Early in 2022, it is increasingly clear that the “Cryptographic Blockchain” genie is out of the bottle. Across the globe historical signs abound of the early stages of a slow push toward eventual universal digital currency adoption and the methodical use of an immutable public ledger known as “blockchain.” Accompanying this exciting technology is a new language and a new understanding of how cryptography and blockchain technology propose to improve our world and solve many of our most vexing challenges.
When Bitcoin (BTC) first appeared in 2009, it presented a never-before-seen way to verify and permanently record Bitcoin transactions (buys, sells, transfers) using a decentralized but interconnected global web of high-level computers performing something called “mining.” The 24/7 high-level mining computers demanded equally high electric power due a mining process known as “proof-of-work” (PoW). PoW builds agreement or “consensus” among various other independent mining computers that compete with each other to verify the accuracy of a certain transaction, in return receiving a reward for verifying and recording the transaction to the public ledger, or “block”.
The bottom line of PoW, as with centralized bank ledgers for fiat money, is to ensure that digital money can never be spent twice, which would undermine the entire digital currency system and render digital currency worthless. The PoW consensus algorithm allows BTC transactions to be either rejected or successfully verified. Verified transactions are written into a form of online ledger (spreadsheet) known as a “block” that is date/time stamped and permanently recorded in the public domain. BTC data blocks have a limited storage capacity, so when a block is full, the process skips to the next successive block that is then linked to the last block and the data verification process continues. Together these permanent interconnected data blocks form an immutable “chain” of verified datapoints appropriately termed “Blockchain.”
In 2022 — thirteen years after BTC’s emergence as the world’s premier cryptocurrency, serious questions have arisen concerning the environmental impact of “mining”, not just of BTC, but all cryptocurrencies that use the PoW consensus algorithm to verify and write their transactions onto a blockchain. And as with any new technology, those concerns have been met head-on by serious people with serious solutions.
One response to this problem is a new way to build a different kind of transaction consensus called “Proof-of-Stake” (PoS). In PoS, the high-power consumption of immense mathematical computing is replaced by a simpler method of verifying the accuracy of blockchain transactions. PoS incentivizes owners of certain coins to stake them as “validators” who then get selected by the protocol to verify and write transactions to the block for rewards. PoS compares favorably against PoW mining with its much lower energy demands. For example, the energy consumption of a single BTC transaction is estimated at around 7 billion joules. Whereas the energy consumption of a single transaction in Solano (PoS) is 1837 joules — less than a Google search.
Like Bitcoin, Ethereum (ETH) — the world’s second largest cryptocurrency by market capitalization — also uses PoW to mine transactions. But in late 2020, the first of multiple phases of ETH 2.0 launched in what is expected to be Ethereum’s eventual complete transition away from PoW. When fully implemented, ETH 2.0 promises to solve many of the scaling issues and energy consumption issues associated with layer-1 ETH and its use of PoW.
Many energy and cost-conscious blockchain applications, such as Beach Token, currently running on Ethereum are now embracing the idea of building on a much-improved ETH 2.0. Why? We believe Ethereum’s “lead” over other blockchains is such that the “best” (or least bad) thing we can do to drive change is to help support and accelerate the roll-out of ETH 2.0. This is expected within the coming months and proposes to reduce transaction energy usage by over 99%. If the transition to ETH 2.0 doesn’t materialize in the next few months we have a contingency plan to bridge to an alternative low-emissions chain.
To help offset the ETH transaction energy footprint, 1% of every $BEACH transaction is set aside for our Blue Carbon Fund including mangrove restoration and seaweed farms, both of which sequester large amounts of CO2. Although we are generally skeptical of CO2 bean counting and “net zero” declarations, we are confident that the money that we have already set aside is easily enough to cover our emissions to date, and will continue to do so as transactions grow. Our Blue Carbon activities will continue to grow, notwithstanding the transition to ETH 2.0. In our view, neutral is not enough.
One of the most pressing challenges facing our world is how to reverse the effects of climate change after 170+ years of unbridled global energy consumption. To solve this challenge requires innovative ways to feed, house, clothe, and transport billions of humans while preserving the land and sea-based ecosystems we share with countless trillions of our planet’s non-human inhabitants. In that vein, old habits, mindsets, technologies, and stereotypes will have to be abandoned and replaced by fresh ideas and ecofriendly methods that place our fragile and beautiful planet first. Despite present issues with PoW, with a few tweaks to the code we believe that cryptography and the blockchain are poised to lead this charge!
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