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Going green: How Ethereum 2.0 Solves Crypto Energy Problems

Going by many headlines, it would seem that there is still much to be desire with respect to sustainability in blockchain. There is much talk about the energy consumption in the Proof of Work consensus mechanism to verify transactions on the Bitcoin blockchain. A lot of the energy used to mine Bitcoin comes from fossil fuels. This leaves a great carbon footprint using up as much energy as Denmark. This is why there’s a narrative around Bitcoin that it is bad for the environment.

Even though some consensus protocols consume a large amount of energy, the applications of blockchain go beyond its use as the technology that powers digital assets. The decentralized and immutable design of the blockchain makes it able to contribute to a more sustainable financial future

Environmental and Social Governance (Crypto Energy Problems)

If you follow cryptocurrency news, you would have heard about ESG– Environmental and Social Governance. Blockchain can enable organizations to get better environmental, social, and governance results.

The extent of the environmental effect of crypto is not very clear. Yet, the mechanics behind the verification of transactions in Bitcoin and Ethereum at the moment mean that a lot of energy is consume. The bitcoin blockchain infrastructure is design in such a way that the longest chain is taken as the legitimate one. This makes it economically inefficient for anyone with malicious intent to tamper with the blockchain. So, the nodes act together to secure the network. An attacker would need to reorder blocks and align the timestamps on them to be successful.

Carbon Offset

Besides reducing carbon emission by using more renewable energy, blockchain can be use to assist carbon offset. Platforms enabled by blockchain permit platforms to offset their carbon usage by investing in eco-friendly projects. 

There are trade-offs. The tradeoff between the security of the blockchain and energy consumption. In the scheme of things, it is nice to have less energy consumption, but that would mean sacrificing security. Considering the value of digital assets on the bitcoin and Ethereum blockchain, security is not negotiable. Proof of Stake works brilliantly when we consider economic incentives. Instead of solving complicated math calculations, people who want to validate transactions can stake. Validators are randomly selecte to validate blocks. When transactions come into the network, nodes validate the blocks. If the data submitted by a node doesn’t match, this means the data is incorrect. Any node who attempts to manipulate the data risks losing their staked funds. If you run a node but are not selecte to validate transactions, you could get to review someone else’s work.

The Switch to Proof of Stake

As we mentioned earlier, the transition from Proof of Work to Proof of Stake is no small feat and it’s something the Ethereum team has been working on since the beginning.

As stated above, moving from Proof of work to proof of stake is a great development. Incidentally, the team behind Ethereum has been working on this from the outset. Ethereum 2.0 is already running simultaneously and the Ethereum foundation is testing out the performance. It is unclear how long the testing phase would run.

The transition is being delayed until they are confident that the consensus algorithm works seamlessly. When this happens, the concerns of Ethereum’s impact on the environment would be put to rest. This could make many people switch to Ethereum from other blockchains.

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