Just 16 years ago, barely anyone had heard of blockchain. Now, the revolutionary technology has led to a whole new way of exchanging money: cryptocurrency Bitcoin is just one example. The founders in the cryptocurrency industry are some of the richest people in the world—or, in the case of FTX founder Sam Bankman-Fried, in jail. Some early investors in crypto are financially set for life. Others lost their savings in seconds thanks to market volatility, or, for one unlucky man, when his wife threw away a hard drive containing what’s now £600 million of Bitcoin.
Blockchain isn’t only significant for the finance industry, nor does it only impact those who invest in it. Its energy-intensive mining process is contributing to the destruction of our planet. Blockchain mining is responsible for 0.6 percent of global electricity consumption—more than the whole of Ukraine. So, what’s behind this immense carbon footprint of blockchain? And how can we reduce it?
The basis of blockchain technology
Bitcoin gained notoriety for being decentralised—and therefore safer than traditional banks. This is thanks to the way blockchain works. Because blockchain data is verified by a decentralised network, it is very costly to alter.
Proof of Work vs Proof of Stake
Blockchains are updated via decentralised consensus algorithms in which computers ‘verify’ transactions and create new blocks on the blockchain. As an incentive to carry out this work, the people who use their computers to solve these algorithms receive newly emitted cryptocurrency. This mining process is known as Proof of Work. Because it involves multiple computers all competing at once to solve an algorithm, it’s very energy-intensive.
In 2012, Sunny King and Scott Nadal developed an alternative way of creating blockchain known as Proof of Stake. This algorithm selects one validator who attempts to verify the transaction. This means that just one computer is working to create a new block, requiring much less energy than Proof of Work. In 2022, the cryptocurrency Ethereum changed to a Proof of Stake algorithm. This saved more than 99 percent of their energy use and reduced the world’s energy consumption by 0.2 percent.
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You’d think that Proof of Stake would be the solution to blockchain’s environmental problems. But some technologies that run on blockchain, most notably Bitcoin, insist on continuing to burn energy by using Proof of Work. RESET spoke to Tara Merk, PhD candidate at BlockchainGov and Associate Researcher at the Weizenbaum Insitute, about the digital carbon footprint of blockchain. We asked her why Bitcoin refused to make the switch to Proof of Stake. “It’s an ideological choice for Bitcoin to continue using Proof of Work,” she explained. “It’s sad to see because we have alternatives [including Proof of Stake] but Bitcoin is an outlier.”
This ideology is at play because of the misconception that Proof of Stake is less secure than Proof of Work; the Bitcoin community is adamant about maintaining the immutability of the Bitcoin protocol. But the majority of new blockchain projects don’t buy into this misconception. “It would be strange to see new projects using Proof of Work,” Merk adds, pointing out that most of the blockchain community recognises that Proof of Stake has a lower climate impact. 60 percent of blockchain projects are likely to adopt Proof of Stake in 2025.
Blockchain as a force for good
Bitcoin might be resistant to switching algorithms and reducing its environmental impact. But Merk shares some positive news: “There’s a growing and sincere blockchain community called ‘Regens’ who use blockchain technology in aid of the climate.”
These include community currency Kolektivo, which gives users a discount if they buy regional products. Climate Guardians is a video game using blockchain technology that educates players on the climate crisis. Blockchain also forms the basis of supply chain tracking technology in industries from coffee to textiles. Regens are also using blockchain to aid social causes, with cryptocurrency Circles promoting a universal basic income.
Merk points out a further benefit of blockchain technology: that it “improves the quality of data”. Because blockchain data is both immutable and accessible, “others can work with existing data sets on the chain”. This open-source system allows new technologies to benefit from existing data instead of investing fresh resources in research and data collection.
New study reveals Bitcoin mining affects locals’ health
A study of the 34 largest Bitcoin mines in the US revealed that 1.9 million Americans were exposed to additional pollution. Find out more here.
Can environmental solutions exist on blockchain?
Given the potential for blockchain to harm the planet by emitting excess carbon, is the technology a suitable tool for climate action and sustainable digital tools? Merk points out a problem tied up with this question: People often see “making money as part of blockchain solutions because it launched with Bitcoin. Financialisation is seemingly part of any blockchain solution.” As blockchain miners receive cryptocurrency in exchange for their computer taking part in validation calculations, blockchain is inextricably tied up with wealth acquisition rather than climate protection.
Another problem is the use of carbon credits to offset people’s blockchain emissions. Similarly to carbon offsets for flights, this system simply creates more demand, Merk explains. The idea that you can continue your consumption as normal and simply purchase a carbon credit to negate your digital footprint is not the solution to the climate crisis. But for blockchain users who want to track their carbon footprint, Carbon.fyi is a helpful tool.
While blockchain technology has great potential, Merk warns against getting carried away by every new planet-saving use case. “A shiny new thing distracts from the root cause [of the climate crisis]. What sort of behaviours do we need to change on all levels?” If blockchain creators are still taking countless flights to further their business, any carbon-reducing impact of that digital technology is redundant.
Where does this leave us?
So, can we safely use blockchain technology as part of our digital toolkit in sustainable climate solutions? Or will the carbon emissions just end up harming the planet further?
Combining the emissions-reducing Proof of Stake algorithm with running blockchain on wind or solar power would allow us to maximise the potential of the technology while minimising its damage to the environment. While blockchain’s power sources depend on each individual miner, some projects already run on renewable energy sources.
The EU published a regulatory framework in December 2024 that requires cryptocurrencies to publish information on their environmental impact. This is a step in the right direction but we need further government regulation to ensure blockchain’s development doesn’t get out of hand. By safely developing the technology, we could have a world where blockchain isn’t just making the rich richer but where we all benefit from the creation of new blocks, one code at a time.
