Can Blockchain be Sustainable? Exploring the Ethereum Merge and Greener Web3 Solutions
Web3 has the potential to completely transform our digital lives. Decentralized applications, non-fungible tokens, and other blockchain-based innovations have opened up new possibilities for online interactions and commerce. But for all of Web3’s potential in creating a more open and transparent internet, blockchain technology has sparked a heated debate, and for good reason: its environmental impact is massive.
Bitcoin, the world’s leading cryptocurrency, consumes an estimated 150 TWh of energy annually – more than all of Argentina, a country with a population of 45 million. This contributes to the release of nearly 65 million metric tons of CO2 into the atmosphere each year. Moreover, the surging demand for digital currencies has only intensified the problem; between 2018 and 2022, the United States experienced a fourfold increase in annualized electricity consumption attributed to crypto assets.
As we navigate the dynamic realm of blockchain, addressing their environmental impact and pursuing sustainable solutions for the industry’s future is of paramount importance.
What makes the blockchain so energy intensive? Much of it is related to the Proof of Work (PoW) consensus networks relied on by many blockchain networks. Some players in the industry, like Ethereum, have turned to Proof of Stake as a potential solution. But is it enough? And will dominant players, like Bitcoin, follow suit? In this blog, we’ll talk about what makes Web3 so energy-intensive, and some of the opportunities for making it more sustainable.
Table Of Contents
What is Proof of Work (PoW)?
Proof of work (PoW) is a consensus mechanism used in blockchain networks to create new blocks and verify transactions. Consensus mechanisms are key to the blockchain, ensuring the validity and security of the ledger when no central authority can verify transactions or resolve disputes. In PoW, participants must complete a complex mathematical function, or “hash function,” to add the next block to the blockchain. Both Bitcoin and Ethereum, the two largest blockchains, use this approach.
Unfortunately, the very element that makes the blockchain so valuable is the same thing that makes it problematic. Hash functions require a lot of computational power and energy, as miners must be constantly solving puzzles to maintain the integrity of the network. The puzzles require the use of powerful computers to perform a huge volume of calculations. Competition between miners means an ever-increasing amount of computational power is required, and with it, energy consumption. As the network grows and more miners compete to solve puzzles, the puzzles become more difficult, and energy usage grows, too.
Because of this, PoW has been criticized for its high carbon footprint, leading some blockchain miners to explore alternative consensus models that might offer more energy-efficient models. The most popular alternative being explored today, Proof of Stake, has been implemented in Ethereum. Others have explored using renewable energy sources as an alternative.
