activity, and in the process reignited debate on the technology’s environmental credentials. Even still, strides are being made to develop blockchain infrastructure that is more carbon conscious.

Relatively cheap energy in Texas has attracted crypto-miners to set up operations in the US state, leading to a strain on the capacity of its beleaguered power grid. These operations in Texas are predicted to require 6GW of electricity by 2023, which is a figure roughly equal to the needs of the state’s largest city, Houston.

As of last week, however, the majority of industrial mining ventures have temporarily shut down in compliance with the Texas grid authority’s request for private enterprises to conserve energy. Cryptocurrency mining is the means by which new coins are effectively “minted.” This is achieved by setting a computer to solve a complex mathematical puzzle in order to generate a new coin. As a blockchain grows, this process requires more elaborate calculations to solve–therefore greatly increasing the computing power and the energy needed.

This “Proof of Work” (PoW) system, whereby a coin is created only if a significant amount of activity is detected from the mining computer, is the critical factor in cryptocurrency’s massive power consumption.

As demonstrated by the shutdown in Texas, the carbon footprint of cryptocurrency mining is a significant weakness in the technology’s growing ecosystem. Bitcoin, the first and still most valuable cryptocurrency, uses around 115 terawatt hours of energy globally each year, thus emitting about 65 million tons of carbon dioxide on an annual basis.

Critics have argued that such huge energy requirements put cryptocurrency out of step with other developing technologies at a time of climate crisis. Proponents of cryptocurrency argue for patience, asserting that the technology is still in its early stages of development and will make improvements over time.

This position is shared by the World Economic Forum (WEF), which has made partnerships with dozens of cryptocurrency organizations around the world. The WEF suggests that blockchain technology will become a valuable innovation in the battle against climate change.

In particular, the use of cryptocurrencies could streamline costly inefficiencies in global trade and energy management. The WEF also outlines a prospective Carbon Utility Token (CUT), a cryptocurrency purchasable by companies in which all proceeds from trades go towards green investment. The more CUTs that a corporation holds, the higher would be its Environmental, Social, and Corporate Governance (ESG) investment rating.

Work is already under way to decarbonize cryptocurrency infrastructure with developments like Ethereum 2.0. This network, second in value only to Bitcoin, is adopting a new “Proof of Stake” (PoS) system which will be 99% more energy efficient than the established PoW model.

Many smaller blockchain projects, like SolarCoin and Cardano, have been set up as entirely carbon-neutral operations. For example, SolarCoins can only be verified on its blockchain if the mining process is powered by solar energy.

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