Cryptocurrency, blockchain, Bitcoin, and Ethereum are all buzzwords that are in increasing usage in everyday conversation.
But as concern grows around the surprisingly high environmental costs associated with cryptocurrencies, there is a new push to redesign the industry through a clear commitment to renewable energy use and net-zero carbon emissions.
Terrapass has stepped forward to introduce an innovative product, the Ethereum-based Terrapass Coin (TPSC), as one way in which individuals and small businesses can help meet world energy goals related to the crypto industry.
What Is Cryptocurrency?
Cryptocurrency is most easily understood as a form of digital currency that can be used to buy products and services, in much the same way as cash or credit, but through online transactions.
The original and most widely known cryptocurrency is Bitcoin, created and launched in 2009. But the crypto market now consists of thousands of alternative options, or altcoins, such as Ethereum, Dogecoin, Litecoin, XRP and Monero.
Crypto is designed on blockchain technology, which uses a network of computers in dispersed locations to verify and record the digital assets and their transactions. There is no central bank, as with traditional currencies like the U.S. dollar, and the data is highly encrypted. This decentralized and encrypted nature of blockchain provides a high level of security that protects against scams, hacking, and counterfeiting.
Unlike cash, there is no tangible asset — you cannot hold virtual currency in your hand — and it is stored in digital wallets rather than your bank. Consequently, there are still limitations on how it can be spent. There remain few retailers or other businesses that routinely accept it for payment.
But applications for cryptocurrency continue to expand. Non-fungible tokens (NFTs) are being used to prove ownership of real-world items, such as music, videos, and digital art. Stablecoins — cryptos that tether crypto assets to fiat currencies, precious metals, or short-term securities, like certificates of deposits and money market accounts — are growing in number.
At least 11 countries recognize cryptocurrency as legal, among them are the United States, Germany, the United Arab Emirates, and Japan. And in June 2021, El Salvador became the first country to adopt a cryptocurrency (Bitcoin) as their official legal tender.
Investors have also had a growing interest in cryptocurrencies as investments. They are being bought, sold, and traded to the extent that many now have widely recognized ISO codes, including Bitcoin (BTC), Ether (ETH), and Cardano (ADA).
Crypto exchanges, like Coinbase, are going public. And in spite of the continued volatility among cryptocurrencies, such financial institutions as Goldman Sachs are discussing cryptos as a new asset class.
Cryptocurrency Presents Unique Challenges to Sustainability
But even as the popularity and acceptability of cryptocurrencies surge, there is greater and greater recognition of the crypto economy’s strain on the environment.
The very nature of its foundational blockchain technology, including the many high-powered computers needed to mine (the method by which new crypto coins are created) or verify a single crypto coin, means cryptocurrency demands an extremely power-intensive system.
Besides the large amount of hardware and processing involved, any single crypto transaction is also very time-intensive, meaning even poorer energy efficiency. Each transaction takes much more time than a traditional credit card transaction, having to work its way across the entire associated blockchain.
“The average energy consumption for one single Bitcoin transaction in 2021 could equal several hundreds of thousands of Visa card transactions,” Statista.com reported in October 2021.
Finally, given that energy consumption is so high and in order to keep costs as low as possible, much of the crypto activities take place in countries with lax environmental regulations. Their energy sectors tend to have a higher dependency on fossil fuels, such as coal and natural gas, and a smaller infrastructure for renewable electricity generation.
For example, until their government’s recent crackdown on cryptocurrency, as much as 75% of 2019’s global bitcoin mining took place in China. In that same year, 57.7% of the nation’s energy mix came from the burning of coal, according to ChinaPower.
Bitcoin Is Worst Crypto Offender
Bitcoin and other proof-of-work (PoW) cryptos have received particular critique in the past couple of years regarding their energy consumption.
These coins are “mined” through a competitive process by which miners vie to be the first to solve more and more complex mathematical puzzles. To keep up with other competitors, miners use increasingly advanced super computers and digital mining rigs, all requiring high power generation.
