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The use of power by bitcoin and other similar blockchain networks has drawn them into a wider discussion about sustainability in recent months. However, the enormous potential for smart contracts, which are completely traceable, transparent, and irreversible self-executing contracts that operate on blockchains, to help to the battle against climate change has been overlooked.
Smart contracts enable us to create globally accessible and fully automated incentive systems that directly reward individuals, companies, and governments for participating in sustainable practices such as regenerative agriculture, carbon offsets, crop insurance, and other similar initiatives. At its essence, combating climate change will need a significant shift in global spending patterns, and smart contracts are a fantastic instrument for motivating involvement in global green activities.
We've reached a stage where CO2 emissions are the primary driver of global warming and climate change on the planet. It is now necessary to take climate action. To address this issue, each company's carbon footprint must be calculated and recorded, as well as the required efforts taken to offset it. In this circumstance, blockchain solutions are quite beneficial, and efficient and we'll explain why.
One of the most significant contributions of Blockchain development is the ability to monitor carbon footprints using IoT-compatible smart sensors. The two together allow for the calculation of energy usage as well as the generation of data that can be studied, debugged, and aggregated on the Blockchain. Blockchain provides full traceability and transparency on the carbon offset projects one chooses to support. It also lets you know about how your support to the carbon offset project would bring a change in the biodiversity.
This network converts carbon emissions into tokens or "carbon credits," which businesses and government entities may trade to offset their carbon footprint. The data obtained via the Blockchain technology project will be traceable and transparent, providing a once-in-a-lifetime opportunity to carbon offset projects.
For example, Carbon Credits Climatecoin, an Ethereum-based cryptocurrency project, has partnered with a carbon credit exchange in an effort to help in the fight against climate change. The move is expected to lead to the creation of the world's first blockchain-based platform for carbon credit trading. The carbon credit is relatively cost-effective in determining the emission of greenhouse gases as compared to other scientific methods that were used to reduce emissions. This conversion has made things easier as calculating carbon credit is less time-consuming. Climatecoin aims to help individuals take part in the emerging crypto market while also assisting in the fight against climate change. Each token is “stapled” to a carbon credit, and climatecoin owners can use the token to purchase carbon credits on the Carbon Trade Exchange (CTX). This token would be proof that the carbon offset is considered and made.
The idea behind using blockchain in reducing carbon emissions is that everyone has a limit to the emissions they can produce. If a nation wants to exceed its limit, it must purchase a carbon credit. Each of these carbon credits serves as a permit to produce a certain amount of emissions; for example, one credit might equal one ton of carbon dioxide emissions. If an entity ends up with extra carbon credits, it can trade them to others on markets such as the European Union's Emissions Trading System in the world (ETS). From this project, a system emerged for voluntary carbon offsets.
The use of this technology while developing a company's or institution's corporate social strategy can effectively improve and enhance commitment to:
Anyone with access to the information may see every emission offset transaction.
Intermediaries are avoided, which saves money.
It makes it easier to keep track of and comply with carbon credits.
Transactions are executed faster since the number of steps is minimized.
It makes it easier to build renewable energy trading platforms.
This is an important element that would aid in the development of policies that encourage greenhouse gas emission reductions.
Organizations may use blockchain to increase the transparency, accountability, and traceability of their greenhouse gas emissions. They will be able to give more accurate, dependable, standardized, and accessible data as a result of it.
Blockchain could contribute to greater stakeholder involvement, transparency and engagement and help bring trust and further innovative solutions in the fight against climate change, leading to enhanced climate actions.
Smart Contracts that compute, measure, and report carbon footprint reduction are one approach to use technology to combat climate change. One of the most important features of this technology is that it allows for quick, real-time authentication and verification while maintaining a single set of data.
The most essential thing to remember when incorporating this technology into business models is that individual, isolated initiatives may now form a network in which everyone's contributions to the battle against climate change can be tracked. It's a win-win situation for everyone involved.
