The cryptocurrency sector must target full decarbonisation by 2030, according to a new report from Edinburgh-based crypto startup, Zumo.

Published this week, the ‘Decarbonising Crypto: A state of play’ report sheds light on the environmental impact of cryptocurrency and explores the fiery debate surrounding decarbonisation.

The report includes input from leading sustainability researchers and cryptocurrency experts such as Energy Web, the Cambridge University Centre for Alternative Finance and the Green Bitcoin Project.

Notably, the study suggests that lingering environmental concerns are a key hurdle to ensuring mass-market appeal. As such, ambitious commitments must be made to cut the industry’s hefty carbon footprint.

“For crypto to reach its full potential and be widely adopted by society, the sector urgently needs to address its carbon footprint,” said Kirsteen Harrison, Environmental and Sustainability Adviser at Zumo. “The crypto sector must aim for full decarbonisation by 2030.”

According to the report, while decarbonisation is fast becoming a priority in the cryptocurrency space, current data and research on the issue is not widely understood and can be taken out of context.

Due to the “partisan and highly emotive” nature of the issue, this lack of understanding is obscuring the path to an open, reasoned debate on the subject and stifling progress.

“We are only just beginning to understand the blockchain’s potential impact – both good and bad,” Harrison explained.

“The current narrative that ‘crypto is harmful to the environment’ is too simplistic and masks a much more complex reality. It doesn’t do justice to the variety of cryptocurrencies that exist, the mechanisms used to create them, or the benefits that crypto can bring to society.”

Previous research has shown Bitcoin’s yearly energy consumption to be equivalent to that of some countries. This intense consumption has led to long-running criticism amid heightened concerns over climate change.

To tackle the issue and accelerate decarbonisation efforts, the Zumo study recommends greater collaboration between stakeholders across the breadth of the crypto ecosystem.

“Awareness and collaboration are rapidly growing on the need for decarbonisation in the crypto sector,” the report states. “Cross-sector initiatives will be pivotal and must encompass all ecosystem participants – miners, platforms and crypto holders / investors.”

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The report also suggests that the inherent transparency and simplicity of cryptocurrency makes it a “prime candidate for rapid decarbonisation” compared to other sectors such as traditional finance, where stakeholders are forced to contend with “many more elements” that are often harder to address.

A recent study from WWF and Greenpeace revealed that the emissions of UK financial institutions stand at nearly double the UK’s net emissions. The report found that UK banks and asset managers were responsible for financing 805 million tonnes of CO2 in 2019, which in theory would make the City of London the ninth biggest emitter of CO2 globally.

“The crypto sector has a relatively easy decarbonisation path ahead of it, compared to many other sectors,” Harrison noted. “In crypto, decarbonisation can be achieved simply by using renewable electricity.”

“There are no complex supply chains, no deeply entrenched ways of working, and we have a clear understanding of where the impacts are. This puts us streets ahead of many other sectors, including traditional finance, which has a complex web of financed emissions to deal with,” she added.

Sharp Focus

Although drawing comparisons between cryptocurrency and traditional finance provides valuable context and insight for consumers, the carbon debate is still dominated by Bitcoin’s energy consumption, despite the presence of more energy efficient alternatives.

Digiconomist founder Alex de Vries said harms the wider landscape and further restricts an open dialogue on the subject.

“Decarbonisation in the crypto industry is primarily a Bitcoin Ethereum issue,” he said. “The impact these two have reflects poorly on the rest of the cryptocurrency landscape even though many communities have already done their part in addressing the issue by running more sustainable algorithms.”

With Ethereum pivoting from a proof-of-work to proof-of-stake model, the report also notes that the emergence of new blockchain technology will likely transform the perception of cryptocurrencies and drastically reduce energy consumption.

Zumo CTO Tim Sabanov said the Ethereum Altair update, which is set to go live on 27th October, could have a “profound impact” on the currency’s carbon footprint.

“Altair is a major milestone towards Ethereum 2.0 and its transition to a proof-of-stake model, which is estimated to reduce Ethereum’s carbon footprint by 99 percent,” he said.

“This is a huge step for the future of crypto, since energy use remains a major barrier to entry for many people.”

Real-world Applications

Another key objective for the industry, the report states, should be to improve how it promotes the real-world value of cryptocurrency and the future potential of blockchain technology.

By improving communication in this regard, the industry can spark a more reasoned discussion on the broader benefits of cryptocurrency.

“For society to fully accept and adopt the benefits of crypto, the industry needs to become relatable to the public and demonstrate its utility/value to a wider audience,” the report says.

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