The energy used to power proof-of-work blockchain technologies is essential to their security. Many in the permissionless blockchain ecosystem will attest that energy consumption “is a feature, not a bug.”
As the effects of climate change worsen, investments in digital assets that use more electricity will become increasingly unattractive. To understand how this technology can be used for good, such as advancing digital inclusion and universal payments and perhaps even promoting sustainability advancements, we must first understand its energy usage and develop more effective methods for verifying carbon offset claims.
To help further this understanding, in July of 2022, in collaboration with Intel, Linux Foundation Research hosted a roundtable to discuss the opportunities to create sustainable blockchain infrastructure and to better understand the impact of blockchain technology on the environment. Additionally, the roundtable addressed how we can reduce that impact, and how blockchain technology itself can help reduce our own carbon footprints and provide mechanisms to incentivize our consumer choices so that they are more sustainable by default.
The roundtable brought together experts and stakeholders from across the Web3 ecosystem to discuss how various Web3 communities define and practice sustainability. The outcome of this roundtable resulted in the recently published report, Web3 and Sustainability: How We Can Reduce the Climate Impact of Blockchains; How Blockchains Can Help Reduce Our Own.
The report's key takeaways are as follows:
Climate change is a pressing issue: According to the IPCC Sixth Assessment Report, limiting global warming to 1.5°C requires immediate and deep emissions reductions across all sectors. Intel has pledged to achieve net-zero greenhouse gas emissions in global operations by 2040 and reduce the carbon footprint of its products and platforms.
There’s a role for open source solutions: Open source solutions are a vital part of the answer to a more standardized and regulated Web3. Open source blockchains help ensure greater transparency while making it easier for companies and agencies to collaborate.
Web3 must have sustainability at heart: Intel's Carbon Reduction and Green Software team is focused on reducing carbon consumption for products currently in use and those shipped in the future, including those engaged in high-energy workloads such as AI, gaming, and Web3.
Community and cross-industry efforts are vital: Solving the climate crisis requires a holistic, cross-industry effort with input from communities, academic researchers, and climate advocates. The report serves as a guidepost for those in the tech industry who may have little familiarity with Web3 to gain a better understanding of the diversity of communities, projects, and approaches to sustainability.
There’s a deep need for standards and regulation: The sustainable blockchains space needs standards, transparency, and accountability, especially regarding claims about carbon offsets and other efforts to benefit marginalized communities. ESG regulation is making carbon measurement and reporting more important, and standardization and regulation will help build and shape the Web3 space.
The crypto crash has had an impact: The financial fallout from the cryptocurrency crash has encouraged Web3 stakeholders to go beyond the hype and financial speculation and figure out the most pressing and effective blockchain use cases.
The relationship between PoW and energy use is real: Calculating the emissions associated with proof of work is difficult, and the public perception of energy-intensive use cases such as NFTs has led to some companies banning NFTs or efforts to ban crypto transactions altogether. The success of Web3's unique approaches to sustainability and carbon reduction depends on strong infrastructures for verification and reporting.
The Ethereum Merge will have an impact: Ethereum's transition from proof of work to proof of stake, a.k.a “The Merge,” purported to reduce the network's energy use by 99 percent. However, the net reduction in energy use is difficult to determine as the PoW infrastructures built over the last decade will not simply disappear.
There’s a gap between discourse and practice: There is a gap between what is said and what is done when it comes to using blockchains to further decarbonization efforts or mitigate the harms of energy-intensive PoW systems. Further research is needed to deepen our knowledge and understanding of these gaps.
Financial inclusiveness is important: One of the main objectives of open source blockchains is to bank the unbanked. However, research by Dr. Will Cong at Cornell University and colleagues found that asset ownership and mining operations on Ethereum were highly concentrated. The researchers concluded that the current gas fee mechanisms, high transaction fees for small players, significant congestion-induced fluctuation of gas prices, and large return volatility of tokens hinder financial democratization and inclusion.
Energy policy will affect ecosystems: Open source blockchains have also been scrutinized for their impact on energy policy. Some countries have banned bitcoin mining because of its strain on local energy grids. Cornell University’s study found that states with lower electricity prices and greater penetration of renewables in their grids could minimize the carbon footprint of data centers used for mining operations.
E-Waste is real: Another issue that open source blockchains are addressing is e-waste. Policymakers are encouraged to support circular-economy initiatives, demonstrations, and proofs of concept for promising future innovations. One study found that the primary way to ensure an e-waste recycler will engage in honest practices with minimum supervision is to make it the more profitable option, either by decreasing the recycling costs or increasing the penalties for fraudulent practices.
Diversity and inclusion are essential in the development of open source blockchains. Climate justice was viewed as highly relevant and applicable to digital worlds and their impact on the planet. Three principles of climate justice were identified: distributive justice, procedural justice, and recognition of diverse cultures and perspectives.
Human infrastructure is a key mechanism for change and implementation. Human infrastructure is the set of public policies for financing and delivering health, education, and nutrition. Those who thrive in the distributed environment of open source blockchains provide the critical human network required to prototype, integrate, harden, and nurture ideas from concept to maturity.
To recap, open source blockchains address a range of socio-political and diversity issues, including financial inclusiveness, energy policy, e-waste, diversity and inclusion, and human infrastructure. By addressing these issues, open source blockchains contribute to a more sustainable and inclusive future.
The Linux Foundation's Web3 and Sustainability report highlights the pressing need for action on climate change and the role that Web3 can play in sustainability efforts. The report emphasizes the importance of community, cross-industry effort, and open source solutions in driving change and creating business and organizational value.