The largest cryptocurrencies — Bitcoin, Bitcoin Cash, and Ethereum — require vast amounts of energy consumption to function. Last year, blockchain used more power than 159 individual nations including Uruguay, Nigeria, and Ireland. Unsurprisingly, this is creating a huge environmental problem that poses a threat to the Paris climate-change accord.
Beyond the environmental concerns, this inefficiency threatens blockchain as a meaningful platform for enterprise. The high energy costs are baked into the system, and, because the cost of running the network is passed on in transaction fees, users of these networks end up paying for them.
An immediate fix is mining is the use of solar power and other green energy sources. Each day, states in US like Texas alone receives more solar power than we need to replace every non-solar power plant in the world. There are numerous commercial services for powering crypto mining on server farms that only use clean, renewable energy.
Other plans will also be to incentivize green energy for future blockchains, too. Every company that uses blockchain also defines its own system for miner compensation. New blockchains could easily offer miners better incentives, like more cryptocurrency, for using green energy — eventually forcing out polluting miners. They could also require all miners to prove that they use green energy and deny payment to those who don’t.
The Delegated Proof of Stake (DPoS) system, which operates somewhat like a representative democracy. In DPoS systems, everyone who has cryptocurrency tokens can vote on which servers become block producers and manage the blockchain as a whole. However, there is one downside. DPoS is somewhat less censorship resistant than Proof of Work systems. Because it only has 21 block producers, in theory, the network could be brought to a stop by simultaneous subpoenas or cease and desist orders, making it more vulnerable to the thousands upon thousands of nodes on Ethereum. But DPos has proven to be vastly faster at processing transactions while using less energy, and that’s a tradeoff we in the industry should be willing to make.