Bitcoin eats through enough energy to power a small country, that’s a fact. It was the first blockchain ever created, back in 2008, using a proof-of-work (PoW) system but the technology has come a long way since then. Today, low-energy, low impact blockchains exist built on proof-of-stake (PoS) systems. These blockchains don’t need computing power to do the heavy lifting. Instead, they rely on staking assets to approve transactions. This technology is ready to support sustainable finance and help us address one of the biggest challenges we face today — climate change. Let’s take a closer look.
‘As blockchain matures, its energy intensity will reduce, and the opportunities for blockchain to help the planet may well far outweigh its energy-use limitations.’
World Economic Forum report
Proof-of-Stake blockchains can turn finance green.
The World Economic Forum projects that by 2027 distributed ledger technology will likely hold 10% of global gross domestic product (GDP). PoS blockchains are maturing offering benefits such as speed, transparency and liquidity to enable markets to scale. When these qualities are coupled with high energy efficiency, it is possible to see how a more sustainable future for finance is possible, for example in carbon credit markets and for green bonds.
What are the most sustainable blockchains?
There are a number of studies that compare the efficiency of the biggest proof-of-stake blockchains.* One recent report by the Crypto Carbon Ratings Institute (CCRI) assesses the electricity consumption and carbon footprint of six leading proof-of-stake networks; Avalanche (AVAX), Algorand (ALGO), Cardano (ADA), Polkadot (DOT), Tezos (XTZ), and Solana (SOL). Here the CCRI has determined the kWh per transaction taking into consideration hardware requirements, energy consumption of the hardware, number of participants in the network and so on. It’s a complex calculation and different blockchains come out on top depending on each metric studied.
For example the range for the electricity consumption per transaction goes from 0.166 watthours for Solana up to 51.59 watthours for Cardano. Though Cardano has the lowest yearly electricity consumption overall.
As the report states, electricity usage alone is not harmful to the environment. To show which blockchain has the lowest CO2 emissions we have to consider location of consumption and intensity of the grid. From this data Cardano performs poorly in comparison.
Overall the emissions of PoS blockchains are very low and are a great fit for the rapidly expanding green finance movement.
Top green blockchains
Our pick of the most sustainable blockchains takes into consideration outcomes of the studies as well as company ethos and community that make these some of the most promising projects for the future of green finance.
Avalanche: Avalanche is a great blockchain of choice because it’s incredibly fast and efficient and is now a net-zero blockchain. It has a relatively small carbon footprint of just 100tons when compared to Bitcoin’s 96 million tons and Ethereum’s 47million tons! It has taken steps to offset its remaining emissions to become carbon neutral. It is one of the first blockchains to do this and we applaud it for taking leadership in this way.
Solana is the world’s fastest growing blockchains and is focused on enhancing the scalability of blockchains by combining proof of stake with so-called proof of history consensus. The Solana blockchain is funding and implementing a refrigerant destruction process, which Green America ranks as one of the most effective methods of carbon emission reduction. Additionally, it has now offset its carbon footprint completely.
Offset your carbon footprint with Likvidi carbon credits on Avalanche
With the recent COP 26 in the backdrop the goal of attaining net-zero emissions in fewer than 30 years has prompted many to turn to carbon offsets. A company or individual can buy carbon credits to account for an equivalent amount of carbon emissions. As a result we are seeing a rapid rise in voluntary carbon markets (VCMs). Figures for January 2022 show that 15 million carbon credits were retired in that month alone, which means that 15 million tonnes of carbon were accounted for.
Now, Likvidi is bringing carbon credits to the crypto market through the Avalanche C-chain. It will tokenize carbon credits called LC02 for use in the Voluntary Carbon Markets and provide a certificated offsetting service for the environmentally conscious.
Likvidi will be the first tokenized carbon credit on the Avalanche protocol, which has been chosen for its eco credentials, speed and scalability, and because its the most decentralized option out of the EVM-compatible PoS chains. Likvidi will make the carbon markets more efficient and scalable because tokenized carbon credits are liquid and tradable on the blockchain. This helps the planet by speeding up decarbonization.
Join us to take part in decarbonizing our planet: https://t.me/likvidiofficial
Footnote *Similar studies also exist for Polygon, Ripple, Hedera and a long tail of other blockchains such as VeChain, Cosmos, Chia, IOTA and others. It should be noted that less active blockchains will show a higher energy demand per transaction because they have a comparatively lower throughput, so energy consumption per transaction should not be the only metric.