The crypto industry, with its questionable carbon footprint, now has a convenient way to showcase its green cred on a verified (rather than trusted) basis.
But that raises a tricky question: The likes of Amazon and Google, whose processing largely takes place within directly owned and controlled data centers, are able to contract clean energy with relative ease and precision. But who do you ask for if you want to make Bitcoin greener?
Announced Wednesday, Energy Web, a non-profit focused on decentralized approaches to decarbonizing the grid, wants to show how a large blockchain platform can switch to a zero-carbon footprint. To start with, the organization is teaming up with San Francisco-based Ripple and the XRP Ledger Foundation.
Ripple’s support of this venture is intended to open the door to other blockchains with more energy-intensive operations like Bitcoin, said Jesse Morris, Energy Web’s chief commercial officer.
To make all this possible, the non-profit has released an open-source app called EW Zero that makes it easy for individuals, businesses or even entire blockchain ecosystems to make the transition. This initial deployment uses energy attribute certificates (EACs) from renewable energy sources to decarbonize electricity, the companies said.
“Blockchains are a massive energy hog and a lot of that electricity is not coming from wind, solar, hydro or other sustainable facilities,” said Morris. “So we have been thinking for a while now about how we could help the crypto industry decarbonize blockchains, given the distributed nature of the technology.”
In the case of Ripple, a 500-person fintech company focused on crypto-powered banking, there is an obvious starting point when it comes to reducing the firm’s carbon footprint. Moreover, Ripple uses a consensus system quite unlike Bitcoin’s proof-of-work (PoW) mining, an algorithm that by definition must burn through a ton of electricity. (At last count, the top five PoW blockchains currently use up to 170 terawatt-hours (TWh) of electricity per year – more than the state of New York.)
Presented with these observations, Ken Weber, Ripple’s head of social impact, said in this case it would be beneficial to put technology-based tribal differences aside and adopt more of an “all in this together” approach.
“It’s early days for all these currencies, which right now have a tiny share of global finance, but further down the line [green energy adoption] is gonna be much more difficult to reverse engineer,” said Weber. “We wanted to help make it easy to adopt these practices. This is not a proprietary wish on Ripple’s part; it’s a whole system wish. As with other social change movements, the idea is not to make anybody feel bad or shamed, but to give them a means to do this that is reasonable, beneficial and participatory.”
Alex de Vries, the founder of Digiconomist, which identifies trends in cryptocurrencies, said carbon offsetting is happening at the level of crypto exchanges looking to do business with traditional financial institutions that follow environmental, social and corporate governance (ESG) mandates.
“Ripple is leveraging the fact that people associate heavy energy consumption with blockchains, but that’s only really proof-of-work,” said de Vries. “With Bitcoin, you’re talking about an extreme carbon footprint of 300 kilograms per transaction. I haven’t done the math on Ripple, but it’s gonna be closer to a Visa transaction, which is 0.4 grams per transaction.”
Nonetheless, this is a step in the right direction for a relatively young industry that could become one of the first to be carbon-neutral, said Energy Web’s Morris. In the same way that large corporates use certificates to decarbonize complex supply chains, blockchain users can purchase certificates from different places around the world (EW Zero also uses a blockchain system to track and account for these certificates).
“Imagine in the future having a wallet interacting with some blockchain, and as a part of that wallet you can actually increase your transaction fee just a bit and you’ve just contributed to decarbonizing the blockchain by purchasing a certificate somewhere,” said Morris. “Or if you are a bitcoin miner in a mining pool, you’re also able to use this application to directly purchase certificates in a specific part of the world.”
The impetus to give this is a go is two-fold, said Energy Web CEO Walter Kok.
“Firstly, on the supply side, it will be useful to hook up existing green energy producers already servicing Bitcoin, which might have an overcapacity of green energy,” Kok said, adding:
“The other part won’t happen overnight, but in the end, everybody wants to be assured they are contributing to a better world. So let’s get to the point where we can say with confidence that all blockchains, including Bitcoin and all its miners, produce in a green way.”