A “pointless way of using energy”?
The amount of energy that is required to operate the Bitcoin network is staggering: Tim Berners-Lee, who is considered to be the inventor of the World Wide Web, has even described “Bitcoin mining” as “one of the most basic senseless uses” of energy . ”
Bitcoins do not exist as physical objects, but new coins are “mined” or put into circulation through a process that uses powerful computers to solve complex math problems. This process requires so much energy that the Bitcoin network is estimated to use more energy than several countries, including Kazakhstan and the Netherlands. And since fossil fuel power plants still make up a large part of the global energy mix, Bitcoin mining can be said to be partly responsible for producing the greenhouse gases that cause climate change (although the impact on the climate is far less than that of heavyweights like Agriculture, construction, energy and transport).
Another problem is the energy consumption per transaction, which is enormous compared to traditional credit cards: for example, each Mastercard transaction is estimated to only use 0.0006 kWh (kilowatt hours), while each Bitcoin transaction consumes 980 kWh, enough for an average Canadian Providing power to the home for more than three weeks, according to some commentators.
Garbage collectors comb through urban landfills in Zambia. An important engine for sustainable development?
Despite these problems, UN experts believe that cryptocurrencies and the technology that powers them (blockchain) play an important role in sustainable development and can actually improve our dealings with the environment.
One of the most useful aspects of cryptocurrencies from the UN perspective is transparency.
Because the technology is resistant to tampering and fraud, it can provide a trustworthy and transparent record of transactions. This is particularly important in regions with weak institutions and high levels of corruption.
The World Food Program (WFP), the largest UN agency that issues humanitarian cash, has found that blockchain can help cash reach those who need it most.
A pilot program in Pakistan has shown that it is possible for WFP to send cash directly to beneficiaries safely and quickly without the need for a local bank. The Building Blocks project has also been successfully tested in refugee camps in Jordan to ensure that the WFP can create a reliable online record of every single transaction.
If this can work for refugees, it can work for other disadvantaged, vulnerable groups as well. The authors of a report by the United Nations Environment Agency (UNEP) suggest that the technology could improve the livelihoods of garbage collectors who make a living in the informal economy.
A transparent monitoring system, the report says, could keep track of exactly where and how the recovered waste is being used, as well as identify who picked it to ensure the right people are being rewarded for their efforts.
Unsplash / Chris LeBoutillier
Air pollution is harmful to our health, but there is often a lack of local data that is made available to find solutions to block environmental degradation
The potential of the blockchain for environmental protection has been tested in a number of other projects by the UN and other organizations. These range from an instrument to eradicate illegal fishing in the tuna industry, developed for the World Wide Fund for Nature (WWF), to a platform (CarbonX) that converts greenhouse gas emission reductions into a cryptocurrency that is bought and Manufacturers and consumers can be sold with a financial incentive to make more sustainable choices.
For UNEP’s DTU partnership (a collaboration between UNEP, the Technical University of Denmark and the Danish Ministry of Foreign Affairs) there are three main areas where blockchain can accelerate climate action: transparency, climate finance and clean energy markets.
Data on harmful greenhouse gas emissions in many countries are incomplete and unreliable, the partnership said. Blockchain solutions could provide a transparent and trustworthy way of showing how nations are taking action to reduce their impact on the climate.
Climate finance – investments that help slow climate change – could be encouraged as carbon markets expand and businesses and industries make the transition to low-carbon technologies.
And blockchain could be an important part of accelerating the diffusion of renewable energy sources like wind and solar power. Since these sources are intermittent and decentralized by their nature, new forms of energy markets are needed.
Tools that use blockchain technology can help create these markets and end our dependence on fossil fuels.
Find low energy solutions
Despite all of these potential benefits, the huge energy consumption associated with the technology is one of the biggest hurdles to overcome and many players in the industry are working to address this problem.
For example, the Ethereum Foundation, the organization behind the cryptocurrency Ethereum, is working on a new method for checking transactions. Switching to a different method (called Proof of Stake or PoS) could cut the energy costs of each transaction by 99.95 percent, the foundation says.
At the same time, many players in the industry want to make sure that the energy consumed by the industry is completely carbon-free.
In April 2021, three major organizations (the Energy Web Foundation, the Rocky Mountain Institute and the Alliance for Innovative Regulations) established the Crypto Climate Accord, which is supported by organizations from the fields of climate, finance, NGOs and energy.
The aim of the deal is to “decarbonise the industry in record time” and achieve net zero emissions in the global crypto industry by 2030.
Unsplash / Jingming pan
Gold has always played an important role in the international monetary system. The ups and downs of the cryptocurrency
Cryptocurrencies are still in their infancy and there are still many technical and political challenges to overcome, as evidenced by the volatility of some of the most popular versions.
A single tweet from tech billionaire Elon Musk can make Bitcoin’s value rise or fall; El Salvador announced plans to make bitcoin legal tender in June, a month after Beijing announced crackdown on bitcoin mining; while another cryptocurrency, Dogecoin, was also traded extensively, with huge, widely reported jumps and dips in its value (again thanks in part to announcements from Mr. Musk), despite being created as a hoax.
Nevertheless, many financial experts believe that these teething troubles will be ironed out at some point and that cryptocurrencies and other blockchain-based financial instruments can become mainstream: A number of central banks are planning their own digital currencies and so-called “stablecoins” that can be linked to precious metals such as gold or national currencies , as the name suggests, could become stable and reliable investment opportunities.
If the weakest are to benefit from the promises of blockchain technology and if the climate crisis is to be really positively impacted, more technical research and stronger international dialogue involving experts, scientists and policymakers are required.
“The United Nations should continue to experiment in the blockchain area,” says Minang Acharya, one of the authors of a recent UNEP foresight briefing on blockchain applications. “The more we experiment, the more we learn about the technology. This will likely improve our UN-wide knowledge of blockchain, our understanding of the environmental and social impacts of mining operations, and improve our chances of dealing with any problems the technology could pose in the future. ”