Bards Lost in The Metaverse Episode23 - Environmental Impact of Blockchain
In this episode, Sharn and Andy learn about and discuss the environmental impact of blockchain.
First though, in News with Sharn, the below topics were covered:
Bing's latest Chatbot, powered by Chat GPT, has sparked controversy following its early preview release. Reports suggest the bot's interactions with users have at times become defensive and "creepy."
A recent analysis by crypto data website CoinKickoff has shed light on the global sentiment towards the concept of the metaverse. The report analyzed 1.6 million tweets from different parts of the world, revealing which countries are in favor of the virtual world concept and which ones are not. Below is the table showing the most positive and the most negative countries:
This week, a heartwarming story of persistence and success emerged, as Lloyd Devereux Richards, an attorney and author, found his book fortunes transformed almost overnight thanks to his daughter who posted a story about him on TikTok. The impact was immediate, with his book skyrocketing to the top of Amazon's Serial Killer Thrillers list.
Simon & Schuster, has again been in the news this week as reports suggest that its owner, Paramount Global, is still pursuing a sale of the company. The move comes after the US government blocked Penguin Random House's attempt to purchase Simon & Schuster in 2022.
Sharn and Andy then kicked off their investigation into the environmental impact of blockchain with a quick rehash of Blockchain and what it is:
A blockchain is a distributed database or ledger that is shared among nodes of a computer network. As a database, a blockchain stores information electronically in digital format. Blockchains are best known for their crucial role in cryptocurrency systems for maintaining a secure and decentralized record of transactions. The innovation with a blockchain is that it guarantees the fidelity and security of a record of data and generates trust without the need for a trusted third party.
One key difference between a typical database and a blockchain is how the data is structured. A blockchain collects information together in groups, known as blocks, that hold sets of information. Blocks have certain storage capacities and, when filled, are closed and linked to the previously filled block, forming a chain of data known as the blockchain. All new information that follows that freshly added block is compiled into a newly formed block that will then also be added to the chain once filled.
A database usually structures its data into tables, whereas a blockchain, as its name implies, structures its data into chunks (blocks) that are strung together. This data structure inherently makes an irreversible timeline of data when implemented in a decentralized nature. When a block is filled, it is set in stone and becomes a part of this timeline. Each block in the chain is given an exact timestamp when it is added to the chain.
They then moved on to talk specifically about blockchain’s environmental impact, but first they looked into the Environmental impacts Web2 currently has on the planet:
The biggest environmental impact from web2 comes from its reliance on data centers and servers, which consume a significant amount of energy. These data centers and servers require constant cooling to prevent overheating, which adds to the energy consumption. Other impacts of these data centres are increased carbon emissions and land use including deforestation, habitat destruction, and soil degradation.
In 2020, Google used 15.5 terawatt hours of electricity with the majority of that going to its data centers. Google does have an aggressive goal though to change this and operate on 24-7 carbon-free energy by 2030.
According to numerous publications, the world's largest data center is the Chinese Telecom-Inner Mongolia Information Park. At a cost of $3 billion, it spans one million square meters (10,763,910 square feet) and will consume 150MW across six data halls.
They then moved on to discussing the Environmental impacts Web3/blockchain have on the planet:
Firstly not all blockchains are the same. The consensus mechanism POW vs POS matters in the realm of environmental impact.
Proof of Work: In POW systems, the consensus mechanism that validates data involves miners competing with one another to see who can problem-solve a complex mathematical equation the fastest in exchange for crypto rewards. POW systems like this take up a large amount of energy. With this system, the high energy consumption involved in “mining” is essential to maintain the integrity of the blockchain network.
Proof of Stake: POS systems, on the other hand, rely on market incentives, and “validators” to put down a stake (a deposit) in exchange for the right to add blocks to the blockchain. Removing competition from the system by using Proof of Stake (POS) reportedly uses 99.9% less energy than Proof of Work, and therefore decreases carbon emissions. Ethereum, the second biggest blockchain, has recently successfully transitioned from POW to a POS system.
There are also other developing consensus mechanisms being put forward that are less energy intensive than POW, called proof-of-authority (PoA) and delegated proof-of-stake (DPoS):
proof-of-authority (PoA): in a PoA system, validators are not required to solve complex mathematical problems or stake their own cryptocurrency. Instead, they are trusted by the network based on their reputation and identity, and they are incentivized to maintain the network's integrity. Because the validators are pre-selected and trusted, a PoA system can be more efficient and consume less energy than PoW-based systems, but it may also be less decentralized and more vulnerable to attacks if the authorities are compromised. PoA is mainly used in private or permissioned blockchains, where the network participants are known and trusted, rather than in public blockchains where anyone can participate.
delegated proof-of-stake (DPoS): In a DPoS system, token holders elect a fixed number of block validators, known as "witnesses" or "delegates", to create and validate new blocks on their behalf. In a DPoS system, token holders can vote for the witnesses or delegates they believe will best represent their interests and ensure the integrity of the network. The weight of a token holder's vote is proportional to the number of tokens they hold. The top vote-getters are then chosen as the authorized validators for a set period of time. DPoS aims to be more efficient than Proof of Work (PoW) and more decentralized than Proof of Stake (PoS) by allowing token holders to have a direct say in the consensus mechanism. DPoS can also be more scalable than PoW and PoS, as the number of block validators is fixed and the network can process a higher volume of transactions with lower latency. However, some critics of DPoS argue that it can be less secure and more vulnerable to attacks if the witnesses or delegates are compromised, and that the system can become more centralized if a small number of token holders control a significant percentage of the tokens.
