Blockchain has the potential to transform our world in a variety of ways. It can give digital wallets to the unbanked, reduce fraud, and replace inefficient systems with more efficient ones. However, we still require this new and improved environment to be one in which we choose to live.
Environmental impact of cryptocurrencies
Bitcoin, Bitcoin Cash, and Ethereum, the three most popular cryptocurrencies, all demand a lot of energy to run. Blockchain consumed more electricity than 159 countries last year, including Nigeria and Ireland. Unsurprisingly, this has resulted in a major environmental catastrophe that jeopardizes the Paris Climate Agreement.
Controlling how the network decides to update to a blockchain ledger may be done in a variety of ways. The so-called proof of work approach was used by Bitcoin, for example (PoW). Anonymous miners from all over the world compete to add a set of proposed transactions to the network as a new block by solving a mathematical problem whose difficulty is modified according to the amount of computer power available.
The PoW approach uses a growing quantity of energy, especially if the cost of energy is lower than the mining revenues.
Change the Code Not the Climate, a movement to switch bitcoin mining from PoW to PoS, believes that the conversion may cut bitcoin’s carbon footprint by 99%. Another famous cryptocurrency, Ethereum, has been attempting to transition from PoW to PoS for the past six years.
There is also an effort to make mining more environmentally friendly by utilizing more renewable energy sources. Our RED Platform is providing renewable energy sources to protect our environment. However, current estimates of the proportion of renewable energy utilized to power bitcoin mining are inconsistent, making it difficult to pinpoint. For example, it is found that renewables contributed less than 30% of bitcoin mining in December 2021, although the Bitcoin Mining Council puts the proportion closer to 60%.
Social impact of cryptocurrencies
When it comes to social effects, crypto has a stronger argument. Cryptocurrencies can promote financial inclusion by stimulating innovation in financial services such as peer-to-peer micropayments, theoretically allowing anybody with an internet connection to participate in financial services and lowering costs by automating financial services at scale.
According to the World Bank, there are 1.7 billion unbanked persons today, or approximately a third of all adults. This figure can reach 61% in some developing economies.
Crypto and ESG Problem
The processing power required to generate the cryptocurrency and conduct transactions in it is the critical argument for bitcoin not being ESG-friendly.
Proof-of-stake cryptocurrencies are less harmful to the environment than proof-of-work cryptocurrencies.
For transaction validation, Bitcoin and Ethereum used proof-of-work methods, but Ethereum is attempting to switch to a proof-of-stake model, putting bitcoin behind. Other cryptocurrencies were built on a proof-of-stake methodology, which means they should be more environmentally friendly.
Use of digital currencies
Investing in cryptocurrency would be difficult for an ESG investor to justify. The negative environmental and governance consequences more than balance out any possible benefits of greater financial inclusion.
But the growing usage of digital currencies, including crypto, appears to be on track to provide a naturally competitive mechanism for the poorest members of society to mitigate some of the worst characteristics of the financial system.
The solution toward a better future
Whatever the future holds, it is evident that cryptocurrencies and blockchain technology offer far more than the gas-guzzling Bitcoin and that many people are rightfully thrilled about the potential of a decentralized ecology of money.
Instead of trying to profit from the Bitcoin bubble, look at proof of stake in cryptocurrencies and invest in community-driven projects that improve the environment, such as SEEDS, Celo, Circles, Regen Network, and much more likely to follow. We can build a more equitable financial system in the future if we all work together.
Also, the industry acknowledges that it has a problem with the environment and has choices for lowering its carbon impact. Governments are also stepping up their efforts to develop regulatory and oversight frameworks. In the long run, how well ESG factors are addressed will determine how widely cryptocurrencies are adopted.
RED Platform and its green tokens
The RED Platform is a platform that connects energy providers, consumers, and businesses. The concept is straightforward.
On the platform, you may receive REO-G tokens as a reward if you’re a green energy producer. The REO-G token is an ERC-721 token that allows energy providers to prove where their energy comes from. This token can be used to claim energy produced within the previous 12 months.
If you’re a green energy consumer, you may earn GTK tokens in the same way that producers do, through a claim based on your electricity bill. These are ERC-20 compliant tokens. GTK tokens earned through a claim procedure may be sold for MWAT only. Both GTK and REO-G tokens can be burned to generate Green Sustainability Certificates to offset a certain amount of CO2, so their purpose is to help the planet.
Take the chance and change the world. Register on RED Platform