Fact and Fiction: Blockchain + Sustainability by Crypto Witch Club

Exploring blockchain and energy usage fact, fiction, and what it all means for the future of the industry.

*Yes, blockchain can be carbon-neutral and even carbon-negative*

Welcome back to our discussion on blockchain, crypto, and sustainability! In our first post on the topic — Crypto x Mother Earth — we demystified how cryptocurrencies (and NFTs) use energy, and how that energy usage stacks up against other industries — like fashion, banking, and tourism. We also reviewed how to invest in sustainable blockchain solutions and shared some of our favorite sustainability articles from others in web3 — like Nic Carter’s How Much Energy Does Bitcoin Actually Consume from The Harvard Business Review.

In our second piece on web3 and sustainability, we’ll explore what’s fact, what’s fiction, and what this all means for the future of the blockchain. How do we decide — as a global, decentralized community — how much energy an industry should consume?

Ok witches. Let’s take a peek at traditional finance versus the blockchain and how each relates to energy consumption.

Demystifying Energy Usage of Traditional Banking vs. Blockchain for a 5-year-old: Think of traditional banking like a metaphorical piggy bank that lots of people use to store their money. The piggy bank is very large, and it needs lots of electricity to keep it secure and ensure everyone’s funds stay safely in the right place. These necessary actions use up a lot of energy, which can be bad for the planet.

The blockchain is not a piggy bank. Think of the blockchain as a magical book that can keep track of everyone’s money without needing that big piggy bank infrastructure (a centralized intermediary). This magical book keeps a record of how much money you have, where you store it, and where you spend it. It doesn’t need as much electricity as a the piggy bank, which gives it the potential to be more sustainable than traditional banking.

Demystifying Energy Usage of Traditional Banking vs. Blockchain for web3 Witches: Blockchain technology is often touted as a more sustainable alternative to traditional banking. Here’s why:

Energy efficiency: Traditional banking involves a vast network of centralized data centers that consume a lot of energy to process and store data. In contrast, blockchain technology operates on a decentralized network of nodes, which reduces energy consumption. Some blockchain networks, such as Polygon, Algorand, and Celo, are carbon-neutral and carbon-negative, further reducing energy consumption.
Transparency: Traditional banking systems often lack transparency, making it difficult for customers to understand how their money is being used. Blockchain technology, on the other hand, is transparent and decentralized, allowing customers to track their transactions in real-time.
Reduced Intermediaries: Traditional banking systems involve multiple intermediaries, including banks, payment processors, and clearinghouses, which adds to the cost and complexity of financial transactions. Blockchain technology eliminates the need for intermediaries, which reduces costs and streamlines the transaction process.
Security: Traditional banking systems are susceptible to hacks and security breaches, which can compromise customer data and funds. Blockchain technology uses advanced cryptographic techniques to secure transactions and protect customer data from hacks and cyber-attacks.
Inclusivity: Traditional banking systems often exclude individuals and businesses that lack access to traditional banking services, such as those in underbanked or unbanked regions. Blockchain technology provides a more inclusive financial system, allowing anyone with an internet connection to participate in financial transactions.

Overall, blockchain technology offers a more sustainable alternative to traditional banking by reducing energy consumption, increasing transparency, reducing intermediaries, providing greater security, and promoting inclusivity. As blockchain technology continues to develop and mature, it has the potential to transform the financial industry and make it more sustainable for everyone.

Fact or Fiction: Cryptocurrency is bad for the environment?

How do we (as a society) justify energy usage? What is its value? How does that value equate to public acceptability? Is some technology justified — because it creates global impact and fosters innovation — while energy usage from other technology is unjustified? How much energy is “ok” to use per person? From our fridges to charging our phone to responding to our emails, we’re constantly using energy.

In fact, according to some reports, the internet will use a fifth of all the world’s electricity by the year 2025.

