Written by Alan Vey, Chairman and Founder of Aventus

The general purpose technology behind blockchain means that its applications are relevant to countless industries, from financial services to creative sectors. Businesses of all sizes are drawn to the security found in decentralized technology to make transactions and transfers safe, smooth, and profitable. Still, it’s no secret that blockchain, especially cryptocurrencies, has traditionally used a great deal of energy.

Bitcoin, the world’s largest cryptocurrency, consumes about 97.1 terawatt-hours of electricity each year, more than the entire country of the Philippines, which has a population of 112 million people. This could meet the total electricity needs of the University of Cambridge for 709 years, or power all the kettles used to boil water in the UK for 22 years. As the climate crisis continues and people and businesses face soaring energy prices, something must change.

Blockchains like Bitcoin and Ethereum 1.0 have mainly operated using what is known as ‘Proof of Work’, a process whereby miners must demonstrate the accuracy of their transactions in order to enter their ‘block’ into the ‘chain’. Sounds simple, right? The problem is that without a centralized guardian, this process comes with an inherent energy penalty; An enormous amount of digital power is required for this model to work due to its sheer complexity.

Laying the foundation for a green Web3 world.

These findings have not been ignored by the blockchain giants. In Q3 2022, Ethereum announced a merger with a ‘Proof of Stake’ model, an option that consumes less power and suits smaller organizations due to its cost effectiveness. Europe leads the way, with swathes of startups using blockchain for good, bolstered by a wave of carbon-neutral status certifications. This has raised hopes that the future of digital assets is green, but there is still much to be done.

There’s no use opening up access to Web3 (and the metaverse markup that comes with some of them) if it burns the world down. Beyond this, the global shortage of chipmakers threatens the Web3 infrastructure, highlighting the importance of efficiency from the ground up. The more founders who can move away from large chips that take up a lot of manufacturing capacity, the better.

How to build a sustainable Web3 future.

To truly separate Web3 from the physical world, forward-looking founders and business leaders need to look at its foundation. They must adapt to support the demands for renewable methods and ensure that the expansion of blockchain technologies does not fall short of sustainable energy.

This democratization of the electrical industry has already begun. For example, Energy Web is committed to decarbonizing the grid by working with customers like Shell, responding to changing customer needs with real-time information on renewable electricity consumption.

This shows how vital it is to go green from the ground up. The technical foundations that blockchain founders install should reflect a desire to be environmentally conscious. From here, this lead will trickle down to more people using blockchain. Just as consumers have changed their attitudes towards physical recycling and alternative diets, they will need to be aware of how things like cryptocurrency drain energy reserves and adjust their activity accordingly.

How blockchain could boost business globally.

There are also some more creative and niche ways that blockchain can contribute to a greener world. Within the NFT sector, artists have been producing digital projects that raise awareness of climate issues such as global water scarcity. Since NFTs find their home on social media, this represents a unique way for companies to showcase causes close to their heart. This is one of many small but encouraging examples of how blockchain can help minimize damage to the environment.

Another key area is greener supply chains. Sustainable trade is not easy; From delays to high costs, the processes for getting products where they need to be aren’t as advanced as they should be. Now, blockchain-powered initiatives can streamline supply chain management by tracking products from the very beginning of their manufacturing journey, optimizing efficiencies and reducing waste. Converting from conventional supply chain methods to blockchain technology could improve US trade volume by up to 15%.

IBM Food Trust, built on blockchain, is a striking case where these technologies have benefited supply chains. The digitization of transactions and data enables producers, processors, shippers, retailers, and regulators to work together more efficiently throughout the supply chain. In addition, this increased visibility of products helps consumers make more informed and environmentally friendly decisions, since they can learn more about the origin of their products.

Consumer decisions can have a profound impact on pollution. Storing relevant data using blockchain technology would help reduce the carbon footprint as it encourages greater transparency for customers. Historically, the transparency of product lifecycles is low, making it difficult for consumers to know how much energy consumption they are contributing through their spending habits.

Help governments achieve their goals.

Finally, since the health and decisions of governments affect the staffing, finances and growth of all companies, it is in everyone’s interest that the public sector share in the benefits of Web3. For example, blockchain can be implemented in air monitoring equipment that adopts linked data records, alerting government environmental agencies when there are excessive levels of pollution. One day, we may even get to the point where technology directly extracts carbon dioxide from the air.

Web3 could also help with problems such as the exclusion of citizens from access to goods and services due to the lack of national identification. Governments around the world persist with ‘fingerprint’ systems, despite knowing that there will be margins of error of up to 15% due to their technological limitations. Blockchain will ensure proper management of digital identities using interoperable infrastructures that do not rely on costly and unsustainable processes.

We are at a crucial moment. Leveraged wisely, blockchain could fulfill its sustainability mandate, helping businesses and governments achieve their respective goals. Web3 founders, investors and business leaders have the power to create a more sustainable future, but there is no more time to waste. Action must be taken now for a brave new world.