The environmental impact of blockchain and cryptocurrencies is a hot topic, since the amount of energy needed to power their network is staggering.

Some analysts proved the Bitcoin network is currently consuming more energy than several countries, including Kazakhstan and the Netherlands, so it is considered to be exacerbating the production of the greenhouse gases that cause climate change. In addition to mining, lots of power is also needed for transactions, which is enormous in comparison to traditional credit cards: if a Mastercard transaction is estimated to use just 0.0006 kWh, every Bitcoin transaction consumes up to 980 kWh, according to some independent studies (but the Ethereum Foundation is working on a different verification method that, being based on Proof of Stake, could cut energy cost of each transaction by 99%).

Despite these issues, United Nations experts believe that cryptocurrencies and the blockchain technology can play an important role in sustainable development and even contribute to climate change mitigation. The three main areas where blockchain can accelerate climate action are transparency, climate finance, and clean energy markets.

Transparency is a key attribute of blockchain-based applications, and this might become particularly relevant in regions with weak institutions and high levels of corruption. For instance, the World Food Programme is leveraging blockchain to ensure that aids and resources get to those who need it most: successful projects are being piloted in Pakistan and Jordan. A transparent monitoring system could contribute to improve waste management and prevent illegal transfers and uncontrolled export, or to tackle illegal fishing.

It can also be beneficial to smart agriculture. As more and more environmental data sets – such as weather patterns or IoT sensor readings – are fed onto blockchains, a wider range of environmentally-conscious smart contract applications becomes available to support the management of crop yields, soil quality controls, carbon offsets, and more. Interesting examples relate to regenerative agriculture programs, which incentivize communities around the world to reduce their carbon footprint through more sustainable land-use practices and a wiser combination of planting trees and conservation.

Blockchain can boost climate financing by securing and favoring investments that contribute to carbon neutrality. Climate data is incomplete and unreliable in many countries but, if carbon markets are scaled up, businesses and industries will be more confident in their transition to low carbon technologies. Blockchain could be an important part of accelerating the take up of renewable and clean energy sources such as wind and solar, providing a reliable framework to trade these sources that are, by their nature, intermittent and decentralized.

Despite all these potential benefits, the huge energy consumption associated with cryptocurrencies and the blockchain technology is one of the main hurdles that needs to be overcome, and many players in the industry are working to address the issue. If we want to make a positive impact on the climate crisis, more technical research is needed, as well as more international dialogue, involving technology experts, scientists, and policymakers.