Why The Blockchain Industry Needs To Deal With Its Energy Usage — Regardless Of Energy Efficiency (And How The Hydrogen Industry Can Help)

Aug 4, 2022

5 min read

Blockchain and all its native utilities such as cryptocurrency, NFTs, smart contracts, minting, ownership declaration (and much more) have brought new incentives and projects for innovators and investors (retail and institutional) to capitalise and leverage on. The many benefits of these technologies such as private hyperledger ownership and their decentralised nature has caused many individuals to take advantage of the opportunity at hand. Despite the optimism cultivated by the new web 3 community, there are still some flaws in the fundamentals of blockchain, of which the most grave are its energy usage. Below we will discuss areas where we believe blockchain has faltered on its energy use and could perform better from an eco perspective, in particular with the help of hydrogen energy.

Ethereum Has Taken Too Long To Implement Proof-Of-Stake

The Ethereum protocol update to EIP-1559 was one of the preliminary steps in the grand transition to ETH 2.0 (AKA “The Merge”) — A process which will allow for Ethereum to utilise a the Proof-Of-Stake mechanism, thereby reducing energy use, which will supposedly reduce gas fees, improve blockchain interoperability, speed and efficiency, as well as ultimately make the Ethereum Blockchain more eco-friendly. The Merge has been in development for a long time since announcement, and so this has meant that Ethereum has been ongoing as one of the most highest energy cost blockchains in web 3 due to the sheer number of dApps utilising the standard. A faster transition to ETH 2.0 would not only likely reduce energy use more immediately, but it will also probably provide a large uplift to the community sentiment.

Further, an important consideration for the future sustainability of Ethereum is its energy sources. Currently, the majority of energy Ethereum uses derives from transaction approval calculations by nodes (computers connected to the ETH network). Oftentimes these nodes are located in large warehouses which may or may not use renewable energy resources. Hydrogen energy, which is a clean, storable and stable constant source of power would significantly improve how eco-friendly these mining companies are as a whole, yet also increase profit margins due to the cheap cost of energy from Hydrogen resources. We believe this would bring much more credibility to the Ethereum community and would help to grow the network and contribution to its development, particularly The Merge.

Too Many Blockchains, Coins and NFTs But Not Enough Clean Energy Resources

With over 1000 blockchains currently in web 3, and more being conceived all the time, there is little room for consideration of the environmental impact of this. Let’s use an example. Take an amateur investor who owns assets across the Ethereum, Polygon and Solana blockchains. If they wanted to bridge their poly-ETH to the ETH network, it would usually cost them around $40-$70 gas. That’s mostly being spent on energy so as to allow the node approving the transaction to function. If all the assets were on a single blockchain however, this would not be an issue. The same problem arises when delegating assets between Ethereum layer 1 and layer 2. This means that not only is energy coming from non-renewable resources, but it is also being used in unnecessary amounts.

What’s clear at this point is that there’s no going back from the ‘intergrated blockchains’ approach web 3 is taking, so what can be done to make this space more sustainable ?— this is where the Hydrogen industry comes in. Right now, the best option for web 3 is to switch to using Hydrogen — a clean, renewable source of energy. This would significantly reduce the carbon footprint of web 3 by paying attention to where we get our energy from. It’s likely that most of the sectors in this space such as NFTs, Crypto, The Metaverse and all the rest of it will only consume more energy in the time to come, so our best bet will be to ensure plentiful and clean fuel for web 3.

Bitcoin Is Designed To Waste Energy

Bitcoin is great. It makes you money, it’s a cool meme, and it’s private. But there is a huge issue with the Proof-Of-Work mechanism it relies upon (and it doesn’t seem to be changing any time soon). Since the Bitcoin protocol is designed to constantly try and create incentive for miners/nodes to continue approving transactions, this means that it must always be profitable for them to approve transactions — essentially, money spent on energy<money earned from miner reward.

Now, the Bitcoin network is continually growing, which means mining capacity is also increasing almost all the time. This creates competition between miners (who can solve the computation the fastest). Bitcoin settles this competitive influx by increasing the difficulty of the computations, thereby requiring more energy for them to be solved. Although this does reduce mining competition, it ultimately means that more energy is spent approving transactions. This is not a sustainable approach long-term. Since the Bitcoin standard cannot be altered, we have to work with the defualt protocol that is already in place. Hydrogen energy sources would be suitable for a blockchain like this so as to make Bitcoin more sustainable.