More Energy-Efficient Blockchains Are Possible. Here's How

Proof-of-stake networks offer decentralization and security while using a fraction of the energy of proof-of-work chains like Bitcoin's. They are the future, says CasperLabs' CTO.

CoinDesk Insights
Jun 29, 2021 at 4:48 p.m. UTC
Updated Sep 14, 2021 at 1:18 p.m. UTC

The past year has been one of massive growth and transformation for the entire Web 3 industry. Thanks to decentralized finance (DeFi) and non-fungible tokens (NFT), and a rise in interest from traditional finance, excitement for blockchain’s potential has never been higher. With this attention, though, comes new scrutiny. Energy consumption sits right at the top of the list. 

While there are differing opinions about Bitcoin’s carbon footprint, and Ethereum is making a gradual transition from a computer-intensive proof-of-work (PoW) model to a more efficient proof-of-stake (PoS) model, blockchains consume a lot of energy. And, I’d argue, for good reason. Blockchains have the ability to not only create entire new multi-billion dollar markets and drive dramatic efficiencies in existing markets. It’s much easier to move $1 million in BTC than move $1 million in gold, for example. 

Medha Parlikar has been the CTO of CasperLabs since 2018, and most recently led the team through its public sale and mainnet launch. She is an advocate for greener alternatives to energy intensive blockchains and is focused on building a sustainable, future-proof enterprise network. 

Our industry was built by innovators. We’ve defied what many perceive to be possible time after time, and now we must continue to push the technology forward as we face the challenge at hand: to reduce energy consumption across the board without sacrificing security, decentralization and scalability. Our ability to do so as an industry is critical to ensuring this technology can support the evolution of society as a whole.   

The environmental issue is growing in importance. In May, we saw Tesla back off of its commitment to accepting BTC payments, only to then keep the door open by noting it’s open to rethinking this approach as less energy-intensive BTC mining models take hold. The Chinese government’s recent crackdown on bitcoin mining in China appears partly related to its environmental impact, at least according to official statements. 

A recent power usage study conducted by developers at CasperLabs found the Ethereum and Bitcoin networks respectively account for 33.5 and 95.45 terawatt-hours annually, according to the Cambridge Centre for Alternative Finance. This means the Bitcoin network consumes more energy than over half of the world's countries each year on an individual basis. And that doesn’t even account for the specialized mining equipment such as custom ASIC solutions and locked GPU configurations that PoW requires that cause another layer of environmental impact that aren’t fully captured in these measurements.

The blockchain sector is just like any other industry in the sense that it’s a mix of outdated, resource-intensive organizations and forward-thinking projects that set new standards for operational efficiency and sustainability. Critics have taken environmental concerns that apply to only a handful of projects and extrapolated these across the entire blockchain industry. It’s only the networks that leverage the PoW consensus mechanism that use high amounts of energy, and it is widely understood that PoS is a more energy-efficient alternative. In fact, Ethereum is now working on transitioning the Ethereum network to a PoS model. (Reality check: Pure PoS won’t be ready until v3.0, and both Ethereum v2.0 and 3.0 have been delayed for years.) 

PoW protocols have proven to be resource-intensive because of the way nodes validate network activity. PoW deserves recognition as the consensus mechanism that spurred the blockchain industry, but it’s clear PoW has triggered a never-ending, resource-intensive arms race between crypto miners, who are constantly upgrading their mining equipment to gain an edge over the competition. 

Within the blockchain industry, energy consumption is clearly a divisive issue. We’re sitting at a pivotal moment, where we have a choice to actively champion new standards for reducing the industry’s environmental footprint. That standard is PoS, and we need to communicate to the world that there are blockchains that are live and in production today – that leverage PoS to drive a drastic reduction in energy consumption without sacrificing the security guarantees and decentralized nature that underpins the tech. 

There is a need for an environmentally friendly enterprise blockchain fully capable of supporting a high volume activity, here and now. PoS networks have stepped up to fill that void. One of the most recent PoS networks to garner attention from devs and enterprises is Casper, a network that is optimized for sustainability due to its novel consensus mechanism, enabling Casper to exceed performance of Bitcoin and Ethereum by using a fraction of the energy.  

A recent performance audit demonstrated the Casper network is 47,000% and 136,000% more energy efficient compared to Ethereum and Bitcoin, respectively. Casper even stacks up favorably against other PoS blockchains such as Cosmos, which is 22,000% and 64,000% more efficient than Ethereum and Bitcoin, but only half as efficient than Casper. That is a figure that CEOs care about, and it’s my job to ensure these executives, along with their shareholders, understand how PoS networks are uniquely designed to preserve as much power as possible.   

Take Casper’s Highway consensus mechanism for example – a unique variant of PoS where validator nodes certify that each newly proposed block is legitimate using a consistent, predetermined set of guiding principles. If the block is appended, each participating validator receives a reward proportional to their bond, while validators that do not contribute forgo their block rewards and are ejected. 

And because developer communities continue to find new ways to improve the efficiency of these networks, it's critical for smart contracts to be independently upgradeable, preventing the disruption caused to regular on-chain activity when the entire network is upgraded. This is essential, as it makes it easier to introduce and scale new features – a time-consuming challenge Ethereum has faced in its transition from PoW to PoS. 

Our ability to achieve measurable sustainability goals has become an urgent priority for society writ large, and industry leaders and regulators alike need to recognize that eco-friendliness should not be an optional feature to be built out later. Three-fourths of the world’s 250 largest companies now have targets in place to reduce their carbon emissions, and it’s important to continue raising awareness around this issue. Shareholders are increasingly demanding this, not just due to regulatory demands but because it’s proven to drive better business outcomes. A recent Harvard Business School study found companies that developed processes to measure, manage and communicate performance on sustainability goals in the early 1990s outperformed those that did not over the next two decades. 

Blockchain proponents need to do a better job of directly addressing valid concerns as they arise, and I personally think every dev team that’s confident in what they’re doing should relish the opportunity to pressure-test their ideas in a public forum. We need to encourage everyone in a position of influence to ask the hard questions about what we’re doing to make our tech more sustainable, because the best way to hold people to higher standards is to provide specific and actionable critiques when warranted, and give credit where it’s due.

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