Crypto wallet and payments platform Zumo this week released the report Decarbonizing Crypto: A state of play. It is a cross-sector effort to explore the carbon footprint of cryptocurrencies and the task of decarbonization. The report also explores the complexities of decarbonization and how the perception of cryptocurrencies’ environmental impact compares to other sectors such as traditional finance.
Decarbonising Crypto: A state of play includes input from sustainability researchers and cryptocurrency experts including Energy Web, Cambridge University Centre for Alternative Finance, The Green Bitcoin Project, The Digiconomist and TAAL Distributed Information Technologies. These organizations participated in a Zumo roundtable event held in September that was the foundation for this paper.
The report said urgent progress is needed towards decarbonization of the sector, but the data that currently exists is not widely understood, and can be taken out of context. The carbon footprint of crypto is a partisan and highly emotive issue, and this has often obscured the path to open and reasoned debate. Decarbonizing crypto is a collective responsibility, which requires collaboration across the crypto ecosystem from miners, exchanges and holders.
Technologically speaking, the authors suggest crypto can easily be decarbonized. Cryptocurrency has key advantages of transparency and comparative simplicity, which some believe makes it a prime candidate for rapid decarbonization. By comparison, the carbon footprint of other sectors such as traditional finance consist of many more elements and are harder to decipher. A recent WWF/Greenpeace report has shown the financed emissions of UK financial institutions to be almost double the UK’s net emissions.
For society to fully accept and adopt the benefits of crypto, the industry needs to become relatable to the public and demonstrate its utility to a wider audience. New blockchain technology could transform the perception of cryptocurrencies and significantly reduce energy consumption. A prime example is Ethereum pivoting from a proof-of-work to proof-of-stake model
“We are only just beginning to understand the blockchain’s potential impact – both good and bad,” said Kirsteen Harrison, environmental and sustainability adviser for 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.
“Meaningful progress on the vital challenge of decarbonization will only be achieved through collaboration, collective action and open dialogue. The industry also needs to get far better at communicating the real-world value of cryptocurrencies. As a sector, we have the potential to make rapid progress towards decarbonization, and at Zumo we are excited to be advancing the objectives of Crypto Climate Accord to make this a reality. ”