The blockchain project can be used to enhance the mechanism for transferring carbon credit token. In China, Energy Blockchain Lab and IBM developed a blockchain platform for trading carbon credits that allows high-emission organizations to monitor their carbon footprints and satisfy quotas by purchasing carbon credits from low emitters.
Blockchain solutions may potentially enable the creation of peer-to-peer platforms for the trading of renewable energy. Consumers would be able to purchase, sell, and trade renewable energy assets using token or digital assets that represented a certain amount of energy production.
The technology might potentially pave the way for the creation of peer-to-peer renewable energy trading systems. Consumers would be able to purchase, sell, and trade renewable energy between themselves, utilizing tokens or transferable digital assets that reflect a certain amount of energy generation.
Blockchain technology can help to increase transparency surrounding greenhouse gas emissions while also making it easier to track and report reduced emissions, perhaps reducing double counting. It might be used to track the progress achieved in achieving the Paris Agreement's Nationally Determined Contributions.
Take control of your company's carbon emissions. Become carbon neutral and do your part for the health and well-being of the planet. Find carbon offsetting projects, All the projects are verified so you can achieve certified emissions reduction. The marketplace allows you to manage the carbon offsetting activities of your company in the most cost-effective way. Offset now Connect the customers and the API and Widget are easy to integrate into your platform so all your products or services can become carbon neutral. Carbon offsetting projects are what the biodiversity needs!
Furthermore, this decentralized approach to blockchain provides breadth and depth, allowing everyone who wants to contribute to this cause, from businesses to governments to people, to do so. As a result, it is a particularly effective weapon in collective action to combat climate change.
Plain Concepts creates Blockchain management solutions that are integrated with other technologies like Big Data and Machine Learning so that our clients may track, analyze, and be open about their everyday activities in order to reduce carbon emissions and preserve biodiversity through offsetting activities.
Startups in the field of clean technology play a crucial part in this process. They create blockchain-based platforms that bring all parties together, including businesses, governments, and individuals.
Blockchain's decentralized method gives both breadth and depth. It involves everyone in the calculation and allows them to contribute. It enables manufacturers, suppliers, distributors, and consumers to measure and report reductions in greenhouse gas emissions across the whole supply chain.
Innovations brought by Blockchain development are significant accelerators for collaborative action in the battle against climate change. The importance of recognizing the unique contribution of clean technology entrepreneurs in this process cannot be overstated. Investors, both public and private, are beginning to recognize their particular worth.
Bitcoin has had an interesting past, even though it has only been around for less than 13 years. Climate change, on the other hand, continues to become an increasingly pressing concern. One of the most major complaints of Bitcoin in recent years has been the CO2eq emissions related to its consensus process, notably proof-of-work (PoW). Resolving Bitcoin's flaws and expanding its function gives a big chance to make Bitcoin a more long-term investment.
The exceptional outcomes cover the time from September 1, 2020, to August 31, 2021. The scenario must be evaluated separately depending on the company's business model for appropriate measurement of an investor's carbon footprint (i.e., simple investing, asset management, crypto exchanges, or custodians).
While Bitcoin could theoretically be mined using 100 percent renewable, carbon-neutral energy, this is not the case today, since miners are encouraged solely to maximize their profits by lowering their costs. According to the "polluter-pays" approach, mining corporations or mining pools should be able to offset CO2eq by purchasing produced power for their activities (Greenhouse Gas Protocol Scope 2 emissions).
This assumption, however, would be impossible to apply and, in reality, falls short. Since all parties who invest in Bitcoin, whether directly through crypto exchanges or indirectly through financial products such as Exchange Traded Notes (ETNs) or crypto funds, benefit from mining operations and, as a result, from their power consumption, mining operations benefit all parties who invest in Bitcoin.
As a result, a method is needed to calculate the proportional responsibility for Bitcoin's CO2eq footprint based on the benefit that stakeholders get. Because Bitcoin mining involves adding new transactions to the blockchain, a quantitative technique for calculating transaction CO2eq emissions is required.
