Blockchain can solve many of the world’s problems. With decentralized finance, people enjoy better lending and equitable finance. Blockchains can also democratize information access, improve supply chain management, and so much more. However, environmental concerns impede the growth and adoption of blockchain technology. Is there any way to overcome this issue? Yes, there is. And Cardano is one of the players that has taken the lead. This article explores how Cardano plays a key role in promoting sustainability and environmental awareness.
Blockchain and energy usage
One of the biggest problems confronting blockchain technology today is the high energy consumption of crypto mining. Mining is an essential part of one of the most popular consensus mechanisms. While it is a great innovation and allows us to imagine a decentralized world, mining requires significant electricity. That’s because they rely on the computational power of a network of cryptos.
As a result of this high energy consumption of mining cryptos, many have raised concerns about the environmental impact of blockchains. For instance, the energy consumption of the world’s largest crypto, Bitcoin, is the equivalent of a small country. And its carbon footprint is comparable to that of a large city. This has led to criticism of the crypto industry and calls for more energy-efficient alternatives.
There have been various proposals to make the PoW consensus mechanism more energy-efficient. Some have tried using alternative hashing algorithms or adjusting the mining difficulty algorithm. However, these solutions have not yet been widely adopted, and whether they reduce their energy needs adequately is still subject to debate.
Alternatively, some propose the use of renewable energy sources, the development of more energy-efficient mining hardware, and the adoption of alternative consensus mechanisms. The last solution is the one that Cardano has adopted. The Proof of Stake (PoS) consensus mechanism, which cryptos like Cardano use, consumes less energy than the Proof of Work (PoW) mechanism of mining cryptos. There are other consensus mechanisms, too. Delegated Proof of Stake (DPoS), Proof of Authority (PoA), and Proof of Elapsed Time (PoET) are some examples.
The energy problem of PoW blockchains like Bitcoin
Bitcoin is a mining or Proof of Work (PoW) crypto. And because it is the world’s most well-known crypto, many others follow this model in an attempt to replicate its success.
Unfortunately, this translates into a lot of power consumption globally. That’s because, in the PoW system, miners have to compete to solve complex mathematical problems to validate transactions. Only then can they keep the system running and make some money. But solving those math problems takes up a significant amount of computational power and, in turn, electricity.
The power consumption of Bitcoin is primarily due to the competition between miners. If too much mining is going on, there will be too much Bitcoin in circulation. That will cause its prices to drop. So the PoW mechanism increases the mining difficulty as more and more miners join the network to compete. As a result, miners must continually invest in new, more powerful hardware to keep up with the competition. This leads to a further increase in energy consumption. Plus, as hardware turns dated and is dispensed away, the e-waste also begins to mount. Both of these things are horrible for the environment.
That’s where PoS is a game changer.
Cardano: An environmentally-friendly blockchain
In PoS, validators hold a stake in the network. And in many PoS cryptos, their likelihood of being chosen to validate the next block is proportional to the size of their stake. This means that PoS significantly reduces its energy needs in comparison to PoW.
By using a PoS consensus mechanism, Cardano greatly reduces its energy consumption and carbon footprint. According to the Cardano Foundation, the energy consumption of the Cardano network is estimated to be just 6 GW per year, compared to Bitcoin’s estimated 115,850 GWh per year.
Further, the developers of Cardano have implemented features such as sidechains and sharding to reduce the load on the main blockchain. This translates into more efficiency and, thus, less energy consumption.
Finally, because Cardano’s system does not involve competition, staking does not lead to much e-waste. In this way, too, Cardano’s system minimizes its environmental impact.
Cardano’s use of a PoS consensus algorithm is an attractive option for investors keen on maintaining their commitment to sustainability. Various features of Cardano, including sharding and its sidechains, help reduce its energy use. Plus, the e-waste is significantly lower with this crypto. This means Cardano has a significantly smaller carbon footprint than other major cryptos.
That said, you should always do your own research and consider various factors, such as market trends, volatility, and risk tolerance, before making any investment decisions.