Environment

Concerns surrounding crypto’s energy usage relate to the Proof-of-Work (PoW) consensus mechanism, which is critical to ensuring the security of Bitcoin and certain other blockchains. PoW uses computing power to validate transactions on the blockchain in a decentralized manner without the need for reliance on a trusted third party. 

Although PoW — also known as “mining” — requires significant energy, much of this energy is drawn from stranded renewable resources that would otherwise go to waste, since mining facilities are most profitable when they use inexpensive energy located far from population centers. Mining facilities are also a unique and highly efficient demand response resource because they can be powered off at a moment’s notice, meaning they can be co-located with renewable resources near population centers without adversely affecting the grid. Although concerns regarding the e-waste stemming from PoW data centers may be legitimate, they are no different for crypto than the concerns related to other — much larger — technology industries. The crypto industry is actively working to minimize the amount of e-waste by ensuring the equipment used in PoW data centers is as efficient and recyclable as possible.

While some blockchains use PoW, many of the most widely utilized blockchains in the ecosystem use a Proof-of-Stake (PoS) consensus mechanism, which seeks to provide the same level of security as PoW with more than 99% reduction in energy use. In 2022, Ethereum, the second largest blockchain by market cap, converted from PoW to PoS, significantly lowering its carbon footprint.