A new study from crypto firm, Zumo, ‘Decarbonising Crypto: A state of play’, sheds light on the environmental impact of cryptocurrency, exploring the fiery debate surrounding decarbonisation efforts.
The report includes input from leading sustainability researchers and cryptocurrency experts such as Energy Web, Cambridge University Centre for Alternative Finance and the Green Bitcoin Project.
A key finding of the report suggests that while decarbonisation is fast becoming a priority in the cryptocurrency space, current data and research on the issue is not widely understood and can be taken out of context.
Due to the “partisan and highly emotive” nature of the issue, this lack of understanding is obscuring the path to an open, reasoned debate on the subject and stifling progress.
“We are only just beginning to understand the blockchain’s potential impact – both good and bad,” according to Kirsteen Harrison, Environmental and Sustainability Adviser at Zumo.
“The current narrative that ‘crypto is harmful to the environment’ is too simplistic and masks a much more complex reality. It doesn’t do justice to the variety of cryptocurrencies that exist, the mechanisms used to create them, or the benefits that crypto can bring to society.”
Previous research has shown Bitcoin’s yearly energy consumption to be equivalent to that of some countries. This intense consumption has sparked criticism amid growing concerns over climate change.
To tackle the issue and accelerate decarbonisation efforts, the Zumo study recommends greater collaboration between stakeholders across the breadth of the crypto ecosystem.
“Awareness and collaboration are rapidly growing on the need for decarbonisation in the crypto sector,” the report states. “Cross-sector initiatives will be pivotal and must encompass all ecosystem participants – miners, platforms and crypto holders / investors.”
Notably, the report suggests that the inherent transparency and simplicity of cryptocurrency makes it a “prime candidate for rapid decarbonisation” compared to other sectors such as traditional finance, where stakeholders are forced to contend with “many more elements” that are harder to decipher and address.
A recent study from WWF and Greenpeace revealed that emissions of UK financial institutions stand at nearly double the UK’s net emissions. The report found that UK banks and asset managers were responsible for financing 805 million tonnes of CO2 in 2019, which in theory would make the City of London the ninth biggest emitter of CO2 globally.
While drawing comparisons between cryptocurrency and traditional finance provides valuable context and insight for consumers, the carbon debate is still dominated by Bitcoin despite the presence of more energy efficient alternatives, which Digiconomist founder Alex de Vries suggests harms the wider landscape.
“Decarbonisation in the crypto industry is primarily a Bitcoin Ethereum issue,” he said. “The impact these two have reflects poorly on the rest of the cryptocurrency landscape even though many communities have already done their part in addressing the issue by running more sustainable algorithms.”
Another key objective for the industry, the report states, should be to improve how it promotes the real-world value of cryptocurrency and the future potential of blockchain technology. By improving communication in this regard, the industry can spark a more reasoned discussion on the broader benefits of cryptocurrency.
“For society to fully accept and adopt the benefits of crypto, the industry needs to become relatable to the public and demonstrate its utility/value to a wider audience,” the report says.
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