Making eco crypto a thing

Cryptocurrency is green in one sense of the word only: it’s new. Because so far, the ecological impact of cryptocurrency production has been a major deterrent in its widespread adoption. Bitcoin mining uses more energy globally than the entirety of Argentina, Pakistan, and the Netherlands. Offsetting its carbon footprint would require planting 300 million trees, starting yesterday.

As Sid Lee’s Chief Strategy Officer Nirm Shanbhag puts it, “The irony of crypto to date has been that while embraced as a better option for the future of money, it simply fails to align with the environmental challenges and realities that the coming decades hold.”

That said, crypto’s perks—advancements in data privacy, the democratization of currency, financial inclusion and decentralization—remain strong enough reasons for brands to jump in and back this revolution. Luckily, starting in June 2022, crypto worldwide will be greening up.

The reason for crypto's energy sap

Most cryptocurrency today is mined through a proof-of-work (POW) system, which is in place to prevent fraud and ensure privacy. Essentially, programs are written that solve complex puzzles in order to virtually “mint” a single coin. Whichever program solves the puzzle first wins the contract and mints the coin. This means that there’s incentive for central processing units (CPUs) to have the highest possible processing power to be able to run multiple programs simultaneously. High processing power = higher electricity use.

Electricity, as we know, is generated through fossil fuels: the greatest contributor to our changing climate.

Further, there’s the issue of toxic waste. Because crypto mining is constantly evolving, new specialized IT equipment called ASIC chips are manufactured and then quickly rendered irrelevant. Or simply broken from overuse. Each case results in waste that experts anticipate will soon approach 64,400 metric tons.

That’s 9,700 elephants, for scale.

The high stakes solution

To counter this quandary, companies like Moss and Aerial have begun offering carbon offsetting for cryptocurrency mining. It’s a step in the right direction, but nothing beats the entire crypto system overhaul scheduled for this June.

In June 2022, Ethereum, the second largest crypto coin next to Bitcoin, is set to transfer to proof-of-stake (POS), alongside Cardano, Tezos, Atmos and other (generally newer) cryptocurrencies. Ethereum’s founder, Vitalik Buterin, claims this will reduce energy use up to 99.95%. The difference is this: unlike POW, POS mining secures the blockchain by verifying transactions in accordance to Ether holders’ stake in the token.

Though specific details vary depending on the project, POS blockchains use a network of validators who offer their own crypto as the stake in exchange for a chance to validate new transactions, update the blockchain, and earn a reward. The winner is determined by both the amount of crypto each validator has at stake, and how long it’s been at stake—literally rewarding the most invested participants.

All that to say, POS mining will not be guzzling electricity to mint coins.

There’s a high degree of pressure on this move, which has been pushed back several times since the initial announcement. The cryptocurrencies that already operate on POS like Tezos and Cardano are being favoured by giants like Redbull and Honda.

“If a sustainable option already exists, then organizations with forward-facing environmental policies are sure to select it,” says Sid Lee EVP and Head of Strategy Yanick Bédard. “2022 will be a pivotal year.”