Ripple co-founder Chris Larsen made headlines this week when he argued against Bitcoin's proof-of-work (PoW) concept and said that the currency's model was environmentally unsustainable.
PoW, as a concept, has come under some well-meant criticism of late. With Bitcoin using the same level of energy used by Argentina in an entire year, the criticism has been justified.
Larsen's pitch isn't entirely new. We previously wrote on the debate over whether Bitcoin is a threat to the environment or just the opposite.
To understand why the former may be, we will look at the PoW concept in comparison to what is arguably its greener cousin, proof-of-stake (PoS).
The Energy Gobbler
When Bitcoin was minted in 2009, Satashi Nakamoto, the enigmatic currency creator, designed it so that obtaining new currencies would require computing power to solve mathematical algorithms.
This is known as ‘proof-of-work’. Early days Bitcoin mining could be carried out by your desktop computer, but as the algorithms grew more complex, more computing power was required to solve them.
That in turn led to Bitcoin consuming more and more energy. PoS is a greener option, one that Larsen himself supports.
In a PoS ecosystem, the validating capacity relies on the stake in the network and validators do not receive block rewards as they normally would in a PoW environment, but rather collect transaction fees as their rewards.
The Blockchain Can Be Greener
In a world threaten by catastrophic climate change the only sustainable future for any business is to go greener.
As institutional investors are happy to invest in crypto these days, they will be forced to comply with greener policies or risk alienating consumers.
Larsen argues that presently Bitcoin consumes 132 TWh a year or roughly what is needed to power 12 million homes in the US.
Evidently, there is room for improvement so far as Bitcoin's energy consumption needs are met. One successful example is Ethereum, which is still figuring out its way, but at least provides a path towards a greener future for cryptocurrencies.
Larsen himself argues that close to half of all new cryptocurrencies today are coded with PoS in mind and that PoW is a brilliantly designed but dated technology that has served its purpose and it's time for the industry to move forward.
The calls for a greener future for the blockchain are not just Larsen's. Even though Elon Musk has endorsed Bitcoin as a payment method, he has also espoused the idea of a greener crypto space.
Tesla's boss recently agreed with a paper by The Bitcoin Clean Energy Initiative, which essentially argues against the claim that mining Bitcoin is damaging the environment.
Rather, the paper explains that because of the energy needs BTC has, people are looking into more renewable sources that are carbon-free.
In future, we should see more companies trying to build energy farms based entirely on renewables sources and looking to mine Bitcoin.
While the short-term impact of Bitcoin mining cannot be written off, the opportunity to evolve into something better, and the fact that there is sufficient interest to do better, are already encouraging.