Back to the current environmental impact of blockchain:
Bitcoin, which is the world’s largest cryptocurrency, consumes an estimated 150 terawatt-hours of electricity every year – an amount equal to the entire country of Argentina. Producing that much energy emits approximately 65 megatons of carbon dioxide into the atmosphere on an annual basis.
There is no direct way to calculate how much energy is used for Bitcoin and cryptocurrency mining, but the figure can be estimated from the network's hashrate and the consumption by commercially-available mining rigs. For example, the Cambridge Bitcoin Electricity Consumption Index estimates that Bitcoin, the most widely-mined cryptocurrency network, used an estimated 85 Terawatt-hours (TWh) of electricity (0.38% of global electricity use) and about 218 TWh of energy (0.13% of global energy production) at the point of production—more than Belgium and Finland, using the latest country energy estimates from 2019
Another estimate by Digiconomist, a cryptocurrency analytics site, places the figure at 130.3 Terawatt-hours, based on energy consumption through July 9, 2022. This computes to around 1,455.8 kilowatt-hours of electricity per transaction, the same amount of power consumed by the average American household over 49.9 days.
Ethereum, the second-largest cryptocurrency network, was estimated to use 62.77 Terawatt-hours of electricity per year, based on energy consumption through July 9, 2022. The average Ethereum transaction required 163 kilowatt-hours of electricity. However, since Ethereum rolled out its proof of stake upgrade during “The Merge” in September 2022, electrical energy requirements have dropped to 0.01 TWh per year, with one transaction using 0.03 kWh
Some experts predict that blockchain might be the key to sustainability innovations that can help us fight climate change. The technology could be useful in pollution monitoring and tracking the sustainability of products.
After discussing the current environmental impacts, they then looked into what steps blockchain companies are taking to reduce environmental impacts today:
Transition to more energy-efficient consensus algorithms: Many blockchain networks are transitioning from Proof of Work (PoW) to more energy-efficient consensus algorithms like Proof of Stake (PoS) and Delegated Proof of Stake (DPoS), which consume significantly less energy.
Carbon offsetting: Some blockchain companies and organizations are investing in carbon offsetting programs to mitigate their carbon footprint. For example, some companies are donating a percentage of their revenue to either carbon offset projects, purchasing carbon credits or planting trees.
Renewable energy: Some blockchain companies are investing in renewable energy projects to power their mining operations. For example, some mining operations are powered by solar or wind energy, which can significantly reduce their carbon footprint.
Energy-efficient mining hardware: Some companies are developing more energy-efficient mining hardware, which can reduce the energy consumption of mining operations.
Blockchain-based solutions for environmental issues: Blockchain can be used to develop solutions for environmental issues, such as tracking carbon emissions, monitoring supply chains, and creating more efficient energy grids. By creating more sustainable systems, blockchain can help reduce the overall environmental impact of various industries.
They then wrapped up with a chat about the different ways blockchain technology itself could help reduce climate change:
Supply Chain Management: blockchain technology has the potential to increase supply chain transparency and enable more efficient resource allocation. By leveraging the transparency and immutability of the blockchain, it may be possible to track and verify the origin, sustainability, and ethical production of goods and services, which can help reduce waste and promote more sustainable practices.
Blockchain technology has the potential to improve recycling by increasing transparency, traceability, and accountability in the recycling supply chain. A few ways in which blockchain can help with recycling include:
Tracking waste streams: Blockchain can be used to track the movement of waste materials from the point of collection to recycling facilities. This can help ensure that waste is properly sorted, transported, and processed, and can reduce the risk of contamination or illegal dumping.
Incentivizing recycling: Blockchain can be used to create a reward system for recycling, where users are incentivized to recycle by receiving tokens or digital currencies that can be used to purchase goods or services. This can encourage more people to participate in recycling programs and increase the volume of recyclable materials.
Facilitating recycling markets: Blockchain can be used to create marketplaces for recyclable materials, where buyers and sellers can transact directly with each other. This can help reduce the middlemen involved in the recycling process, increase efficiency, and reduce costs.
Traditional power grids are centralized, which can create inefficiencies in energy distribution, like having unused surplus. And in parts of the world affected by natural disasters or poverty, power outages can leave people without access to electricity.
A peer to peer blockchain based energy system system would reduce the need to transmit electricity over long distances, which can result in losses along the way. It would also help reduce the need for energy storage, because such trading can move electricity locally from where it’s being produced in excess to where it’s needed.
Overall, they found that the sustainability of blockchain and its environmental impacts are complex issues, and there are ongoing efforts to address these challenges. As blockchain technology continues to evolve and mature, it will be important to find ways to mitigate its environmental impact and leverage its potential to promote sustainability in other ways.
As always, we have a lot to do and a lot more to learn. Hope you all have fun following along as we improve our understanding and knowledge!
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NOTE: Everything discussed during the podcast is simply our own interpretation of information we come across as we research topics, or is commentary based on our own personal experiences. We highly encourage everyone to conduct their own research into topics of interest as information, especially in the technical space, changes regularly.
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