By Miguel Hernández Sánchez y Pablo J. Castellanos Compaña / Sevilla, 24/10/2024
Blockchain technology has revolutionized various sectors, from finance to logistics, thanks to its ability to guarantee secure transactions. However, its environmental impact has generated controversy due to the high energy consumption required for its mining. In this article we will explain what exactly blockchain is, what its impact on the environment is and what measures are currently being implemented to mitigate its impact.
What is the Blockchain?
Blockchain is a shared or distributed database where the recorded information is stored in blocks (or “blocks”) to which information related to another block of the previous chain is added to keep track through large cryptographic calculations, allowing digital transactions to be carried out securely, transparently and without the need for intermediaries. Each block is validated through a consensus process, such as Proof of Work (PoW) or Proof of Stake (PoS).
Highlights of the blockchain include:
- Decentralization: There is no central authority controlling the information. The authority is democratized by the users themselves.
- Transparency: All nodes in the network can see the transactions made.
- Security: Transactions are encrypted and, once recorded on the chain, cannot be altered.
Although the blockchain has revolutionized industries such as cryptocurrencies (Bitcoin, Ethereum) and smart contracts, it has also generated controversy due to its high environmental impact.
Why does the Blockchain Affect the Environment?
Despite these benefits, it is important to note that blockchain technology also has environmental impacts due to its high energy consumption. PoW requires a large amount of energy, which can contribute to greenhouse gas emissions. This system requires “miners” to solve complex mathematical problems to validate blocks, a process that consumes enormous amounts of electricity.
Main factors affecting the environment:
- Energy consumption: Mining cryptocurrencies such as Bitcoin can consume the same amount of energy as entire countries. According to studies, Bitcoin came to consume more energy than Argentina in 2021; in 2022 it reached 93.98 TWh/year, equivalent to the energy consumption of Kazakhstan. A smart contract on Ethereum can consume 142 kWh of energy and generate 83 kg of CO2. This is because PoW demands the continuous operation of specialized equipment (ASICs) running at full capacity, generating high electricity consumption.
- Carbon footprint: Much of the energy used for mining comes from non-renewable sources, such as coal, which contributes to greenhouse gas emissions. In addition, increased energy demand in places where miners are located, such as China and some regions of the US, has exacerbated dependence on fossil fuels.
- Electronic waste: The hardware used for mining has a short useful life, which generates large amounts of electronic waste. Mining equipment, which must be constantly upgraded to remain competitive, is discarded in very short time frames.
Measures to Reduce the Environmental Impact of the Blockchain
As a countermeasure to these problems, solutions are being investigated, such as the use of more efficient algorithms or the use of renewable energies to power the blockchain network.
Among the main initiatives and technological improvements are the following:
- Switching to Proof of Stake (PoS): The migration of networks like Ethereum from PoW to PoS is one of the most important strategies. Unlike Proof of Work, in Proof of Stake, validators are selected based on the amount of cryptocurrencies they own and are willing to “bet” or “block” as collateral. This eliminates the need for massive computational competition, drastically reducing energy consumption. Ethereum, for example, estimates that its transition to PoS has reduced its energy consumption by 99.95%.
- Use of renewable energy: Some miners and companies are beginning to use renewable energy sources, such as solar and wind, to power their operations. Places like Iceland and Canada, which have access to abundant and cheap hydropower, have become hubs for greener mining. In addition, organizations like Crypto Climate Accord are looking for the entire blockchain industry to run exclusively on clean energy by 2030.
- Algorithm optimization: New consensus solutions that require less energy are being developed. Algorithms such as Proof of Authority (PoA) or Proof of History (PoH) are designed to be more efficient than traditional PoW.
- E-waste minimization: Several companies have begun to explore ways to recycle and reuse mining hardware. There are also initiatives to develop more durable and efficient mining equipment, with less planned obsolescence.
In short, blockchain is a disruptive technology with enormous benefits, but its environmental impact cannot be ignored. However, the adoption of new solutions such as proof of stake and the use of renewable energy shows that it is possible to make it more sustainable. As technology evolves, it is crucial that the industry continues to innovate to reduce its ecological footprint, ensuring that the digital revolution is also environmentally friendly.