Headlines and deep dives on the staggering levels of crypto energy consumption — among some blockchains in particular — have put the industry under a spotlight. As crypto continues to become more mainstream and new applications utilizing this technology gain popularity, crypto’s carbon footprint threatens to continue accelerating. The question of cryptocurrency’s environmental impact has never been more important, and Ripple is on a mission to provide answers.
In a just-released report, the world’s top climate scientists say “it’s now or never” in humanity’s fight to keep global warming from increasing above a target 1.5 degrees Celsius threshold—the global temperature cap agreed upon in the 2015 Paris Climate Accords to cut carbon emissions and slow rising global temperatures.
Climate change has already had severe consequences for both the planet and humanity’s wellbeing, harming environmental ecosystems and displacing millions of people due to rising sea levels and natural disasters. And while transitioning away from fossil fuels to a more sustainable future is an expensive endeavor, studies estimate that global warming could cost the world economy $23T by 2050. The new 2023 Federal Budget says that climate change could lead to domestic revenue losses as high as $2T per year with hundreds of billions of additional costs in the forms of disaster relief, insurance and more.
Sustainability is both a financial investment and a human one. It’s vital that crypto and blockchain take the greenest path forward for the longevity of the planet, the industry and the lives touched by this technology.
The Push for More Sustainable Crypto
Governments around the world are realizing how massive the carbon footprint is for those cryptocurrencies on energy-intensive blockchains. In March, President Biden signed an Executive Order outlining the responsible development of digital assets, including a call to “reduc(e) negative climate impacts.” And other regions like Scandinavia are looking to alternative energy sources to power highly consumptive crypto mining operations.
Increasing awareness of the potential benefits of this technology to enable further adoption is equally as important as differentiating between blockchains and their varying levels of energy consumption. A Tesla and a Hummer can both get you from point A to point B, but the carbon emissions from each are vastly different. The same thinking should be applied to blockchains and how they are used today.
For example, low-energy blockchains are in fact so inherently efficient by design, they can actually reduce the environmental impacts and improve the sustainability of legacy payment mediums. Using crypto for payments can even be more sustainable than cash — which contributes to deforestation, water loss and pollution. Alternative cash solutions such as CBDCs or stablecoins on a sustainable blockchain also have the potential to be more environmentally friendly than existing payment systems, and we’re seeing more countries explore and pilot digital currency projects like these across the globe.
New Crypto Use Cases Can Aid Awareness in the Fight Against Climate Change
This effort will continue to evolve as new demands and technologies emerge. For example, the rapid and remarkable growth in popularity of non-fungible tokens (NFTs) has helped to further highlight the negative impact of proof-of-work blockchains on the climate. The transactions required to mint, bid and trade NFTs on these blockchains can be highly energy-intensive.
While some are using NFTs as a creative means to champion sustainability through use cases like environmental art and tokenizing carbon credits, other artists and collectors have been vocal critics of the climate consequences of NFTs, with one recent outcry leading to the cancellation of Artstation’s planned NFT platform launch.
But it’s critical that artists, environmentalists, developers and entrepreneurs all recognize that NFTs are not inherently energy-intensive. Energy usage depends on the underlying blockchain, and there are those like the XRP Ledger that are carbon-neutral and use very little energy.
These constituents do care about sustainability. In our recently published New Value report research substantiates sustainability’s move towards center stage in NFTs, with roughly three-fourths of global consumers preferring sustainable NFTs and two-thirds of developers saying their organization is more likely to choose a sustainable blockchain.
At The Fore of Crypto Sustainability
Ripple has remained committed to sustainability since the company’s founding, and our design and development choices have been made through this lens. This is why we support the open-source, decentralized XRPL and use its sustainable, native digital asset XRP as the underlying crypto technology for our payments solution.
The XRPL uses a Federated Consensus protocol to more efficiently manage transactions, helping minimize the energy consumption required to transact on the XRP Ledger. The XRPL was also the first major global blockchain to be carbon-neutral, a milestone achieved in October of 2020. And because its native digital asset XRP does not require mining, this further reduces the overall carbon footprint of technologies built on the Ledger.
As the first major blockchain company to pledge to be carbon net-zero by 2030, Ripple continues to create and champion a network of engaged partners with a like-minded commitment to sustainability.
We believe that the crypto industry as a whole can lead the charge towards a greener, cleaner future for blockchain. Key industry stakeholders must come together through efforts like the Crypto Climate Accord and the World Economic Forum’s Crypto Impact & Sustainability Accelerator (CISA) — both of which Ripple is a founding member.
The industry also needs to be transparent in educating consumers, businesses and artists on the truth about crypto and blockchain energy usage, and the benefits of transitioning to proven, inherently less energy-intensive mechanisms like federated consensus or proof-of-stake. And it can apply its expertise, financing and creativity to help turn the tide.
Together, we have an opportunity and an obligation to make a difference, helping to preserve the celebration of Earth Day for generations to come.
Join Ripple in making crypto and blockchain sustainability a priority for the industry.