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Dispelling Friends' Doubts About Blockchain's Energy Efficiency

2023-08-14

Main Takeaways

  • Blockchain technology often faces skepticism about its energy efficiency and environmental impact.

  • In fact, much of this impact can be attributed to mining bitcoin and similar proof-of-work (PoW) assets. However, the majority of newer blockchains use a much more environmentally friendly consensus mechanism, proof-of-stake (PoS).

  • This article will provide you with a five-step strategy to explain to your friends, family, and any crypto doubters out there how the blockchain industry is addressing energy consumption concerns.

Struggling to convince your friends that blockchain can be energy-efficient? Don't worry, we've got you covered.

As a new technology, blockchain is often misunderstood. Some sing its praises, while others deride it as a dangerous fad. But what exactly is the reality? One of the most common blockchain issues present in the public mind is its perceived energy consumption. 

Claims that blockchain networks, particularly those using proof-of-work (PoW) consensus mechanisms, are energy-intensive has led to skepticism. If you've tried to explain blockchain's potential to your friends, but only hear accusations of it being environmentally harmful, we're here to lend a hand.

So what’s the trick? It all comes down to realistically explaining blockchain's energy consumption and how the technology is evolving to address these concerns. Sit back and learn exactly how to dispel your friends' doubts about blockchain's energy consumption in five easy steps.

Why Do People Worry About Blockchains’ Energy Consumption?

Doubts about blockchain networks’ energy efficiency often revolve around several key concerns:

The PoW consensus mechanism. Many popular blockchain networks, like Bitcoin, currently rely on PoW. This consensus mechanism requires significant computational power and energy to validate transactions and maintain the distributed consensus.

Environmental impact. Critics worry that the energy-intensive nature of PoW blockchains contributes to higher carbon emissions and environmental degradation, given its alleged reliance on energy sources that may not be environmentally friendly.

Lack of awareness: Misinformation and lack of awareness about the ongoing efforts to improve blockchain's energy consumption contribute to doubts about its sustainability.

Is Blockchain's Energy Consumption Worth it?

Before we jump into how much energy blockchain actually uses, it’s worth assessing blockchain’s benefits. At the end of the day, appraising any industry’s energy efficiency comes down to making a judgment about whether the benefits the sector provides outweigh the energy that it consumes. Let’s consider what the digital-asset industry brings to the table. 

Decentralization and trust

Blockchain's decentralized nature eliminates the need for a central authority in numerous types of transactions. This reduces the risk of single points of failure and increases transparency and trust in data integrity – a benefit that can be productively used across many industries and domains of human activity.

Energy efficiency improvements

While PoW blockchains are energy-intensive, there are ongoing developments to improve energy efficiency. Many networks now use alternative consensus mechanisms like proof-of-Stake (PoS) that significantly reduce energy consumption. 

Positive effects on the environment

Blockchain's applications in supply chain management, renewable energy trading, and carbon footprint tracking show potential for a positive environmental impact.

Innovation for sustainability

Blockchain technology is fostering innovation in energy-efficient solutions, such as incentivizing green energy production and consumption, ultimately contributing to a more sustainable energy ecosystem.

Where Are the Energy-Efficient Blockchains and Use Cases?

Although blockchain technology has faced criticism for its energy consumption, it's essential to recognize that not all blockchain networks use the energy-intensive PoW consensus mechanism. PoS blockchains – and those using other alternative consensus algorithms – are gaining traction due to their capacity to ensure network security using a fraction of the energy that PoW systems require.

For one, the Crypto Carbon Ratings Institute (CCRI) has examined the impact of Ethereum’s transition from PoW to PoS and found that its annualized electricity consumption went down by more than 99.9% as a result of the upgrade. Accordingly, Ethereum’s carbon footprint also decreased by 99.9%.

Some blockchain projects are also actively working on energy-efficient use cases, such as:

  • Green energy solutions. Blockchain is being used to facilitate peer-to-peer energy trading, where individuals can buy and sell excess renewable energy, promoting a greener and more sustainable energy ecosystem.

  • Carbon footprint tracking. Blockchain is utilized for transparent tracking of carbon footprint throughout supply chains, thus introducing more accountability and encouraging businesses to reduce their environmental impact.

  • Environmental conservation. Certain blockchain projects enable the issuance of crypto tokens as rewards for eco-friendly actions, stimulating environmentally conscious behavior.

  • Supply chain sustainability. By leveraging blockchain's transparency and immutability, companies can ensure their supply chains adhere to sustainable and ethical practices.

The Elephant in the Room: Bitcoin’s Energy Usage

So, how much energy does Bitcoin actually use, and what does its green energy usage look like? These are, by far, the biggest points raised when talking about blockchain systems’ energy consumption.

Estimates of Bitcoin's energy needs vary widely depending on the methodology used and the source of data. Typically, the network's energy consumption has been compared to that of industries or even entire countries.

However, it's important to note that the energy consumption of Bitcoin can change due to factors such as the price of BTC, efficiency of mining hardware, and the overall network hash rate. Nevertheless, it would be disingenuous to claim it’s small or insignificant.

In terms of green energy usage, some efforts have been made within the Bitcoin community to promote more environmentally friendly mining practices. This includes the use of renewable energy sources such as hydroelectric, solar, and wind power. While the exact proportion of green energy used for Bitcoin mining is difficult to quantify due to the decentralized and private nature of many mining operations, there is evidence suggesting the existence of a powerful “green” turn in BTC mining.

According to some estimates, at least in the United States, the share of renewable energy used to mine BTC has surpassed 50% in 2022, and keeps going up. To explore the topic further, make sure to read our Crypto Myths – Debunked! Part 8: The Myth That Crypto Is Bad For The Environment deep dive.

How to Dispel Your Friends' Doubts in 5 Steps

Below we've outlined five key points that can help address your friends' doubts about blockchain's energy efficiency.

1. Clarify that there are different consensus mechanisms.

Explain that not all blockchains use energy-intensive PoW. Highlight the existence and benefits of energy-efficient PoS and other consensus mechanisms, and also note how these are increasingly popular today. 

2. Showcase eco-friendly use cases.

Demonstrate blockchain projects focused on green energy, carbon footprint tracking, and environmental conservation, showcasing their positive impact on the environment.

3. Highlight energy efficiency efforts.

Share information about ongoing developments to improve blockchain's energy efficiency and the growing commitment to environmentally conscious solutions. Ethereum’s move to PoS is a great example, and you can easily find official facts and figures supplied by the Ethereum foundation to back this up.

4. Discuss performance improvements.

Here, talk about scalability advancements, layer-two solutions, and user-friendly interfaces that have contributed to better performance and usability. These significantly reduce the energy and cost needed for users to successfully use a blockchain.

5. Promote a balanced perspective. 

Both sides of this debate have legitimate arguments. While some players and technologies are working efficiently, others aren’t. Here, it’s best to encourage a balanced view of blockchain technology, acknowledging both its challenges and its potential to drive positive change.

Blockchain Has a Role in a Sustainable Future

Blockchain technology has the potential to contribute significantly to a sustainable future. However, misconceptions about its energy consumption could impede its progress. By dispelling ill-informed notions, highlighting energy-efficient use cases, and promoting a balanced perspective, we can help our friends and family better grasp blockchain’s transformative potential.

So, next time you hear doubts about blockchain's energy efficiency, make sure to equip yourself with these five simple steps and offer some reassurance!

Further Reading