As a result, the most accurate method is to calculate the percentage of blockchain space used concerning overall Bitcoin blockchain growth (transaction-based network usage). The methodology is employed in both the transaction-based and ownership-based approaches.
However, many parties that do not have access to their transaction-related data would be excluded from this strategy. Furthermore, as previously said, a large part of Bitcoin's appeal stems from its long-term macroeconomic model: the store of value. We propose a calculating model for this circumstance that focuses on the share of Bitcoins retained compared to Bitcoins in circulation for a certain period (ownership-based network usage).
In this line, we believe that all investors, asset managers, crypto exchanges, and custodians have a chance to step in and take responsibility for their carbon footprint in the Bitcoin network. The goal should not just be to demonstrate corporate social responsibility (CSR), but also to offer value by making Bitcoin a more sustainable investment in terms of carbon footprint.
The Bitcoin Carbon Neutrality Investment Standard (BCNISTM) is being used by INTAS.tech in partnership with the Frankfurt School Blockchain Center to calculate the proportionate carbon footprint of Iconic Funds Physical Bitcoin ETP (ISIN: DE000A3GK2N1) for Q2/2021.
The carbon emission was calculated using the BCNISTM's transaction-based carbon footprint calculation model: CO2 equivalent calculated: 37.60 tCO2 (observation period: April 15, 2021 – June 30, 2021)
Model for calculating the carbon footprint of financial products that contain Bitcoin by GHG Protocol Scope 3 emissions. As part of this study, more information about the methodology is accessible. This method enables investors, asset managers, cryptocurrency exchanges, and custodians to anticipate and comply with ESG criteria regulatory requirements such as the European Union's Sustainable Finance Disclosure Regulation (SFDR) at an early stage.
The prospect of an economic future regulated by a blockchain (a decentralized database shared among the nodes of a computer network, rather than being stored in a single location, such as a central bank) is attractive for cryptocurrency supporters.
The quick growth of cryptocurrencies has astounded everybody who has been paying attention. The worldwide cryptocurrency market was worth $793 million in 2019. According to a survey by market research firm Facts and Factors, it is now predicted to reach approximately $5.2 billion by 2026. The global use of bitcoin increased by more than 880 percent in just one year, from July 2020 to June 2021.
However, environmentalists are concerned about the growing popularity of cryptocurrencies, because digital "mining" has a significant carbon footprint due to the massive amount of energy it demands.
According to a February 2021 CNBC article, the carbon footprint of Bitcoin, the world's largest cryptocurrency, is equivalent to that of New Zealand, based on data from the Bitcoin Energy Consumption Index from Digiconomist, an online tool created by data scientist Alex de Vries. Both emit nearly 37 megatons of carbon dioxide emissions into the atmosphere every year.
To understand why this is an issue, it's necessary to first explain how a cryptocurrency like Bitcoin is created. Unlike conventional money, which is governed by central banks, Bitcoin transactions are monitored using a public database called the blockchain, which is made up of a global network of computers.
This validation, which is an energy-intensive operation, is enabled via "mining"—a process in which computational puzzles are solved to authenticate transactions between users, which are subsequently added to the blockchain.
Bitcoin has had a roller-coaster journey. For the first time since January 2021, the market price of a single bitcoin fell below $30,000 in June 2021, down more than half from its April peak of about $65,000. Nonetheless, some experts and billionaire investors remain positive about the cryptocurrency, citing the adoption of the money by some major corporations.
Goldman Sachs has begun to trade Bitcoin futures (agreeing to transact the coin at a predetermined future date and price). Tesla made a $1.5 billion Bitcoin investment. PayPal said in March 2021 that its U.S. customers would be able to pay its millions of online businesses using cryptocurrencies. El Salvador became the first country to recognize bitcoin as legal cash in September
"We're essentially fueling 21st-century technology with 19th-century energy sources," Andrew Hatton, Greenpeace United Kingdom's head of information technology, told CNBC.
He explains the high energy consumption to the "large amount of data-crunching required to produce and sustain this cyber-currency," which is a time-consuming procedure.
