Cryptocurrency and Sustainability: The Energy Usage Debate

Kogod School of Business professors and panelists discussed the environmental impact of cryptocurrency at the Fourth Annual Blockchain Forum.

Tomicah Tillemann presenting at 2019 blockchain forum

Tomicah Tillemann presenting at the 2019 Blockchain Forum.


 

As blockchain continues to develop as a form of digital business, the Kogod School of Business tracks its progress. On April 20, 2022, Kogod hosted its Fourth Annual Blockchain Forum, The Long Game: Blockchain and Sustainability, a virtual event that discussed current environmental innovations and challenges related to blockchain.

Blockchain’s emergence as an alternate finance method creates implications for the future of business, and Kogod’s forum highlights the current research and discussion surrounding this technology. This year’s forum brought in experts from around the world to share ideas on how developments in the field can be leveraged to support environmental consciousness.

Two Kogod professors participated in the event’s first panel discussion, “Unpacking the Crypto Energy Debate.” Professor David Bartlett moderated the panel, while information technology professor Erran Carmel served as a panelist. Professor Carmel joined Sue Ennis of Hut 8 Mining, Jerry Tang of VCV Digital Group, and Neil Cohn of Chia Network in the spirited conversation about current environmental issues in cryptocurrency and what can be done to mitigate them.

“Bitcoin and other cryptocurrencies have both opportunities and challenges, especially regarding their energy consumption. The discussion was quite successful in sharply illuminating that.”

David Bartlett 2

David Bartlett

Kogod School of Business Professor

The energy consumption required for cryptocurrency mining is increasingly well-documented. The Cambridge Center for Alternative Finance recently launched the Bitcoin Electricity Consumption Index, which estimates that 110 terawatt-hours a year go toward bitcoin mining. Ennis pointed out that the energy usage depends mainly on its framing—for instance, 110 terawatt-hours is less electricity than clothes dryers and air conditioners in the United States use during the summer. However, Professor Carmel believes that cryptocurrency’s environmental concerns are compounded by its ethical and pragmatic issues.

“Crypto fails all three classic tests of money. It’s not a store of value, it’s not a good way of accounting, and it’s not useful for transactions,” Carmel explained. “It’s evolved into a speculative pyramid scheme driven by some utopian vision.” Having taught several blockchain courses for Kogod, Carmel has studied cryptocurrency to the point, and he argues that its energy usage has yet to be justified by its utility, as it currently has little practical value.

Nonetheless, Ennis believes that cryptocurrency has potential as a decentralized economic structure and points to her own company’s work in setting sustainability standards for the industry. Hut 8 is currently working on reducing its landfill footprint and increasing its usage of solar power in mining. Ennis hopes that their strides can encourage improvements across the cryptocurrency sphere.

“We believe that there are ways that we can make the environment a stakeholder and a shareholder in our business and this industry,” Ennis said. Tang echoed this sentiment, remarking that the best counter to cryptocurrency's energy usage criticism is finding and utilizing renewable energy sources in the field.

Cohn, meanwhile, believes in the value of both stances—that blockchain is an exciting and innovative technology and that those involved with it need to be responsible and honest about its issues.

“Blockchain can be a pathway to lead us to a more equitable economy, but we can’t take shortcuts. Any advance in technology must also advance the biosphere and society. When we screw something up, we have to go back to square one and figure out how to fix it.”

Neil Cohen

Neil Cohn

Global Head of Markets and Sustainability at the Chia Network

What fixing cryptocurrency’s energy usage problems would entail depends on what’s available and what people are willing to do. Most cryptocurrencies currently use a proof-of-work (POW) mechanism, which uses a specific method to validate transactions. The proof-of-stake (POS) mechanism, which randomly selects miners to validate transactions, uses less energy and is less robust than the POW mechanism.

“I think it would be tough to form a consensus amongst the Bitcoin stakeholders to transition into proof-of-stake,” Tang remarked. “Right now, the majority think that proof-of-work is safer and more secure.” Though some cryptocurrencies plan to shift to the proof-of-stake method, the preference for proof-of-work remains an obstacle in reducing energy use.

Instead, Tang suggests establishing a relationship between cryptocurrency and alternative energy to benefit both industries. His company is currently working on a solar farm that includes the capability to power data centers, and he believes that solar power is just one option. “You could use processed gas power, or hydrogen power, or many other forms of power that will create a more renewable generation capacity,” he suggested.

“Bitcoin will be here, so we should proactively use it to benefit renewable transition.”

Blockchain_2022_JerryTang

Jerry Tang

Cofounder and CEO of VCV Digital

Though the panelists approached the topic from different perspectives, they agreed that the cryptocurrency sphere is at a point where it’s vital to ensure healthy practices. The panelists agreed that they are all able to spearhead necessary changes. “I very much believe in the power of blockchain, but we all need to be flexible and open to finding a better solution instead of just justifying what we’re doing and finding band-aids,” said Cohn. The shared desire to balance advancements in blockchain with a responsibility to the environment reflected the overarching theme of this year’s Blockchain Forum—that technological innovation and sustainability efforts can and should exist in tandem.