Cryptocurrencies have been widely criticized for their enormous energy consumption and consequent carbon emissions. A new climate deal wants to change that fame. Called “Crypto Climate Accord”, its goal is to migrate the entire market to renewable and non-polluting energy sources.
The plan is to arrive in 2040 with the entire carbon neutral cryptocurrency industry. It is an initiative led by the private sector that seeks to migrate all blockchain networks to run on clean energy by 2030. From then on, the agreement wants to reduce air pollution to offset the CO2 emissions accumulated there.
Among the early members, there are big names in the industry. Ripple, the company responsible for the XRP cryptocurrency, is on the list with more than 20 institutions. The company of Tom Steyer, a billionaire and environmental activist, and the huge blockchain conglomerate Consensys are also part of the project.
Bitcoin and ether are major obstacles
Undoubtedly, it is an ambitious plan that will face difficult and numerous obstacles to be realized. The main problems are the two largest cryptocurrencies on the market, bitcoin (BTC) and ether (ETH). Both are primarily responsible for carbon emissions, since mining of these digital currencies is mostly concentrated in China.
For a blockchain to work, it is necessary for people to give up the processing power of their machines and computers to record and encrypt all operations with the cryptocurrency on the network. This is the mining process, which in order to sustain the countless processes that are carried out in bitcoin and ether systems, consumes an enormous amount of energy.
Thus, China is one of the most financially viable countries for mining cryptocurrencies. Energy is cheap in most parts of the country due to the predominantly fossil and extremely polluting energy matrix.
According to a study recently published in the journal Nature, China is responsible for processing about 80% of all bitcoin transactions in the world, while 40% of its plants are fueled with coal. In this way, the bitcoin blockchain, for example, consumes a lot of polluting energy and consequently generates carbon emissions.
Goals are unrealistic
The “Crypto Climate Accord” plan is ambitious, but too shallow. There is still no detail on how the agreement aims to solve the biggest problems in the industry. Bitcoin, for example, is still responsible for more than half of the capitalization of the entire cryptocurrency market, and making it sustainable would be an almost impossible task.
The bitcoin protocol naturally consumes an enormous amount of energy. It is a poorly optimized model, based on “proof of work” checks, which increases the demand for processes as activity with the cryptocurrency grows. With that in mind, with limited renewable resources it is practically impossible to maintain an increasingly costly blockchain. In the case of Ethereum, the network uses the same system, but has plans to change the model in the coming years.
Crypto Climate Accord believes in sustainable bitcoin
Even so, the project’s founders believe that the future of bitcoin can be sustainable. “I’ve been talking to people in the bitcoin ecosystem, it’s a pretty simple proposition,” said Jesse Morris, commercial director for the nonprofit Energy Web Foundation and leader of the initiative, to the The Verge. “If we can make bitcoin sustainable, the greater the ease and the less the risk for other organizations to go in and buy more of the cryptocurrency.”
Economist Alex de Vries disagrees. He stated to the The Verge that “some things simply have no solution”, referring to the plan to “clean up bitcoin”. For him, attracting miners to clean energy regions would require many subsidies, otherwise they would turn to cheap and polluting electricity. That said, Vries sees no point in spending money to encourage an industry that demands so much energy, just to consume limited resources, “it is a waste”.
However, Morris said the climate deal is not about “coming together to ask for subsidies”. The project as a whole seeks to unify a sector to find solutions to the problem. The objectives of the plan must be defined in full by November, in time for the UN climate conference.
With information: The Verge