Crypto carbon: Investing in carbon offset projects, or modifying their business operations to adhere to the development of sustainable models, could make crypto even more sustainable, according to Alexander Normanco-founder of Roundly.
Cryptocurrency has taken the market by storm. It’s a revolutionary way to pay for things without needing to consult a third party in the middle of a purchase. Replacing popular contactless payments like Venmo or Apple Pay, cryptocurrency has sparked interest from investors and consumers alike.
As interesting and innovative as the concept of cryptocurrency is, it is not so green or good for the future of the environment.
Cryptocurrency, while not effective in combating climate change, has presented a unique set of benefits. For example, one of the biggest benefits of implementing the use of cryptocurrency is improving the corrupt use of traditional currencies. Basically, cryptocurrency allows the power of money to stay in the hands of the user, whereas the twenty dollar bill in my wallet today might not be worth the same amount tomorrow.
But does this enduring value outweigh the deleterious effect that cryptocurrencies have on the environment?
Crypto Carbon: The Numbers Behind Crypto Mining
Cryptocurrency requires mining, intensive energy use and certainly does not meet the requirements to reach net zero emissions by 2050. For example, Bitcoin, one of the most popular cryptocurrencies, uses nearly 91 terawatt hours of electricity per year, although the latest news says it uses 10.9% renewable energy. That’s more electricity than Finland needs to power its country of 5.5 million people for an entire year.
Ethereum, the second largest cryptocurrency company behind Bitcoin, recently completed the “merger” in an effort to reduce their power consumption. Long story short, we are still waiting to see the beneficial results of the project which aimed to cut out the middleman – or cryptocurrency miners.
Mining is the most energy-intensive and carbon-emitting component of the cryptocurrency harvesting process. By eliminating the need for mining, Ethereum is trying to position itself as a sustainable crypto giant. But he still has a lot of work to do before he can be considered as such.
The amount of energy used by cryptocurrency companies is alarming. Ethereum alone is responsible for 0.34% of the world’s total energy. While that doesn’t sound like a lot, it does strain the planet’s limited energy supply. It is commendable that a cryptocurrency company like Ethereum is trying to use blockchain technology to reduce its emissions. But the entire cryptocurrency industry needs to expand its sustainability efforts.
In 2020 alone, Ethereum was responsible for producing 16.6 million tons of carbon dioxide emissions. For Ethereum to offset the emissions they created, over 84 million trees would have had to be planted.
Is there a solution to all of this?
So what can be done to get cryptocurrency companies to reduce their massive carbon footprint? Unfortunately, cryptocurrency businesses need to realize that reducing their emissions alone will no longer be enough. An industry that is used by so many multifaceted organizations – should be mindful to recognize that no amount of reduction tactics will allow humanity to achieve net zero emissions.
All companies, businesses and individual endeavors will create some carbon footprint. This part is unavoidable, but what companies and individuals do to offset their own emissions is not.
It’s never a waste of time to try to reduce your own emissions. Therefore, cryptocurrency companies like Ethereum should not stop looking for new ways to reduce their electricity. However, they must strive to think outside the box. Cryptocurrency companies like Ethereum need to find ways to contribute to carbon offset projects to help reduce external emissions.
Crypto Carbon: An expectation to invest sustainably?
Many people invest in cryptocurrencies simply because they want to make money. When so many cryptocurrency users seek financial gain, why aren’t more cryptocurrency companies seeking to align themselves with the ideals of impact or socially responsible investing?
Impact investments are investments made with the intention of creating beneficial social and environmental impacts in addition to a lucrative financial return. Impact investments can be made in both developed and established markets. Socially responsible investing, on the other hand, refers to a type of investment in which the stakeholder is also interested in creating beneficial social or environmental change, but goes one step further. The potential investment must meet several environmental benchmarks, such as a ESG Rating or a company obtaining a ISO14001.
Cryptocurrency may not be able to completely change their currency model to adhere to these investments. But they can most certainly promote the primary missions – contributing to a social cause in conjunction with their investments. For example, cryptocurrency companies could create donation programs to invest in cryptocurrency. This is in conjunction with joint carbon offset projects that help mitigate excessive emissions. These can include reforestation, sustainable travel and helping developing countries achieve carbon neutrality.
Carbon offset projects
A carbon offset project is a financial contribution to another organization that seeks to reduce excessive emissions elsewhere. Companies like Ethereum could dedicate themselves to more carbon offset projects. Also, they can remain alert to the discovery of new sources of energy to maintain their activity in a more sustainable way. Then cryptocurrencies could start to make a real difference in emissions.
These companies could create programs where if they invest in X amount of cryptocurrency, the cryptocurrency company itself will donate X amount of funds to a carbon offset project. This can be chosen by the person investing in the cryptocurrency. In this way, cryptocurrencies remain relative. And, they also use their available profits to do good to the world.
Companies like Bitcoin and Ethereum are cross-functional companies that are not in the same position as start-ups seeking exponential growth. These cryptocurrency companies are already here. They have all the resources to take more concrete measures to reduce emissions that are made outside their own perimeter. As explained earlier, this could be done by investing in carbon offset projects or changing their business activities to adhere to the development of sustainable models.
About the Author
Alexander Normanco-founder and CEO of Roundly, a provider of carbon assessment and accountability solutions for small and large businesses. He is an entrepreneur, Techstars alumnus at Embleema, former B2B manager at Withings and Nokia Digital Health product manager.
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