Only the first miner to successfully solve the puzzle is granted the crypto coins. All other work done on the challenge is deemed, essentially, irrelevant. The additional — and vast bulk of — associated labor, hardware, and power consumption goes to waste.
Bitcoin, currently the most popular and most highly valued cryptocurrency, inspires the highest amount of competition, including the greatest investment, highest power usage, and greatest waste in this PoW mining process.
“The process of creating Bitcoin to spend or trade consumes around 91 terawatt-hours of electricity annually,” reads a recent article in the New York Times, “more than is used by Finland, a nation of about 5.5 million.”
The glaring energy consumption/high carbon emissions has even caused early enthusiasts of the technology to pull back support, such as when Elon Musk, who has been a consistent proponent of cryptocurrency, declared that his electric vehicle company, Tesla, would suspend acceptance of Bitcoin as payment until it is more environmentally friendly.
Greening Cryptocurrency
In response to the growing criticism of Bitcoin and other proof-of-work cryptocurrencies, industry leaders, governance bodies, and NGOs have pivoted attention to address the high carbon footprint of crypto mining.
Some blockchain developers, such as Ethereum, an open-source blockchain on which many cryptocurrencies are based, are moving away from the energy-intensive PoW method. Ethereum has started to shift toward a Proof-of-Stake (PoS) method by which crypto transactions would be validated based on the number of coins a user has.
This process will eliminate the competitive race and require much less processing power and processing time. The move is anticipated to reduce the environmental impact of Ethereum by 99%, according to Ethereum core protocol developer Tim Beiko.
And to encourage more creative solutions, a private sector partnership known as the Crypto Climate Accord (CCA) debuted in April 2021 with a mission to decarbonize the cryptocurrency and blockchain industry in record time, through a shift toward renewable power.
The CCA now has over 150 signatories, both corporate and individual, who have publicly agreed to support a series of objectives aimed at decarbonizing the crypto industry through a shift to sustainable energy.
Signatories have all agreed to three primary goals:
- Develop standards and tools to help blockchains move toward the 100% use of clean power by 2025
- Achieve net-zero emissions from their own sources of energy by 2030
- Reach net-zero greenhouse gas emissions across the cryptocurrency industry by 2040
The United Nations Framework Convention on Climate Change (UNFCCC) Climate Champions, “tasked with supporting the global response to the threat of climate change,” has also lent support to the CCA initiative.
Renewables: Key to Sustainable Cryptocurrency?
In a world where technology continues to advance and in which tech is inextricably tied to power generation, renewable energy will play a major role in achieving the goals of the UNFCCC and the Crypto Climate Accord.
Also known as clean energy, renewable energy comes from natural resources that are continually repeated or restored. For example, solar energy is renewable as the sun will continue to provide energy that can be harnessed and utilized, in spite of daily cycles of darkness or periods of bad weather.
Other examples of clean energy technologies are:
- Wind energy (including onshore or offshore wind)
- Hydroelectricity or hydropower
- Geothermal energy
Encouraging the cryptocurrency industry to explore renewable energy systems, whether for PoW or PoS creation and verification processes, is necessary for an effective reduction of its current carbon footprint.
And ultimately, advocates would like to see commitment to a renewable energy transition — reducing and eventually eliminating carbon emissions — in those fields and operations interconnected with cryptocurrency, such as crypto development, crypto finance, and crypto exchange.
Renewable Shift Can Begin With Carbon Offsets
Another means to addressing greenhouse gas concerns in the crypto industry is through carbon offsets.
Carbon offsets are produced by projects that balance out carbon being emitted through other activities, especially when those activities cannot yet transition to 100% renewable energy sources.
Carbon offset projects can consist of strategies that either capture and destroy greenhouse gases, produce power using clean energy resources, or intercept and trap greenhouse gases as energy storage.
For each metric ton of GHGs diverted from the atmosphere, one carbon credit is granted. These credits can be bought, sold, and traded, which has led to the development of an entire industry of its own, the voluntary carbon market (VCM).
The VCM has garnered such interest that it has demonstrated record growth in 2021 and has seen the genesis of ever more innovative sustainability products, including in the cryptocurrency market.
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