Blockchain technology is a hot topic in the world of finance and business. The development of blockchain protocols has accelerated rapidly since the introduction of Bitcoin, but what does this mean for our environment? Does blockchain have a place in sustainability?

This short read will explore how blockchain technology affects the environment and what steps can be taken to prevent it from hurting the earth.


The emerging cryptocurrency market is booming with the recent success of Bitcoin, Ethereum, and more recently–Solana. Cryptocurrencies have been around for nearly a decade — and at the time of this writing, their combined value has surged to $1.4 trillion, and over $2.5 trillion just a few short months ago (it is highly volatile). These two, Ethereum and Bitcoin, make up nearly 62% of the entire market capitalization of over 12,250 known cryptocurrencies, according to CoinBase. With this newfound global interest in digital currencies, it’s important to consider the energy consumption that goes into mining cryptocurrencies like Bitcoin or Ethereum. From January 2016 to June 2018, an estimated 3-15 million tons of CO2 emissions were generated by miners as they competed for blocks of transactions on bitcoin’s blockchain network. Mining requires a lot of computing power which means more electricity usage, so it can be difficult to know if mining efforts are worth the carbon footprint created when mining these coins.

Blockchain provides a digital ledger that records transactions across many computers around the world which allows it to be decentralized and tamper-proof; however, as such a large amount of energy is required to keep all those computers running, there are prospective environmental consequences when using a resource-intensive blockchain system. The standard proof-of-work (PoW) blockchain mining process used by Bitcoin requires significant amounts of power, more than traditional financial transactions like credit card companies or banks transactions. Proof-of-work means that each node (computer) would compete to solve a mathematical puzzle. This translates to real environmental risks that arise from mining and operating at such volume.

This is why many blockchain proponents who give in to this would argue that the mining process is unnecessary and that it can be done more efficiently. One Bitcoin transaction consumes as much energy as it takes to power an American household for a week. The Cambridge Center of Alternative Finance (CCAF) estimates that the annual amount of energy used by Bitcoin transactions has reached 110 Terawatt Hours (0.55% of global electricity production), or roughly equivalent to how much Malaysia and Sweden need each year. Even so, the demand for blockchain processing capacity is only expected to grow.

However, the environmental benefits of blockchain technology could be enormous. By using this type of ledger, and by going beyond mere proof-of-work (e.g. proof-of-stake, proof-of-authority, or proof-of-concept), we could reduce the carbon footprint and improve our environment significantly by optimizing supply chains to make them more efficient. One such use case is the proposed integration of a carbon emission calculation process. Another is in the agri-business to give an end-to-end view regarding the “traceability of the supply chain, proving the origin of berry production, and personalizing the roles of each actor in the supply chain.”

Industry 4.0 use cases — sustainable use of blockchain technology

From sourcing to consumption, blockchain can make the carbon supply chain transparent and help us address climate change.

Blockchain technology promises transparency in all sectors of society through decentralization, disintermediation, and democratizing data access for everyone involved: citizens as well as governments or businesses.

Currently, large companies such as IBM and Microsoft are developing blockchain systems to support these systems. These companies hope to eventually reduce the mining and computing energy demand by adopting more efficient methods. There are even open-source collaborations around a specific project of the Linux Foundation called Hyperledger to make blockchain more accessible across the world, as a public good.

Using blockchain technology to create sustainable digital currencies

The idea behind digital currency with blockchain technology is to create an economic system outside of the traditional banking sector. This decentralization would allow people all over the world access to financial services without any limitations imposed by banks or governments, while also enhancing privacy and security for users.

To see this dream through, some cryptocurrencies (e.g. stablecoins like DAI or USDC) have been created as decentralized alternatives to fiat money (e.g., US Dollar). They are different from conventional currencies because they rely on cryptography instead of trust in central authorities like government-controlled mints or commercial banks. Cryptocurrencies are still relatively new, but their benefits are already becoming evident: faster transactions, low fees, international transfers without intermediaries, and better security.

Just yesterday, 30 September 2021, Federal Reserve Chairman Powell recently hinted that cryptocurrencies, especially stablecoins may need regulations. And the Federal Reserve has “no intention to ban” stablecoins or other cryptocurrencies. Not just that, but the Federal Reserve is researching means and methods by which to mint a centralized cryptocurrency, often referred to as a Central Bank Digital Currency (CBDC). This has pros and cons for centralized monetary systems that we won’t get into, but just know that it is on the horizon.

What if there was a way to help the environment with blockchain technology and cryptocurrency?

There are a couple of ways of doing this, one of them is to create a cryptocurrency specifically for the environment. By creating a token that is backed by real environmental value, users can start voting with their money in favor of pollution control and green technology. By doing so, they could incentivize businesses to reduce pollution and implement more efficient practices to save natural resources and protect the environment. This might also lead to more jobs, as the companies that use environmentally friendly practices may earn more by keeping resources in the environment.

However, this idea is still not an everyday possibility. For a decentralized currency to have significant traction and become a viable option for most users, an ecosystem of products, services, and other financial tools may need to be built around it. The foundation for this ecosystem would have to be distributed, as decentralization makes security and privacy extremely important. The technical infrastructure would have to be secure and reliable, so that no one can abuse the system and make payments to themselves, for example. The entire ecosystem would also have to be transparent and available to everyone without the possibility of corruption or hacking. The trillion-dollar question is: Could we build an ecosystem around the blockchain and create a decentralized currency as an entry point to a sustainable future?

Not just that, we will soon see more and more blockchain-connected and secure smart grids. The potential for our society’s infrastructure to evolve—such as for the electricity infrastructure—as it is vulnerable to cyberattacks. One prospective solution would incorporate blockchain technology. But, as current-day infrastructure evolves, will it happen soon enough to secure it from cyberattacks (e.g. 51% attacks)?

Startups are now developing applications, which allow you to directly purchase products on behalf of your designated carbon footprint. It is an interesting and innovative idea and one that could have a role in the development and proliferation of the blockchain ecosystem to the masses. A cryptocurrency designed around the environment could not only support global environmental initiatives but would also help to build a sustainable economic system without the middleman-like influence of central banks.

A strong effort is now being made to tackle the current issues of our world, from climate change and pollution to poverty and unemployment. Developing a decentralized currency that considers these issues is the first step in changing the world for the better.

While cryptocurrencies may not solve the problem of global climate change, the development of blockchain technology may lead to a better economic system that addresses the environmental issues of our time for generations to come. There is still a long way to go before the cryptocurrency ecosystem will develop to its full potential, and it is certainly not the answer to all our problems. However, we should not be disheartened or underestimate the potential of this amazing technology to bring about a more sustainable world for us all.

With projects like Bitcoin, Ethereum, and Basic Attention Token (BAT for short, which is an alternative coin on the Ethereum blockchain), we are on our way to creating a world without middlemen. Perhaps we are not there yet, but if we use this technology to create a more stable economic system, we are that much closer to creating a sustainable and safer future for us all.

Interested in reading more? See Coinbase’s new ‘Fact Check’ media arm that goes deep into the topic of Bitcoin mining and the environment.