Report on layer-1 blockchains' environmental credentials.
The ‘Regenerative Finance Movement’ report by blockchain analysis firm Messari explores the energy footprint of various PoW and PoS chains as well as the function of carbon offsets in the sector. It highlights how many cryptocurrency projects are now turning green in order to improve their image.
Proof of Stake Networks Up the Ante
Proof of Stake chains already have a lower carbon footprint than Proof of Work networks like Bitcoin. As a result, PoS layer-1s have become the favored option for environmentally conscious artists wishing to release NFTs, as well as crypto projects that support ESG. Indeed, the scorn showered on prominent artists who release their work on Ethereum has driven others to search for green chains as an alternative.
Damien Hirst, a British contemporary artist, opted to unveil his exhibition ‘The Currency’ using the obscure Palm blockchain, which claims to be 99% more energy efficient than proof of work systems like Ethereum or Bitcoin. However, many purchasers opted to bridge their NFTs to Ethereum in order to trade them on OpenSea, which arguably undermined the entire purpose of the exercise.
For environmentally minded artists, the natural approach for establishing a green NFT collection is to use a layer-1 with features and network effects comparable to Ethereum. This includes smart contract capabilities, a well-established developer community, extensive liquidity, and a diverse set of third-party dApps. Based on the criterion, the strongest options are Polkadot, Tezos, Avalanche, and Solana. All four networks were featured in Messari's Regenerative Finance paper.
Crypto Embraces Green Energy
Messari calculates Bitcoin's yearly energy usage to be 89k GWh, which is almost equivalent to the whole country of Argentina. Meanwhile, Ethereum has an estimated 17k Gwh, albeit this figure will drop dramatically with the transition to Proof of Stake.
According to Messari, Solana is the least efficient in terms of energy consumption among the top PoS networks, consuming 1.9 GWh. While it is lesser than Ethereum's footprint, it is still several times greater than the best in the test. Polkadot and Tezos are the obvious winners, with projected yearly energy consumption of 0.1 GWh apiece. That is, incidentally, the amount of energy used by their consensus mechanisms. As Messari notes:
“Protocols are actively dispelling the myth that cryptocurrency is harmful to the environment by overhauling programming and financing carbon offset projects.”
The assertion that Bitcoin is harmful to the environment has long been disputed and controversial. Its supporters believe that bitcoin miners are encouraged to use renewables and capture the energy that would otherwise go to waste, such as flared gas. Regardless, the emergence of green PoS networks can only be a good thing, providing crypto detractors one less stick with which to bash the sector.
