Economy Cryptocurrency players sign a climate agreement

Cryptocurrency players sign a climate agreement

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Blockchain climate deal unites part of the industry – Geeko

The blockchain, or block chain in French, allows operations to be carried out in a secure, transparent and decentralized manner. However, technology can require the mobilization of a large number of machines to function. This ultimately represents a huge energy impact and a significant carbon footprint.

In terms of energy consumption, Bitcoin is the worst student, but also the oldest technology. Its operation in Proof of Work (validation by proof of work) allows secure and fast transactions without having to trust a third party. For this to work, a significant number of computers have to solve complex computer problems. Last February, this “digital gold” represented 70% of the cryptocurrency market capitalization. Its operation has an annual carbon footprint comparable to that of New Zealand.

The Ethereum protocol and its namesake currency is a blockchain technology that appeared shortly after Bitcoin. It goes further and provides the basis for performing all kinds of smart, complex and transparent contracts, which again do not require third-party intermediation. Although faster than Bitcoin, Ethereum is no slouch and is said to have a carbon footprint similar to that of Lithuania. Several cryptocurrencies work thanks to Ethereum, but hundreds of other alternative protocols of all kinds have emerged in recent years, always more efficient and less energy consuming.

Recently, non-fungible tokens or NFTs have been a hot topic. It is now possible to authenticate a unique digital work, thanks to the blockchain. We can therefore sell it and make it increase in value. If this represents a real revolution for the art market, NFTs are strongly criticized for their not very ecological character. A series of works can indeed reach the equivalent of the annual CO2 consumption of a European citizen. Most of these NFTs work in Proof of Work on the Ethereum protocol, but other more ecological solutions exist and are emerging.

A private agreement for a sustainable blockchain

With the support of the UN and to give credibility to the use of the blockchain, several private players in the sector have joined forces to present a special cryptocurrency climate agreement. The agreement was initiated and signed by the Energy Web Foundation based in Switzerland and founded by the American think-tank Rocky Mountain Institute (RMI), which works to reduce the use of fossil fuels in the industrial sector, as well than by the Alliance for Innovative Regulations (AIR), another think-tank in favor of technological innovations in the regulation of the financial sector.

About twenty other influential players in the crypto industry or in the fight against climate change have also joined the agreement. Among them is the American cryptocurrency firm Ripple, which in 2012 developed a payment protocol and a cryptocurrency of the same name. It differs from Bitcoin by offering an alternative by “validation by consensus” to the “validation by proof of work” (Proof of Work) of Bitcoin. That is to say, thousands of machines should not be mobilized to verify and secure transactions. It is therefore not trivial that Ripple supports the initiative, because the technology is faster and consumes much less energy than Bitcoin. Ripple is not, however, as decentralized and secure as the latter.

Targets for the deal are expected to be ready by November 2021, in time for the COP 26 climate conference in Glasgow, Scotland. The agreement is inspired by that of Paris drawn up during the COP 21. It intends in the long term to bring together all the players in the sector.

Jesse Morris, Commercial Director of the Energy Web Foundation, is optimistic about the sustainable future of Bitcoin: “If we can make Bitcoin green, it will be easier and less risky for organizations to buy it.” The agreement, still highly vague and preliminary, would aim to make the blockchain work mainly in renewable energies by 2030 and without any CO2 emissions by 2040.

Illusory perspectives

According to Alex de Vries, economist and great critic of the ecological impact of Bitcoin, it is simply illusory to believe in a green Bitcoin: “Some things cannot be fixed”. Indeed, the mechanism on which Bitcoin is based is unchangeable. While several green alternatives are emerging to replace it, the latter remains the market leader. This is one of the most important hurdles to overcome in the fight for a sustainable blockchain.

A climate agreement for the blockchain unites part of the industry
Blockchain climate deal unites part of the industry – geeko
Hundreds of computers continuously mine Bitcoin for commissions (Credit: Lars Hagberg / AFP)

Even if the agreement manages to convince Bitcoin miners to switch to a more expensive renewable energy, the mobilization of these resources to the detriment of other sectors is difficult to justify, while alternatives exist. Ethereum also works in part thanks to Proof of Work, but will gradually transition to another technology called Proof of Stake, less greedy in energy, but with its own ideological issues.

Convince the industry

Like Bitcoin, many blockchain technologies operate in decentralized and horizontal ways, governance is not from top to bottom, but by users, for users. It will therefore be difficult to convince everyone to join the agreement, even on a single blockchain.

In addition, some of them appeared against an ideological background of cyber libertarianism, a movement firmly opposed to the regulation of the Internet. Bitcoin, for example, was created in order to be able to exchange money in a secure and anonymous way without having to pass for an intermediary such as a bank or a state.

However, the Crypto Climate Accord lays the foundations for future groups of actions and consultations so that the industry can resolve major issues such as its energy consumption. The credibility defended by the crypto industry does not lie only on horizontality, decentralization and security, but also on sustainability. The ecological vector in the development of the industry cannot therefore be put aside.

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