Mining blocks in a blockchain, namely, creating transactions, involves using powerful computers to solve complex mathematical problems to reach a consensus. World electricity final consumption by sector 1974 – 2018. Why is this relevant? It turns out electricity accounts for 25% of the total greenhouse emissions worldwide, and approximately 62% of electricity comes from burning fuels, mostly coal and natural gas, which is counterproductive for the environment and global warming (EPA, 2021b).įigure 1. The greatest electric energy consumption is made by the industry worldwide, followed by residencies and commercial buildings. In most countries, end-users receive electricity from centralized power plants that use different energy sources, such as natural gas, coal, nuclear energy, and renewable energy (solar, hydroelectric, wind power).įigure 1 shows the distribution of energy consumption by end-users in 2018, allocated to industry, residential, commercial, public services, transport, and others. Today, many electric power grids worldwide are governed by a complex network of power plants, transmission and distribution wires, and end-users of electricity. Thus, this article analyses not only the resource intensiveness of Ethereum, but it also covers key aspects of regulation, action plans, and Environmental, Social, and Governance (ESG) activities in order to track their implementation in sustainable technologies.
However, they failed to zoom out to provide some context, comparing blockchain-based solutions, such as cryptocurrencies, with mere equivalents of just one side of a multi-pronged system. Most comparisons out there are just focused on specific activities that support this system, such as mining and placing transactions, which are obviously depending on electricity consumption. To understand how blockchain is affecting the environment, it is essential to remember how the electricity system works and the most common sources of energy. However, the concern about its sustainability has undermined these advantages and slowed adoption.īut, are these concerns accurate? Can they justify the loss of efficiency and transparency that is causing? Is blockchain adoption really a negative environmental tradeoff? That is why this tamper-proof, transparent technology that has earned its reputation as “ the trust machine ” is being increasingly implemented across multiple industries that aim to benefit from its efficiency gains. Unlike big tech’s algorithms, which are kept secret and are constantly changing, blockchain’s contracts as well as their standards and governing logics, are public (open-sourced) -at least the case of Ethereum, the most used blockchain in the world. Through distributed networks, every transaction is validated by multiple parties, ensuring that no participant can alter the data without informing the entire network. Unlike centralized networks, where a minimal number of shareholders control and benefit from the network’s growth, blockchain enables an incentive system that can benefit the entire network. A portion of this potential lies in the alignment of network value creation through participation. Blockchains and other Distributed Ledger Technologies (DLT) have the potential to drive positive impact at an immense scale. With this, the negative environmental impact of cryptocurrencies such as Bitcoin has been widely covered in the press in recent weeks and months, flagged as a cause for concern.Īlthough cryptocurrencies have been recently involved in this unease, what should be analyzed is the technology behind them and what it enables.
Nowadays, the pressing apprehension amid the climate crisis has pushed the markets towards sustainable targets seeking to improve their environmental-friendly practices. With the new updates expected for 20, Ethereum promises to be the leading data and logic processor, transaction validator with distributed storage in the crypto market, adding to its consensus protocol the sustainable development goals (SDGs). With less than half the market capitalization of Bitcoin, Ethereum had a trading volume of 600 billion dollars in May 2021, 60% higher than Bitcoin, according to Morgan Stanley. “Ethereum is outperforming Bitcoin” is the new headline from CNBC (2021), the business and financial news network.
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