It’s not often we hear the internet criticized for its energy use, because society at large views the internet as a necessary tool that we need to communicate and survive. In contrast, a blockchain like Solana uses less energy per transaction than 2 google searches, (according to the Solana Foundation). And KlimaDAO (a decentralized autonomous organization built on the Polygon blockchain), offers tokens backed by real carbon assets — to make it easier for companies to become carbon-neutral and even carbon-negative. Like the internet, blockchain is a tool. This tool also allows for:

Decentralized transactions: Blockchain allows for peer-to-peer transactions without the need for intermediaries such as banks or financial institutions.
Cryptocurrency: Blockchain technology is the backbone of cryptocurrencies like Bitcoin, Ethereum, and others. It enables secure, decentralized transactions and ensures that there is no double-spending.
Smart contracts: Blockchain can be used to create smart contracts that are self-executing and enforceable without the need for intermediaries. These contracts can be used for a wide range of applications, including supply chain management, real estate transactions, and more.
Secure data storage: Blockchain can be used to securely store and manage data. The decentralized nature of the technology makes it difficult for hackers to compromise the data, making it ideal for sensitive information like medical records, financial data, and more.
Supply chain management: Blockchain can be used to track and manage the supply chain of goods, from raw materials to finished products. This can help increase transparency and accountability in the supply chain, reducing the risk of fraud and ensuring that products are sourced and manufactured ethically.
Voting systems: Blockchain can be used to create secure and transparent voting systems. The decentralized nature of the technology ensures that votes cannot be tampered with, and the transparency of the system ensures that the results are fair and accurate.
Identity management: Blockchain can be used to create secure digital identities for individuals. This can help reduce the risk of identity theft and fraud, and also make it easier for people to access services like banking and healthcare.
Gaming and entertainment: Blockchain can be used to create decentralized gaming and entertainment platforms. This can help ensure that the ownership and distribution of digital assets are transparent and fair, reducing the risk of fraud and ensuring that creators are properly compensated.

Energy consumption is not equivalent to carbon emissions

There are many different types of energy and each type of energy impacts our planet differently. Blockchain has the ability to harness the power of renewable energy — which not all industries are able to. A few types of energy that are important to know include:

Renewable energy: Renewable energy refers to energy sources that are replenished naturally and sustainably, either by the sun, wind, water, or geothermal heat. These sources of energy are considered renewable because they are not finite and will not be depleted over time like fossil fuels.

Examples of renewable energy sources include solar power, wind power, hydro power, geothermal power, and biomass. Solar power is generated by harnessing the energy of the sun using solar panels, while wind power is generated by harnessing the energy of the wind using wind turbines. Hydro power is generated by harnessing the energy of moving water using dams or turbines, while geothermal power is generated by harnessing the heat energy of the earth’s crust. Biomass energy is generated by burning organic matter like wood, crops, and waste.

Nonrenewable energy: Nonrenewable energy refers to energy sources that are finite and will eventually be depleted over time. These sources of energy are typically fossil fuels, including coal, oil, and natural gas, which were formed over millions of years from the remains of plants and animals.

Fossil fuels are a major source of energy for modern society, and are used for electricity generation, transportation, and heating. However, the extraction and use of nonrenewable energy sources has several negative environmental impacts. For example, the burning of fossil fuels releases carbon dioxide and other greenhouse gases into the atmosphere, contributing to climate change. Additionally, the extraction and transportation of fossil fuels can lead to habitat destruction, air and water pollution, and other environmental problems.

Nuclear Energy: Nuclear energy is a type of energy that is generated through the process of nuclear fission, which involves splitting the nucleus of an atom to release energy. The energy released during nuclear fission can be harnessed to generate electricity in nuclear power plants.

In a nuclear power plant, nuclear fuel, such as uranium, is loaded into a reactor vessel where the fission process takes place. As the nucleus of the uranium atom is split, it releases energy in the form of heat, which is used to create steam. The steam then drives a turbine, which generates electricity. The process is similar to that used in traditional thermal power plants, except that nuclear energy is used to heat the water instead of burning fossil fuels. Nuclear energy is considered a clean energy source because it does not produce greenhouse gases or other air pollutants during operation. However, the nuclear fuel used in the process is highly radioactive and requires careful handling and storage to prevent exposure to harmful radiation. In addition, there is a risk of accidents, such as those that occurred at the Chernobyl and Fukushima nuclear power plants, which can have catastrophic consequences.

Ok web3 Witches! What did we learn today?

Facts:

The traditional banking industry uses much more energy than the cryptocurrency industry
Blockchain can use renewable energy, unlike other industries
Different blockchains require different amounts of energy
Blockchain-related energy usage can be sustainable, even carbon neutral or negative

Fiction: