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Ripple Co-Founder Proposes Alternatives to Proof-of-Work Model to Make Bitcoin More Sustainable

With the emergence of cryptocurrencies into mainstream finance and as a viable asset class, many industry experts have increasingly addressed the issue of sustainability, and how the current Bitcoin network can be tweaked to achieve better energy efficiency.

While many industry leaders have increasingly resorted to a proof-of-stake model, which offers better energy efficiency and scalability, some still run on the conventional proof-of-work model, the underlying consensus mechanism behind Bitcoin.

Ripple co-founder Chris Larsen addressed this and said that it might be problematic, especially with the way in which Bitcoin has been appreciating and gaining popularity. A switch to a proof-of-stake model or a Federated Consensus would be an essential move for Bitcoin if it wishes “to remain the world’s dominant cryptocurrency,” said Larsen.

In a blog post on Medium, he wrote:

“While many newer cryptocurrencies are already low consumers of energy or even carbon-neutral, Early protocols such as Bitcoin use a core technology called Proof-of-Work (PoW) to validate transactions, which is not only a huge and growing source of CO2 emissions but also uses massive amounts of energy, both from fossil fuels and ‘green’ sources.”

Larsen goes on to remind the crypto community that Bitcoin has significantly grown since its inception in 2009. Currently, according to the Ripple co-founder’s research, Bitcoin alone consumes an average of 132 TWh a year, which is equivalent to roughly 12 million US homes’ energy consumption. Annually, it releases an estimated 63 million tons of CO2, and of coins running on a proof-of-stake protocol, Bitcoin accounts for 98% of the hashrate.

Meanwhile, in a bid to achieve crypto sustainability, Ripple follows a federated consensus model to validate its transactions and conduct cross-border payments with XRP.

Recently, the fintech firm has also joined the Crypto Climate Accord, an initiative comprised of crypto industry figures such as ConsenSys and CoinShares, to further the conversation on how to develop solutions that enhance sustainability and scalability in the crypto sector, all the while creating value.

According to a previous Ripple blog post, XRP was “designed with sustainability in mind,” and the fintech firm asserts that the cryptocurrency is inherently green. Unlike Bitcoin, where there is a maximum supply to be mined, all XRP is already in existence, meaning no additional mining processes – which require energy consumption – will be needed to produce more.

United Nations Showcases NFTs Meant to Foster Climate Change Awareness

The United Nations, through its UN-Habitat program, partnered with Unique Network, Exquisite Workers, and IAAI GLOCHA to take advantage of NFTs to create awareness about the global climate crisis through an initiative called DigitalArt4 Climate.

During the United Nations Climate Change Conference or COP26 in Glasgow, Scotland, the UN showcased the results of the NFT art with Philippian digital artist Bricx Martillo Dumas bagging the top spot.

Alexander Mitrovich, the CEO of Unique Network, welcomed this move and said:

“We believe that the future of human expression will be through NFTs, and we are dedicated to showing the whole world how it can unite our disparate communities in the fight to save our planet.”

He added that the DigitalArt4 Climate initiative illustrated the ethos of open data and distributed ledger technologies in taking amicable climate actions.

Empowering digital artists

Given that NFTs are blockchain-based, they create intrinsic value because of their limited supply. The secondary sales of the non-fungible token (NFT) recently has surpassed $10 billion, the NFT sector continues to take the world by storm.

The U.N. expects the initiative to empower activists, designers, and artists to create digital art that would inspire the global populace to take action against the climate crisis. As a result, monetizing their work in unique ways.

Blockchain technology also has been playing a pivotal role in tackling the climate crisis. For instance, Acciona, a leading Spanish renewable energy company, teamed up with Climate Blockchain Initiatives (CBI), a Valencia-based startup, to boost the sale of its carbon offsets using the latter’s blockchain-powered trading platform.

Carbon offsets help reduce climate change by prompting compensations for minimizing carbon dioxide emissions or other greenhouse gases.

Furthermore, the World Economic Forum (WEF) launched a unique proof of concept to track greenhouse gas emissions across the value chain using distributed ledger technology in 2020.

US Senator Questions Bitcoin Mining Firm on Environmental Impact

US Senator Elizabeth Warren questioned bitcoin mining firm Greenidge Generation Holdings about the impact of its operations on power prices, climate change and the local area as part of her efforts to tackle the negative consequences of cryptocurrency mining on the environment.

Warren, in a letter to CEO of Greenidge Generation Holdings Jeff Kirt, inquired about the aforementioned concerns on Thursday afternoon.

Highlighting her concerns, Massachusetts’ Democratic US senator Warren wrote in the letter stating that: “given the extraordinarily high energy usage and carbon emissions associated with Bitcoin mining, mining operations at Greenidge and other plants raise concerns about their impacts on the global environment, on local ecosystems, and on consumer electricity costs.”

