Energy Efficiency in Blockchain Technologies
For the whole Web 3 industry, the past year has been unprecedented development and transformation. The excitement for blockchain’s potential has never been higher, thanks to decentralized finance (DeFi) and non-fungible tokens (NFT), as well as an increase in interest from traditional finance. However, with this attention comes new scrutiny. The usage of energy is at the top of the list.
There is a growing interest in green technology and its widespread adoption. For those in the financial industry, the question of whether cryptocurrencies have a positive or negative net environmental impact remains divisive.
The demand for cryptocurrencies is at an all-time high. Large businesses are beginning to accept cryptocurrency as a form of payment instead of traditional currencies. Non-fungible currencies based on blockchain systems are assisting craftsmen in novel and fascinating ways. In the meantime, large firms and institutional investors have begun to include cryptocurrency in their financial statements. This surge in demand has brought attention to the technology’s rising energy consumption.
In this article, we shall bring to you the rising environmental effects of blockchain technology and the new variants that are more eco-friendly compared to their ancestors.
Why does Blockchain technology consume more energy?
The consensus mechanism is the troublesome characteristic of blockchain. The way a blockchain validates a transaction is by consensus. While many blockchains use different consensus mechanisms, Bitcoin’s Proof of Work (PoW) process is the Hummer of blockchains due to its popularity and reach.
In PoW, users compete to mine blocks of transactions. Mining is part of the validation process that ensures that a transaction’s input and output are identical. Many competing miners spend a lot of time and effort trying to find an integer that ends in a block’s hash value being beneath the current target difficulty. This is especially true for well-known cryptocurrencies like Bitcoin.
However, not all blockchains are Hummers. PoW is just one of several popular consensus processes. Others include Proof of Stake (PoS) and low-energy private blockchain alternatives.
PoS gives individuals with higher bitcoin holdings more power in transaction validation than PoW’s energy-intensive mining free-for-all. A validator may stake bitcoin to qualify as a validator, depending on the nature of the PoS protocol. The staked sums may be “slashed” if they abuse their position of authority by acting dishonestly. This encourages good conduct and eliminates the need for consensus computation puzzles, consuming less energy than PoW models.
The blockchain sector is similar to any other industry in that it is a mix of archaic, resource-intensive enterprises and forward-thinking projects that set new standards for operational efficiency and sustainability. Environmental issues that pertain to only a few projects have been generalised over the whole blockchain industry by critics. Only networks that employ the PoW consensus process consume a lot of energy, and it’s well acknowledged that PoS is a more energy-efficient option. In reality, Ethereum is now working on converting the Ethereum network to a proof-of-stake (PoS) mechanism. (Reality check: Pure PoS won’t be available until v3.0, and Ethereum v2.0 and 3.0 have been years in the making.)
Because of how nodes authenticate network activity, PoW protocols have proven resource-intensive. PoW deserves credit for igniting the blockchain sector, but it’s evident that the consensus mechanism has sparked a never-ending, resource-intensive arms race among crypto miners, who are continually updating their mining equipment to get an advantage over the competitors.
BLOCKCHAINS THAT ARE ENERGY EFFICIENT
Energy usage is certainly a contentious topic in the blockchain sector. We’re at a crossroads, with the option of actively championing new regulations to reduce the industry’s environmental imprint. That standard is PoS.
There is an immediate demand for an environmentally friendly enterprise blockchain that is fully capable of handling high volume activity. PoS networks have risen to the occasion to fill the hole.
Casper, a network that is optimized for sustainability due to its revolutionary consensus method, is one of the most recent PoS networks to gain attention from developers and businesses.
Crypto is powered by electricity, just like other energy-powered technologies such as cloud computing and social networks. The Crypto Climate Accord (CCA) is a private sector-led initiative for the entire crypto community. Inspired by the Paris Climate Agreement, the Accord will decarbonize the industry in record time. The CCA was created by the non-profits Energy Web, the Alliance for Innovative Regulation, and RMI with the backing of over 20 organizations, including the UNFCCC Climate Champions, CoinShares, Consensys, and the Web 3 Foundation.
Energy Web (EW) is a global non-profit organization that uses open-source, decentralized technologies to accelerate the development of a low-carbon, customer-centric power system. EW focuses on establishing basic infrastructure and shared technologies, accelerating commercial solution acceptance, and cultivating a community of practice.
EW is the world’s first open-source, enterprise-grade, blockchain platform. EW Chain boasts high scalability, low transaction costs, and lean energy consumption. It uses a permissioned Proof-of-Authority (PoA) consensus mechanism for its transactions. In contrast, EW Chain’s PoA consensus mechanism consumes six orders of magnitude less energy than Ethereum. PoA is a permissioned Proof-of-Authority (PoA) consensus mechanism in which a pool of known and trusted computers are responsible for validating transactions and creating blocks.
According to new research, the Avalanche blockchain is the most energy-efficient of the major blockchain networks.
Hedera Hashgraph (HBAR)
Hedera is a new, energy-efficient cryptocurrency. Powered by hashgraph consensus, its proof-of-stake public network is characterized by incredibly low bandwidth consumption. It’s led by the Hedera Governing Council, which consists of up to 39 term-limited organizations.
SolarCoin (SLR)
Solarcoins are distributed to solar power system owners based on how much electricity they generate rather than how much energy they consume through mining. The SolarCoin Foundation, a global solar energy incentive program with over 100 locations, receives information on energy generation from owners.
BitGreen (BITG)
BitGreen’s patented protocol includes a low-energy Proof-of-Stake algorithm. In a similar way to SolarCoin, they promote environmentally good decisions to realise their commitment to sustainability. Users are rewarded for participating in bike-share programs, volunteering, and supporting environmentally friendly businesses and charities.
Our Thoughts
Blockchain proponents must do a better job of immediately addressing real issues when they arise, and we believe that any team that is confident in what they’re doing should welcome the opportunity to put their ideas to the test in public. We need to encourage everyone with clout to ask tough questions about what we’re doing to make our technology more sustainable because the best way to hold people accountable is to deliver precise and actionable critiques when merited and to provide credit where credit is deserved.
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