At this stage in its development, most people are familiar with the fundamental ideas of cryptocurrency, which has allowed us to see the emergence of new types of blockchain technology. Another well-known aspect of this technology is that it consumes a lot of energy, although not everyone understands why. The truth is that the energy consumption of a blockchain or cryptocurrency network is determined by its consensus mechanism.
What are consensus mechanisms?
These are techniques for achieving decentralized computer network agreement, reliability, and security. In the crypto world, this means that all transactions on the network are authentic, and all participants agree on the ledger’s current state.
Proof-of-Work (PoW) and Proof-of-Stake (PoS) are the two major types of cryptocurrency consensus techniques.
The main difference between these two in terms of sustainability is that the PoW mechanism, which is currently used, is responsible for huge amounts of energy consumption because it requires high energy consumption and a longer processing time; and the PoS allows for a 99.9 percent reduction in energy consumption.
Another question is why the key players do not use the other, more environmentally friendly mechanism. The thing is - the PoS algorithm operates on a different premise, which might easily encourage crypto enthusiasts to hoard their coins rather than use them. The name "Proof-of-Stake" also implies that there is collateral (certain assets or tokens) for this one-of-a-kind, lottery-style opportunity to validate transactions. If the system detects irregularities in the validator’s behavior, part of his stake will be taken by the network.
PoS isn’t a typical innovation, but if crypto giants adopt it, it will usher in a massive shift and represent an innovative way to achieve more sustainability.
Ethereum, the world’s second-largest cryptocurrency, is working on Ethereum 2.0 in stages, with a 2023 release date expected. This improvement to the system is one of the largest, and one of the problems addressed in this innovation is among others, the energy-efficiency.
Aspiration, a credit card company that plants trees when you spend money, has partnered with NFT marketplace "Curio."
OneOf announced its collaboration with "Right Here, Right Now" Climate Alliance, where they commit to donating a percentage of their earnings to UN Human Rights in support of its global climate change projects.
If the Ethereum project continues as intended, we can expect additional crypto platforms to switch to more sustainable, greener PoS mechanisms soon. Is it already too late? Climate change is unavoidable, but the sooner we advance in our attempts to be more sustainable, the better.