This is the first time that Warren has pushed a specific bitcoin mining firm for information. “We need to better understand how much energy facilities like Greenidge are using, how much they’re emitting into the environment, and what impact they’re having on electricity prices for American consumers,” Warren told Bloomberg media in an email.

Greenidge will respond to Warren to shed light on how “the facility meets all of New York’s nation-leading environmental standards, is bringing economic opportunity to an under-served area of the state and is a model for crypto mining with widespread local support,” the company mentioned in a statement.

Greenidge, which is managed by private equity firm Atlas Holdings LLC, has come under scrutiny for its rising electricity consumption which has increased to almost as much as the entire nation of Argentina’s energy usage.

According to its website, the firm uses low carbon sources of electricity for its mining operations and purchases carbon offsets credits. It also stated that the electricity used for its New York mining plant is generated by natural gas.

Greenidge, which claims to be the first carbon-neutral bitcoin mining company in the US, has one mining facility in upstate New York and has plans to install another one in South Carolina.

Earlier this year, Greenidge’s mining facility in New York obtained much criticism. Environmentalists complained against the idea of the power station burning natural gas to mine Bitcoin and operate its cooling system, alleging that such activities have a negative impact on the local lake.

Big Fight Brewing Over Crypto

Raising issues against Greenidge generation firm is not the first time that Senator Elizabeth Warren has taken aim at the cryptocurrency sector over its adverse impact on consumers, the financial system, and the environment.

The long-standing critic sees cryptocurrency as a new shadow bank. According to her, a shadow bank is a non-bank financial entity that offers services outside the remit of normal banking regulation. In July, Warren – a member of the Senate Banking Committee and a longtime critic of the nation’s largest banks – wrote to the Treasury Secretary Janet Yellen to identify and remedy risks posed by crypto assets and to draft a comprehensive and coordinated framework through which federal agencies can continually regulate virtual coins.

While some investors choose to buy Bitcoin as an investment hedge, Warren also told CNBC media in July that she is sceptical that the cryptocurrency will prove to be a reliable hedge against inflation over the long run. She mentioned that cryptocurrency is not going to have its own inflationary pressures, stating that inflation comes from a different source than what happens with the dollar, and also pointed out the high volatility in the crypto prices.

In September, in a Senate Banking, Housing, and Urban Affairs Committee hearing, Warren argued that the high and unpredictable fees on cryptocurrency present severe risks to investors who have the least money to lose. In response to her question about fees on decentralized crypto exchanges and whether they present a path to greater financial inclusion, U.S. Securities and Exchange (SEC) Commission chairman Gary Gensler told Senator Warren that cryptocurrency does not sound like the path to a more inclusive financial system and instead serves as a highly speculative asset.

As a result, Warren expected chair Gensler and the SEC to take a leading role to ensure that US regulators address crypto’s regulatory gaps and ensure that the nation is building the inclusive financial system that it needs.

New Wave of Green Energy Programs Influence Crypto Mining Sector

Since the mass exodus of crypto mining operations out of China based on intensified crackdowns has triggered the urge for sustainable and environmentally friendly mining activities.

This is founded on ongoing projects by Bit Digital, Bitfarms, Marathon Digital Holdings, Riot Blockchain Inc., and EV Battery Technologies.

With 27,744 crypto miners under its watch, The U.S.-based Bitcoin mining company is eyeing zero-carbon emission sources in its mining system.

On the other hand, EV Battery Technologies, a blockchain and battery tech company, recently launched a commercial emission-free crypto mining solution dubbed Daymak Solar Tree. Furthermore, it collaborated with the Renewable Obligation Base energy economy for environmentally friendly initiatives in cryptocurrency mining.

Riot Blockchain Inc., another large-scale American Bitcoin mining company, also joined a controllable load resource program by the Electric Reliability Council of Texas, the state’s grid operator, to make mining sustainable.

In Central America, El Salvador’s decision to use volcano power to mine Bitcoin (BTC) was propelling the leading cryptocurrency’s quest to accelerate renewable energy development.

This move showcased that Bitcoin can act as an accelerant to renewable energy development. Geothermal energy is renewable, clean, and in some places, it makes use of a previously untapped resource.

Meanwhile, Bitcoin miners have been able to dust themselves off from the Chinese government’s suppression because the hashrate recently reached historic highs.

This has been made possible because the miners relocated to other areas like the United States, Kazakhstan, and Iraq.

Therefore, American miners have emerged among the largest beneficiaries, given that US-based pool Foundry recently generated the biggest share of issued Bitcoin.

With clean energy programs being rolled out, this approach enhances the narrative of making crypto mining green.

