We all know that blockchain is an ideal financial instrument that provides speed, efficiency and low transaction costs. But there is one “but”. According to the researchers, one bitcoin transaction consumes as much energy as the average American household would consume in 73.82 days (2.5 months). Since mid-2021, the annual energy consumption in the Bitcoin network has grown from 78 Tera (trillion) watt-hours (TWH) to almost 198 TWh last year. Ethereum, although less demanding on energy, still uses as much electricity for a single transaction as a household in the US in 8.32 days. The annual energy consumption of the Ethereum network has grown from almost 15 TWh to more than 92 TWh.
Bitcoin is also the most polluting cryptocurrency. In total figures and based on estimates made in 2021, the mining of this cryptocurrency led to the emission of more than 56.8 million tons of CO2 into the atmosphere (or more than 1,000 pounds of CO2 per transaction). To compensate for such a scale of pollution and make Bitcoin mining carbon neutral, additional planting of more than 280 million trees will be required. To compare the scale of pollution from mining, it is worth saying that as a result of mining in the same year 2021, just over 22 million tons of CO2 were emitted. Other cryptocurrencies that also use the same proof of work (PoW) consensus mechanism face the same problem.
Increasing number of investors attach importance to investments following the environmental and social principles laid down in the Sustainable Development Goals, developed in 2015 by the UN General Assembly as a “plan to achieve a better and more sustainable future for all”. Growing concerns about energy consumption when creating cryptocurrencies, pressure from very influential people such as Elon Musk (who stopped bitcoin payments at Tesla due to the impact of cryptocurrencies on the environment) and government restrictions in large countries such as China are pushing the crypto industry to adapt. In response to these developments, new and existing blockchain projects are striving to switch to less energy-intensive verification systems before exploring mining based on renewable energy sources. New and existing blockchain projects are exploring everything from switching to less energy-intensive consensus-building systems to exploring the possibility of mining based on renewable energy sources. While it seems obvious and effective to solve the problem of CO2 emissions and high energy consumption by banning cryptocurrency mining, such a decision can seriously slow down the development of the blockchain. And therefore, it is possible and necessary to look for solutions that can return the blockchain to the status of “green” technology.
The most promising is the transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS). The operability of PoS-blockchains is supported by validators — owners of cryptocurrencies. They check user transactions, and if at least 2/3 of the validators agree that the transaction is correct, it is included in a new block. Validators are engaged only in useful work (verification), and not in sorting numbers, so they do not have a race for performance, like miners.
The PoS algorithm is the most environmentally friendly way of blockchain operation. It is he who is used in the work of the HAQQ blockchain of the Islamic Coin project. Islamic Coin cannot be arbitrarily printed and therefore devalued. It also cannot be “inflated” by raising the Central Bank’s interest rate; its price is determined by the market and, therefore, is always fair. Islamic Coin can be minted (issued) only by those who contribute to the work and investments as validators of the network at a predetermined announced rate.
The HAQQ blockchain can also be used in projects of so-called green smart contracts. Green smart contracts open up new ways to combat climate change and overcome the negative consequences of its change. This is especially important in areas requiring the collection and verification of large amounts of data and the promotion of sustainable environmental behavior, such as regenerative agriculture, carbon offsetting, crop insurance, etc. Green smart contracts can help solve environmental problems as they expand the scope of environmentally-oriented blockchain-based solutions. And this is an excellent application for compliance with the 7 and 12 Sustainable Development Goals, declaring “Access to inexpensive, reliable, sustainable and modern energy” and “Ensuring rational consumption and production models”.
Advances in consensus mechanisms and a focus on the use of renewable energy sources will reduce the overall environmental costs of cryptocurrencies and blockchain networks with widespread adoption. There is still a problem of electronic waste from outdated mining operations that needs to be dealt with, but non-PoW cryptocurrencies will reduce the demand for the construction of new and larger mining installations in the future, which will potentially reduce energy consumption and environmental emissions. Despite the rather gloomy picture drawn by eco-activists when analyzing the cryptocurrency and blockchain market, the situation may change.
To do this, it is enough just to change the approach to the work of the blockchain and find common ground for the reasonable existence of the digital and real worlds. The developers of HAQQ and IslamicCoin already clearly feel these points and are able to put the blockchain at the service of ecology.