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Cryptocurrency is so hot it might melt the polar ice caps. But a new group dubbed the Crypto Climate Accord is debuting today as a way to address how the industry deals with token mining’s negative effects on the environment.
The group is a private sector initiative aimed at making the cryptocurrency industry’s energy consumption 100% renewable by 2030. The group is a partnership of Energy Web, RMI, and the Alliance for Innovative Regulation (AIR). The group brings together parties such as CoinShares, ConsenSys, Web 3, Ripple, and the United Nations who want sustainable blockchain and crypto technology. It’s getting support from the United Nations Framework Convention on Climate Change (UNFCCC) Climate Champions.
“It’s about being efficient with energy and as making sure that the energy consumed is actually green,” said Walter Kok, the CEO of the nonprofit Energy Web, in an interview with VentureBeat. “What these computers do is execute a protocol to make sure that you can trust the outcome in a more decentralized way. At the highest level, if we can make sure that these services actually run on green energy, then we have a solution. Our job is to prove the blockchain is running on green energy.”
With Energy Web, utilities that actually produce green energy, through wind turbines or through solar, can show where they source that energy and how it gets used.
How big is the problem?
Bitcoin has gotten a bit of a bad reputation. Cambridge University estimated that the annual amount of electricity consumption for Bitcoin is around as much as Sweden produces in a year, but not as much as all of the televisions in the U.S. consume while operating on standby power.
“Is it waste to keep your television on standby? That’s a judgment,” Kok said. “That’s why we invest in green energy production.”
Kok said that offset investments can also be made in the meantime to make up for any non-green energy usage.
Surging demand for crypto and accelerating adoption of blockchain-based solutions among businesses and individuals have highlighted a critical issue: the impact of the technology’s growing energy consumption on the world’s climate. As cryptocurrencies become increasingly mainstream, it’s imperative to shift toward a renewable energy future now.
The aim is to create wins for both the planet and the global economy. For climate advocates, it can eliminate emissions from a fast-growing source of electric load. For the cleantech industry, it can onboard an entirely new class of customers with significant demand for energy. For the crypto industry, it can help support the widespread adoption of crypto by making a more sustainable and scalable industry.
Unspoken is the need for the crypto industry to also head off regulation. Energy Web points out that electric cars will eventually pose a bigger challenge for green electrical energy consumption. But that’s a bit like saying “Regulators should go after that guy, not me.” For the most part, Energy Web likes to stay out of those politics.
Still, Energy Web marketing director Peter Bronski said in an interview that Bitcoin consumes about 136 terawatt hours of electricity annually. By comparison, China alone produced 2,200 terawatt hours of renewable electricity. But of course, the interest in Bitcoin is growing, and its market value has soared past $1 trillion.
Cambridge University has been measuring the amount of energy consumed by Bitcoin mining, and other parties have been evaluating the carbon footprint of Bitcoin, as well as cryptocurrencies beyond Bitcoin.
How it will work
The accord intends to achieve this by working with the cryptocurrency industry — including all blockchains — to transition to 100% renewable energy by 2030 or sooner. While many organizations are individually taking steps to decarbonize their operations, the accord recognizes that an industry-wide coalition and scalable solutions can quickly multiply impact.
The accord will employ a “big tent” approach and act as a coordinating framework to decarbonize all aspects of the industry. Energy Web, AIR, and RMI have developed three high-level objectives for the accord, to be finalized with supporters in advance of the United Nations’ COP 26 Climate Conference later this year.
The goals include enabling all of the world’s blockchains to be powered by 100% renewables by the 2025 UNFCCC COP Conference; developing an open source accounting standard for measuring emissions from the cryptocurrency industry; and achieving net-zero emissions for the entire crypto industry, including all business operations beyond blockchains and retroactive emissions, by 2040.
Energy Web has a track record of sourcing renewable energy and building tools to decarbonize blockchains. To help launch the accord, Energy Web will bring to bear open source software and sector expertise to help crypto market participants take near-term action and begin decarbonizing the industry.
Cryptocurrency presents a unique problem. It can’t be hacked, or the digital currency could be gone in an instant. To make it hackproof, you need a large number of decentralized computers. Since it’s hard to hack every single computer, the blockchain ledger is secure and transparent, as each computer can be tapped as a source of truth. To make the cryptocurrency secure, it needs to have a big network, as Bitcoin and Ethereum do. More energy-efficient networks can use fewer, more trusted computers. These use different schemes such as “proof of work” or “proof of authority.” But then they can be hacked more easily, and they are also more centralized and therefore vulnerable.
But you can’t use so many computers that you use all of the world’s electricity, especially for functions like mining, which produces more coins for a party that controls computers and uses them to solve mathematical puzzles. Bitcoin already exceeds a $1 trillion market capitalization, and it’s getting more popular.
“The question of whether things are wasteful is a judgment call,” Kok said. “I think that the real solution is to convert all the electricity production to green. That’s what we’re focusing on. Let’s accelerate the journey and, as a sector, let’s invest in that so that we whatever we use is provable as green.”
AIR will lead the engagement of key policymakers and regulators globally as the renewed focus on sustainability presents a clear opportunity to develop and implement pragmatic and effective energy sector-related policies.
The companies involved in the agreement include:
- Alliance for Innovative Regulation (AIR)
- D-REC Initiative
- Decarbbitcoin Labs
- Energy Peace Partners
- Energy Web
- I-REC Standard
- Singapore Power Group
- Streambed Media
- Tom Steyer
- UNFCCC Climate Champions
- Web 3 Foundation
- XRP Ledger Foundation
“In addition to urgently eliminating future emissions, this industry is uniquely placed to address its historical emissions debt,” said Nigel Topping of the United Nation’s COP26 in a statement. “The very nature of blockchains enables historical system-wide transparency, making crypto’s emissions debt a ripe target for carbon dioxide removal solutions. This is a unique chance to publicly clean up the past, reject future emissions, and push the boundaries of climate leadership.”
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