Blockchain technology offers many benefits; however, the high energy consumption of some of its applications (especially cryptocurrencies) and its direct involvement with ecology is a point that some detractors use to attack the sector or question it. For the sector to develop globally, it is important to see blockchain technology as more ecological. The impact is as less negative as possible on society and the environment in general. Currently, several proposals promise to help search for solutions to an increasingly sensitive issue in a global society.
Do cryptocurrencies consume more energy than the current banking system?
Although there are cryptocurrencies that are making important advances in reducing their energy consumption, there is still a long way to go since there are currently many cryptocurrencies that are large consumers of electricity, especially when doing mining activities, which it is evident if a comparison is made of the cost of production of the coin and its subsequent circulation.
For example, it is estimated that Bitcoin consumes around 123.77 billion kilowatt-hours of energy per year, compared to 2.64 million hwh of cash, in such a way that if Bitcoin were to become the reserve currency worldwide, global energy production would likely double. Although these data may be worrisome, we must take into account that much of this information is disseminated by the main detractors of cryptocurrencies (traditional banking); likewise, we must also take into account that it is easier to know the consumption of Bitcoin than to know the real consumption of the FIAT banking system at a global level, for which we can say that in reality, both systems have the same problems and that the high consumption of electrical energy is not something that exclusively affects Bitcoin, but affects several sectors and industries globally.
The green blockchain
The ecological blockchain aims to be more efficient by reducing energy consumption; for example, a smaller and more efficient chain of blocks would positively impact the environment. Determining the “real ecological cost” of the blockchain is not that simple; for example, many say that the equation kilowatt per transaction in some cryptocurrencies is not exact. On the other hand, some claim that a third of the electricity used to “mine blocks” comes from renewable sources, and most of the remaining energy comes from other sources such as coal and natural gas.
Renewable Energy Adoption A Solution?
Proponents of cryptocurrencies claim that adopting renewable energy could be greener than the global banking system itself. As blockchains become more popular (and their tokens gain more value), more miners are joining; increasing the total consumption of electrical energy. For example, some experts say that being conservative with “non-renewable” energies could represent only 25% of the total energy used.
Migration to places where energy is cheaper
Some experts say that mining will end up moving to places where energy costs are lower, or they will become buyers of “green energy” as a last resort. It will be necessary to see if this last argument is maintained over time, given the degree of regulation of the energy markets, the costs of relocation, and the possible implications that the concentration of miners would bring for safety.
P2P energy trading
One of the most interesting alternative solutions is a promising application in P2P energy trading. Today, large public utilities provide electricity to large cities through centralized networks. Future smart cities could be based on a more flexible micro-grid network to satisfy local consumption. These localized and autonomous electrical micro-grids would mainly use local energy sources, such as power generators or photovoltaic panels.
Blockchain technology in P2P
Blockchain technology is always a promising way to validate, execute and record P2P energy transactions, thus allowing anyone in a local micro-grid to become a buyer or producer of electrical energy. However, so far, the technology is not up to the challenge. It would require the market to operate with low energy units, with few kilowatts, which would be equivalent to a lower monetary value.
What do you think about this topic? What do you think would be a viable solution to the high power consumption of blockchain technology?
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