The token universe offers world-changing potential, but it faces many challenges. Perhaps the greatest hurdle to overcome is onboarding enough new users for the space hit mass adoption. One of the biggest difficulties in introducing new people to tokens is helping them overcome concerns and skepticism surrounding cryptocurrencies and blockchain technology. For many people, the greatest concern relates to the environment and the possible impact that blockchain technology could have on the climate. Few people are aware that the token universe is home to many climate-conscious crypto projects. In the future, too, tokens could enable countless ways to support the environment and prevent climate change. In this guide, we’ll go deep on crypto’s climate debate and introduce our dedicated climate-focused Collection: Climate-Conscious Crypto.
Please note: Investing in cryptoassets is risky. Due to the volatile nature of the cryptocurrency market, investors run the risk of losing their funds when they make an investment. Returns from cryptoasset investing are not guaranteed, therefore users should always be aware of the risks.
Crypto’s climate debate
If you’ve read about cryptocurrencies, there’s a good chance you’ve read about blockchain technology’s impact on the environment. In recent years, the growth of Bitcoin and digital assets has sparked furious debate over the space’s energy consumption. However, there is currently a huge amount of confusion surrounding crypto’s climate issue.
The debates largely stem from Bitcoin, the world’s biggest cryptocurrency. The Bitcoin network uses a Proof-of-Work mechanism to validate transactions, with miners using powerful hardware to solve complex cryptographic problems to add new blocks to the chain. The problem is that mining uses a lot of energy; according to a Cambridge Centre for Alternative Finance study, Bitcoin consumes more energy than Kazakhstan and the Philippines per year.
Bitcoin’s heavy energy consumption has turned many against the broader token ecosystem as it is still the most recognisable brand in the space. The world’s second biggest blockchain, Ethereum, previously used Proof-of-Work too, though it upgraded to the greener Proof-of-Stake mechanism in September 2022. However, as there is still lots of misunderstanding surrounding cryptocurrencies, the wider ecosystem and specific niches such as NFTs have been criticised over their environmental impact.
Skepticism and misunderstanding over new technology is nothing new. When the Internet first surfaced, many people had similar concerns that are hard to imagine today. While Bitcoin’s energy consumption remains a point of concern, the confusion surrounding crypto’s impact on the climate proves that the space is still in its infancy.
Climate-conscious projects and tokenization
Although Bitcoin still uses a Proof-of-Work consensus mechanism and is likely to for some time, most other newer blockchain networks use Proof-of-Stake to achieve consensus. Instead of relying on miners with expensive hardware, Proof-of-Stake uses validators who can “stake” tokens for a network and often run their own nodes on inexpensive energy-efficient hardware.
Ethereum completed an upgrade from Proof-of-Work to Proof-of-Stake known as The Merge in September 2022, and it was estimated that the update would make the network 99.9% more energy efficient. However, the world’s second-ranked blockchain isn’t the only one that has climate-conscious credentials. Most other Layer 1 blockchains are similarly energy efficient today, with some even achieving carbon negative status.
Beyond the various climate-conscious Layer 1 blockchain networks found in the token ecosystem today, there is a clear path in which tokenization could be used to positively impact the environment in the future. We believe that tokenization will create ways for people to invest according to their interests and causes they want to support—with tokens, saving the climate could become one of the most widely supported causes. It’s likely that we’ll see the emergence of carbon credits in token form and other ventures with a focus on preserving the climate (in fact, while the climate-conscious crypto space is still in its early stages, some have already surfaced today). For example, tokens could be used as membership tokens for a DAO focused on preserving the environment, with new trees planted whenever a new member joins the DAO.
While the token universe is currently focused on use cases like decentralised finance and NFTs, the token revolution will make investing much more accessible to regular people. The limitless potential of tokens means that they will not be limited to choosing between tokens that align with their financial incentives—tokens will also let people invest according to their interests and support for causes. Moreover, as blockchains offer greater transparency than traditional finance, they allow for investors to signal their interests. This is crucial when it comes to the environmental issue; if major corporations want to signal that they care about the environment, they could make a transparent investment that the public ledger records. NFTs have also been used to allow entities to signal their support for causes; soon, we could see environment-themed NFTs gain traction.
Though crypto has some way to go to hit mass adoption, as climate change becomes an increasing urgency for the world, tokens could serve as a vital technological advancement that helps limit the damage.
The token.com Collection
Climate-Conscious Crypto compiles a list of some of the key projects that have committed to limiting their environmental impact.
The Collection features several of the ecosystem’s most prominent smart contract blockchains. They include the carbon neutral network Polygon, the mobile-focused Celo network, and the high-speed, low-cost NEAR network.
Climate-Conscious Crypto also includes the carbon negative Hedera network, which is known for its low bandwidth consumption and high-speed transactions, and Fetch, a network focused on building “the autonomy of things.”
The Collection also features one of crypto’s foremost digital payments networks, Nano. The project places focus on energy efficiency, letting users send payments around the world at a high speed with zero fees.
NFTs have been central to crypto’s environmental debates due to Ethereum’s previous reliance on Proof-of-Work, and our Collection features two projects that have served as a hub for green NFTs. They are Tezos, which has become a home for many emerging climate-conscious NFT artists, and Flow, a blockchain network that uses less energy than a Google search to mint an NFT.
Finally, Climate-Conscious Crypto features Gitcoin, the Ethereum fundraising platform dedicated to supporting public goods and important social causes. Gitcoin has shown a commitment to “impact DAOs” and a variety of climate-focused projects, so its place in our Collection makes sense.
Discover more
Climate change has become a hot topic of discussion in relation to blockchain technology, and it’s likely that it will remain a point of focus in debates over crypto for many years to come. However, the current token landscape consists of many blockchain projects that are focused on sustainability. What’s more, over the long-term, tokenization could offer people the chance to support all kinds of causes focused on preserving the environment. Just one of many reasons to be excited about the future.
Learn more about token.com here