"Only roughly a fifth of the power utilized in the world's data centers comes from renewable sources," according to Hatton.
Another important feature of bitcoin is that there is a finite supply. As more bitcoin is mined, the complicated math problems required for transactions get more difficult to solve, requiring more energy.
The system is set up in such a manner that each digital token created has its unique cryptographic reference to the blockchain, which ensures its security.
The problem of energy use over time is aggravated by mining incentives. In the case of Bitcoin, a miner receives a little amount of the cryptocurrency each time they solve the difficult hashing process necessary to create bitcoin (the "PoW").
The works generate, by processes known as proof-of-work (PoW), which establishes its unique identity.
While this is an improvement over the conventional art market in terms of preserving the value of the original piece, it is extremely harmful to the environment.
According to Charles Hoskinson, co-founder of Ethereum, the underlying difficulty with this is that "the more successful bitcoin becomes, the higher the price rises; the higher the price goes, the more competition for bitcoin; and therefore the more energy is required to mine [it]." As the price of bitcoin rises, so does the incentive to mine it, creating a feedback cycle that is bad for the environment.
According to the Cambridge Bitcoin Power Usage Index, Bitcoin accounts for roughly 0.52 percent of total world electricity consumption in December 2021. That may not seem like a lot, but according to Digiconomist, Bitcoin's entire yearly power use is about 204.50 terawatt-hours, which is roughly similar to Thailand's power consumption.
"Numbers like this should be regarded with a grain of salt. Bitcoin's energy consumption is highly dependent on its price, which fluctuates drastically. Because the pace at which new bitcoins are generated is supposed to be half every four years, the authors [of a report published in April in the journal Nature Communications] believe the long-term trend will be upward.
Aside from the massive energy use, there's also the question of where that energy originates from. There is no exact figure for the percentage of renewable vs fossil-fuel-powered electricity utilized in bitcoin mining.
Bitcoin's energy consumption is measured in two ways, according to Earth.org: According to CoinShares, a cryptocurrency asset management, and analysis organization, 74.1 percent of Bitcoin's power comes from renewables in 2019, whereas the University of Cambridge puts the figure at 39 percent in a 2020 report.
Not how Bitcoin is powered, but where it gets its power is a better sign of its energy source. According to a March 2021 story in Quartz, "approximately 65 percent of bitcoin mining capacity, or hash rate, has been situated in China due to its inexpensive power" since April 2020. This diagram should help you understand what Bitcoin's major source of energy is right now.
Any serious criticism of Bitcoin must take into account the larger context of energy use. "Although we think the levels [of energy used by Bitcoin] are preposterous right now," Michel Rauchs, a research affiliate at the Cambridge Centre for Alternative Finance, told CNBC, "that is still half as much as inactive household appliances in the United States consumed."
A similar rationale might be extended to a range of ordinary operations, such as sending emails or surfing the web in general, both of which consume a significant amount of energy.
"What we have here is individuals trying to figure out what is and isn't a smart use of energy," Meltem Demirors, CoinShares' chief strategy officer, told CNBC. Bitcoin's energy openness, according to Demirors, puts it in a better position than other, more opaque energy-consuming businesses like banking.
According to research published in May 2021 by Galaxy Digital, a financial services and investment management organization located in New York, Bitcoin uses less than half the energy produced by the banking and gold industries.
To put this finding in context, the report's authors point out that "Bitcoin is a fundamentally novel technology that is not a precise substitute for anyone legacy system." This means that, unlike traditional currency or gold, Bitcoin is "not solely a settlement layer, not solely a store of value, and not solely a medium of exchange."
Companies might use the methods outlined above for transactions and Bitcoin ownership to calculate their carbon impact, which they would then offset. As previously stated, such computations must take into account the individual company model. It is likely that the outcomes of such computations will need to be validated and reviewed by specialist service providers in the future.
Recent increases in security breaches and digital surveillance highlight the need for improved privacy and security.
People have realized the need for direct trades and have also experienced the drawbacks of centralized exchanges.
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