Raul Dufy: The Spirit of Electricity

Blockchain and CSR: Ecology Crypto or Carbon-Crypto Bomb?

Too volatile, purely speculative, unregulated, organised crime and terrorism funding, monetary sovereignty of the states (banks), etc. You have already heard at least one of these objections to cryptocurrencies.

Even though there are still many causes of mistrust towards blockchain and more precisely towards the underlying cryptocurrencies, they have most often become obsolete and/or instrumentalized by industrial protectionism.

However there is one of them — not so prominent even among industry insiders — that deserves attention. Is blockchain a technology compatible with ecological issues or is it an ecological scourge?

Some climate and low-carbon industry experts are highly critical about blockchain. The advanced arguments are sobering but also expose the limit of their authors’ knowledge about blockchain.

Blockchain under injected electricity ⚡⚡⚡

Blockchains and their various applications would be completely dependent on and addicted to electricity. Why? Because of mining. The miner is a computer or a complex of computers (called “mining farm”) whose role is to validate transactions on blockchain networks. He receives a reward in cryptocurrency for this work. The computer needs electricity to mine, this is a reality.

According to the Cambridge Center for Alternative Finance report, the direct energy bill for mining in 2020 would be 7.46 gigawatts. Which is equivalent to the annual production of 7 nuclear power plants. A recent study in the Joule scientific review estimated the industry’s carbon footprint at 22 megatons of CO2.

However, it is difficult to make a true comparison with the direct energy bill of “conventional” financial institutions. It should be possible to transparently evaluate the cost of 766 billion digital transactions in 2020, as well as the cost of the technical infrastructure (servers, ATMs, networks, office automation, fiat, etc.) of the global financial network. Impossible unless you make it an economics thesis. We may, however, be interested in the Oxfam France report which points out the catastrophic carbon footprint of the banking sector. For BNP Paribas, Société Générale, BPCE and Crédit Agricole only, the carbon footprint would be close to 2000 megatons of CO2. You can imagine a projection of the global footprint of this industry at the highest level of asymmetry between impact and environmental responsability.

So yes, all industries are dependent on energy flows and any emerging industry needs to be supplied. But to simply say that the blockchain consumes far less would not be a valid argument if it did not consume better.

Yes, behind this profitability quest and these more flexible, more agile, more nomadic decentralized networks, there are also brilliant engineers and businessmen, anxious to find the best costs for their energy flows. Perhaps, some of them also care about climate issues. And yes, many blockchain projects aim to answer it.

The proof of stake alternative

First of all, not all blockchains require mining. The proof of work protocol used to validate transactions in Bitcoin’s blockchain is a first-generation protocol. Since December 2020, more and more blockchain, including Ethereum, are turning to the proof of stake protocol which no longer requires any mining and precisely avoids overconsumption of energy. Permanent innovation in the sector already offers new technological perspectives (DAGchain, Holochain, Lightchain, etc.) and new validation protocols are constantly being tested.

Bitcoin KING of sustainable mining

Even in the case of bitcoin, which represents more than two-thirds of the world’s mining and thus energy bill, miners will locate as close as possible to renewable energy sources with low storage capacity. It is estimated that in 2019, 74,1% of bitcoin mining was already powered by untapped renewable energy. And this trend had to be further increased in 2020. This actually makes the mining industry the most clean energy oriented industry.

Búrfell Hydroelectric Power Station (Iceland)

This is the case, for instance, of hydraulic energy. Relatively under-exploited and very difficult to connect to distribution networks, hydraulic power plants are often far from urban areas, which makes their transport expensive. This represents a real opportunity for mining industry, anxious to locate near these infrastructures and therefore to obtain cheap electricity. The majority of miners therefore settle in areas where hydropower is at the best price, such as in Scandinavia, Siberia or Iceland, where electricity is mainly from renewable energies (hydropower and geothermal). The miners, instead of pressing the industry to build new submarine cables to the countries in demand, are exploiting the surplus electricity.

This is what Simonin Owen alias Hasheur already explained in his video of December 10, 2018.

Hardware infrastructure and premature obsolescence 🖥️

Independently of the energy flow to supply the mining industry, it is necessary to consider the constitutive physical flows of this industry and therefore also the consecutive energy flows.

Indeed, before being supplied with energy, the industrialist must build a computer park enabling to be competitive on the mining market (graphic cards, processors, memory cards, etc.). A material mainly composed of rare earths (metals essential to microelectronics). A heavy IT asset that is consequently ecological and energy efficient (extraction).

In addition, this equipment is constantly pushed to the maximum of its capacities which implies its premature obsolescence.

These subjects concern all high-tech industries, but the mining industry, which is still emerging, has the opportunity to integrate these issues as quickly as possible.

A project like Golem for example, aims to offer a decentralized technical infrastructure to companies that need huge computing power (AI, machine learning, deep learning, quantum computing, etc.). The latter could then use (for payment) some of the computing power of your Macbook connected to the Golem network and this simultaneously to millions of computers/smartphones. This project aims to fully exploit the existing hardware park and therefore to limit the extraction of rare earths necessary for the constitution of a new centralized technical infrastructure.

UN recommends energy decentralization in Africa

On the African continent, ⅔ of the population remains deprived of electricity due to complex and overly costly transmission between production centers and customers in growing demand. The UN report believes that miners could act as intermediaries on the transmission route to make these new electricity grids profitable. The solution would therefore be to sell rather than store in an expensive and inefficient manner.

Profitable Distribution Scheme for Energy

In Congo, a mining center project near the Virunga natural park would, for example, make the commissioning of 5 hydraulic power stations profitable to replace coal-fired power stations. By exploiting surplus energy, the mining industry can support the profitability of low-carbon energy projects and help deliver electricity where it is lacking.

Compatible Ecology Crypto 🌱

Every human activity requires a certain amount of energy flow. The same goes for blockchain and mining. But it is unfair to point at the energy bill of this emerging industry under the pretext that it would be high in proportion to the current use of its applications. And this, while we are attending a more and more obvious democratization of these and a more and more integrated deployment. This would mean denying the right to disrupt an established and particularly carbon-intensive order under the pretext of climate protection. On the contrary, this industry has the potential to find innovative, less carbon-intensive solutions to existing systems and to be a leader in the energy transition.

By Lepetit Jeremi —Retreeb’s Co-Founder

Translated from French into English by Julie Lenfant

Ethical Payment Solutions - www.retreeb.io

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