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Can Crypto Help Fight Climate Change?

The year is 2023, and crypto technology has gone far to help us tackle the biggest problem of this century — climate change.

Posted February 17, 2023

Bitcoin with windmills in the background.
Bitcoin with windmills in the background.

Cryptocurrencies and the technologies that make them work can help fight climate change. Even though it’s true that Bitcoin takes a lot of energy to run these days, there are many other crypto networks that use much less energy.

On top of that, distributed ledger technologies like blockchain, hash graphs, and more have helped green projects in the real world.

With the help of these technologies, the projects become more open and effective, which increases the impact of these projects to restore ecological balance around the world.

Scope and definition

In this article, the word “crypto” will refer to any network that uses distributed ledger technology (DLT) and the digital currency that is used to move money across the network.

Also, “crypto networks” won’t just refer to decentralised public networks that anyone can join, like Ethereum. It can also mean networks that are privately owned or government owned, which can have a central point of control.

The Bitcoin argument

Before we talk about how DLTs can be used to protect the environment, it’s important to talk about Bitcoin.

Many people fear that Bitcoin threatens the environment because of its high energy demand. So much so, the act of processing Bitcoin transactions is known as “mining”.

This argument comes from the fact that it takes approximately 1,449 kilowatt-hours to process one batch of Bitcoin transactions every 10 minutes. This is equivalent to switching on one 18-watt LED household lightbulb for 80 hours straight.

But this doesn’t mean that a single Bitcoin transaction really uses this much energy.

Every 10 minutes, Bitcoin processes around 2000 transactions in a batch. So, if you send Bitcoins to one or more addresses, you’ll use 0.724 kWh, which is the same amount of energy as turning on the same lightbulb for 2 minutes.

In a different way, you can think of the carbon you put into the air when you fly. It’s true that airplanes put out a lot of carbon. Unless you’re on a private jet, you probably share the carbon emissions with the other people on the plane.

Bitcoin could use less energy, in theory

In theory, Bitcoin could use a lot less energy than it does now. Let’s say that governments all over the world could set a limit on how much energy Bitcoin mining could use. The Bitcoin network can adjust to this change by lowering the “mining difficulty” automatically.

Having a lower mining difficulty means that Bitcoin will use less energy. The only reason why Bitcoin uses so much energy is because, built into its code is a rule that says Bitcoin transactions must take on average 10 minutes to process. 

However, miners are competing against each other to become the fastest at processing Bitcoin transactions.

The fastest one to process Bitcoin will earn new Bitcoins. If Bitcoin is mined too quickly, the network will automatically set the mining difficulty much higher to increase the transaction time.

Right now, it’s hard to get all of the world’s governments to agree on a consistent policy for Bitcoin mining. But in some places, local governments have made it a requirement for crypto miners to get their energy at least partly from renewable sources.

Learn more about Bitcoin: Read our beginner’s guide on Bitcoin.

EU: Harnessing blockchain for climate action

The European Commission (the EU’s executive body) praises blockchain’s potential to help fight climate change.

The commission is taking some steps to overcome “the tragedy of the commons” and using blockchain to incentivise actors to reduce their carbon footprint.

Blockchain’s greatest strength is in providing transparency to any system that implements it. For example, let’s say that the EU has passed a law that limits the carbon emissions of individual goods delivered across the union.

Related: What is blockchain technology?

Bitcoin BTC with windmills in the background.

Without blockchain technology, it could be very costly to verify information about carbon emissions, in this case. A cheeky mega corporation could obfuscate the measurement by finding loopholes — a byproduct of flexible regulations.

Even with a very low rate of corruption, it’s hard to audit carbon emissions across the whole economy without using a number of trusted agencies to look for any possible loopholes.

Blockchain removes our reliance on trusted agencies 

Making the data input “officially verified” is what makes the auditing process more expensive. Think of it this way: If auditors are underpaid, will they always be honest? If that were the case, there would be a greater chance of corruption.

Imagine that this method of checking is done mathematically, with a strict code that can’t be changed. This is exactly what code on a blockchain can do.

Blockchain and other DLTs take away the need for trusted agencies. It is a way to organize data that can’t be changed, like a spreadsheet. There is no way to change records that have been put on a blockchain.

Let’s say we now combine blockchains with automated carbon sensors that work as they are programmed 24 hours a day, 7 days a week, and in key places in this economy.

It would be very hard for corporations with a lot of money to cheat the system and avoid the responsibility of taking care of the planet.

Real-world projects that actually helps fight climate change

In theory, all this talk about blockchain technology sounds great. But are there any concrete green projects that use blockchain and crypto?

The answer is yes — there are some interesting projects that actually work and aren’t for “greenwashing.” Here is a list of the ones I want to talk about in Part 2 of this series.

Regenerative agriculture projects

Clean energy projects

Voluntary carbon markets

Impact investment platform

Further reading: Explore more topics on all things crypto related in our learning hub.

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Disclaimer: Information is current as at the date of publication. This is general information only and is not intended to be advice. Crypto is volatile, carries risk and the value can go up and down. Past performance is not an indicator of future returns. Please do your own research.

Last updated February 16, 2023

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