UN backs reducing cryptocurrencies’ carbon footprint
Thursday, Jul 12, 2018
The UN climate change body is lending its support to a new company that aims to reduce the carbon footprint of cryptocurrencies – by using a blockchain, the foundation of the currencies.

The UN climate change body is lending its support to a new company that aims to reduce the carbon footprint of cryptocurrencies – by using a blockchain, the foundation of the currencies.

New Era Energy, a start-up based in Singapore, has developed the Carbon Grid Protocol, a framework to offset the emissions generated by the digital currencies.

Bitcoin, the most established currency, is estimated to require more than 1 MWh of electricity for every transaction, by the Digiconomist Bitcoin Energy Consumption Index. This adds up to an estimated carbon footprint per transaction of more than 500 kg and an annual energy consumption of more than 71 TWh, on par with the electricity used by Chile every year and several hundred thousand times more energy than is used in a Visa transaction.

“Bitcoin’s biggest problem is not even its massive energy consumption,” Digiconomist says, “but that the network is mostly fuelled by coal-fired power plants in China.”

Not all cryptocurrencies are equal in this regard – Ethereum uses just 78 kW per transaction, putting its annual electricity consumption on a par with Iceland. Nonetheless, even generating 35 kg of CO2 per transaction is unacceptable and all cryptocurrencies will come under increasing pressure to reduce their carbon footprint.

New Era intends to create a carbon credit market that allows users to offset every transaction, tracking and verifying such moves using the blockchain that underpins the currency and means that all the necessary data is readily available.

The technology can be used to offset the emissions of any kind of company, but co-founder Andy Tan says that New Era is targeting cryptocurrency companies because of the easy availability of the data and the high footprint of the currencies.

“By connecting carbon initiatives from different countries and industries, our goal is to improve liquidity and efficiency in a carbon market system that is currently highly fragmented,” the company says.

The Carbon Grid Protocol is part of the Climate Chain Coalition, a blockchain initiative supported by the UN Framework Convention on Climate Change (UNFCCC), the first Asian project the coalition has backed.

An increase in offsetting should also encourage bitcoin miners to become more efficient. “If crypto users have to cover the cost of the carbon that is created when they make a transaction, systems that prioritise efficiency could benefit,” says the website Cryptodisrupt.

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