White House Suggests Banning Proof-Of-Work Crypto

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The White House Office of Science and Technology released a report on Thursday urging the Environmental Protection Agency (EPA) and the Department of Energy (DOE) to take measurable actions to control high energy consumption by crypto mining proof-of-work mechanism.

The report is among the first responses to US President Joe Biden’s executive order on cryptocurrencies.

The document acknowledges that cryptocurrency technologies use a high amount of electricity that contributes to greenhouse gas emissions, additional pollution, noise and other local impacts.

The first section of the report, which serves as an introduction, hints toward banning proof-of-work cryptocurrency mining operations if regulatory action fails to enable the country to achieve its climate goals.

“Should these measures prove ineffective at reducing impacts, the Administration should explore executive actions, and Congress might consider legislation, to limit or eliminate the use of high energy intensity consensus mechanisms for crypto-asset mining,” the report said.

The next part of the document explores the impact of crypto mining on national electrical grids. The White House’s Science and Technology team claims that Bitcoin mining, powered by a proof-of-work consensus mechanism, adds stress on the power grid that results in cases of blackouts, fire hazards, and equipment deterioration. According to the report, Bitcoin mining has raised the average electricity cost for local consumers.

“Depending on the energy intensity of the technology used, crypto-assets could hinder broader efforts to achieve net-zero carbon pollution consistent with U.S. climate commitments and goals,” the report elaborated.

The final section of the report suggested ways in which Bitcoin mining can benefit efforts toward achieving U.S. climate goals. The report advocated for the responsible development of digital assets and solutions to drastically reduce crypto energy consumption.

The report recommended the use of the “less energy-intensive consensus mechanism, called Proof of Stake (PoS), which is considered to consume less than 0.001% of global electricity usage.

The White House also encouraged crypto miners to consider using electricity generated from vented and flared methane at oil and gas wells and landfills as another viable alternative.

Why Is the White House Taking an Interest?

In March, U.S. President Biden signed an executive order, calling on the government to examine the risks and benefits of crypto assets.

The measures focused on six key areas like consumer protection, financial inclusion, financial stability, U.S. competitiveness, illicit activity, and responsible innovation.

The executive order was a kind of a ‘call to action’ that laid out a series of policy statements, such as the need to protect consumers, investors, and businesses in the US, as well as the need to support technological advances that promote responsible development and use of digital assets.

The executive order expected a set of reports coordinated through the interagency process from a broad range of executive branch stakeholders.

Riot Blockchain's Texas Mining Operations Disrupted by Winter Storms

The cryptocurrency mining company Riot Platforms, previously known as Riot Blockchain, has announced that 17,040 rigs that were installed at its facilities in Texas have been rendered inoperable as a result of the “extreme winter weather” that has been experienced in Texas.

Riot said in a press release dated February 6 that two of the buildings of its Whinstone plant located in Rockdale, Texas were damaged in December as a result of the subzero conditions that the state endured for many days. From the 22nd through the 25th of December, temperatures plummeted below freezing in numerous areas of Texas as well as the rest of the United States.

According to Riot’s Chief Executive Officer Jason Les, “certain pieces of pipe in Buildings F and G were damaged during the severe winter storms that hit Texas in late December.” “It is likely that we will miss our previously declared aim of attaining 12.5 in total hash rate capacity in the first quarter of 2023 due to the harm that has been caused,” said the company.

According to Les, the damages caused an initial decrease in the facility’s hash rate capacity of 2.5 EH/s. However, when repairs were made, the business was able to return 0.6 EH/s to the facility. As of the 31st of January, the business Riot claimed creating 740 Bitcoin (BTC), which had a value of around $17 million at the time of publishing. Riot announced that there were 82,656 rigs operating with a hash rate capacity of 9.3 EH/s at that time.

Even though significant temperature reductions occurred in many regions of the United States in December due to increased travel over the holiday season, major towns in Texas such as Dallas and Austin were hit by a significant ice storm in early February. As a result of the weight of the accumulated ice, numerous tree branches and limbs collapsed, which caused damage to power lines, automobiles, and roadways, leaving thousands of inhabitants without access to electricity.

It is unknown if miners at Riot were impacted in a similar manner by the storm. Despite this, the firm did not disclose any reductions in operations as a result of the strain that the recent freeze placed on the electricity system in Texas.

Additionally, throughout the month of January, Riot reported selling 700 BTC for around $13.7 million. As of the 31st of January, the business had a total of 6,978 BTC. After the record-breaking heat wave that swept over the Lone Star State in July of 2017, the mining company reported selling coins.

During same month, Riot said that it intended to relocate a significant number of its mining rigs from a location in New York to one in Texas in an attempt to lower the company’s operational expenditures. Riot stock ended trading on the Nasdaq the same day it was released at $6.68, down 2.3%.