The recent Merge — where the Ethereum network officially switched over to a less-energy-consuming proof-of-stake (PoS) model from a proof-of-work (PoW) mechanism — has brought ‘green’ blockchain or sustainable blockchains under the spotlight. This comes at a time when cryptocurrencies are facing flak across the globe over their power-intensive mining procedure, having already seen a strict mining ban in countries like China and Kosovo due to rising electricity costs. As India is looking to tap into the digital coin space with its very own central bank digital currency (CBDC), and since crypto trading is seeing a rise in the country, it’s only apt that the Centre considers facilitating green blockchain endeavours to assist a sustainable growth in the crypto industry.
What is a green blockchain?
A blockchain is a digital ledger that keeps a log of all transactions done on a network. If we put it simply, cryptocurrencies exist only on a blockchain and it helps track all transactions related to a coin in a decentralised manner (not controlled by a single entity).
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Now, you may already know a crypto coin is created by ‘mining’. A highly competitive process, crypto mining traditionally uses a proof-of-work method to verify and add new transactions to the blockchain. This procedure requires multiple powerful computers working nearly 24×7 to execute complex mathematical calculations to mine crypto coins.
As you can understand, these computers consume a considerable amount of power. Additionally, you need even more electricity to run the cooling machines (like air conditioners or other coolants) that keep the temperature of these computers low in order to ensure they continue operating properly.
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As mentioned earlier, countries like China and Kosovo have already enforced a ban on crypto mining just to get rid of the spike in their electricity consumption. In India so far, crypto mining is still unregulated. So, you can still mine crypto coins in the country, but the overall proof-of-work mining model is hampering power distribution in a nation that is not only heavily dependent on fossil fuels but where electricity shortage is a major concern for those living away from urban regions.
A green blockchain comes in as a sustainable alternative. As mentioned earlier, the Ethereum network has switched to a proof-of-stake mechanism. In the case of PoS, processing doesn’t use up much energy, transactions are comparatively cheaper, and importantly, it is safe from a major attack on the network.
To put things into perspective, a PoS mechanism consumes 99.9 percent less energy than a PoW model.
Why is a green blockchain necessary in India?
Since less energy is consumed, a green blockchain has a notably small carbon footprint. Poorvi Sachar, Head of Operations, Tezos India, told ABP Live, “In a country like India whose primary source of energy is fossil fuels, the use of ‘green’ blockchain technology would have a massive impact on the electricity consumption for mining/baking. It would lead to a much cleaner and greener environment, leaving fewer carbon footprints.”
If we look at numbers, mining a single token of Bitcoin can consume up to 2,165kWh of electricity in traditional methods. As per a study by the Council of Energy, Environment and Water (CEEW), a typical Indian household consumes about 5.7kWh of power on a daily basis. So, the power taken to mint a single Bitcoin via traditional methods could be enough to power a household for over a year — 380 days to be exact.
If we consider the PoS model’s 99.9 percent reduction in power consumption, a Bitcoin can be mined by consuming a little over 2kWh of power.
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As per weTrade founder and CEO Prashant Kumar, a green blockchain will also help remove the negative outlook crypto mining has among people. Kumar told ABP Live, “With a green blockchain in India, the biggest advantage would be that innovation in blockchain technology will get a push without being associated with its detrimental effect on the environment.”
“Climate change is a real crisis and a green blockchain can play a role in both reducing carbon footprint and providing innovative solutions to tackle it,” Kumar added.
Mudrex co-founder and CEO Edul Patel believes that green blockchain will also lead to even more research and development around eco-friendly crypto operations. “In a developing country such as India, green blockchain can reduce energy consumption significantly, driving more startups to solve problems innovatively in public and private sectors by utilising blockchain efficiently,” Patel told ABP Live.
What can companies and the government do to establish green blockchains in India?
As per Sachar, spreading awareness on the use of green blockchain if the “need of the hour”. She said, “Concerning organisations should profess the idea of ‘green’ blockchain through online sessions, workshops, and discussions. Practically, it can be made possible through the use of the ‘proof-of-stake’ mechanism which consumes 99.9 percent less energy.”
Kumar believes that support from the Centre is of utmost importance for any new technology to find its foothold in the country. “India is a leader in taking initiatives to tackle climate change and the same needs to be demonstrated in blockchain which is possible via government intervention,” he said. “As green blockchains are in the limelight, India has an opportunity to innovate and globally show the way.”
Regulatory support is also mandatory for the sustainable growth of green blockchain in India, as per Patel. The Mudrex chief said, “As blockchain and related digital technologies are gaining momentum, a supportive and friendly regulatory environment can help the country expand sustainably, thereby driving economic growth.”
Just like Ethereum, there are several more cryptocurrencies that mostly use PoS model, hence making them more eco-friendly, including the likes of Cardano and SolarCoin.
So, with a right mix of government initiatives and responsible operating from crypto companies, it can be expected that green blockchains will soon be a mainstay in the digital coin sector, leaving a positive impact on India’s carbon footprint.
Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Cryptocurrency is not a legal tender and is subject to market risks. Readers are advised to seek expert advice and read offer document(s) along with related important literature on the subject carefully before making any kind of investment whatsoever. Cryptocurrency market predictions are speculative and any investment made shall be at the sole cost and risk of the readers.