2. Problems Targeted

2.1. Primary Threat to Mass Adoption

On May 13th, 2021 Tesla’s CEO Elon Musk said that Tesla has suspended vehicle purchases using Bitcoin due to climate change concerns. Being one of the leading voices in the crypto space, Elon Musk added that the electric carmaker would not sell any of its Bitcoin, and intends to use it for transactions as soon as mining shifts to using more sustainable energy. Such a stance primarily demonstrates the desperate need for a solution before DeFi can become mainstream.
Several news outlets and opinion leaders in the field are also increasingly vocal about the lack of sustainability of the digital assets ecosystem - which also comes at a time when other sustainable, ESG-positive investments are booming. Recently, Bill Gates joined the public unrest by telling the New York Times that “Bitcoin uses more electricity per transaction than any other method known to mankind…It’s not a great climate thing,”.
Because of the growing awareness of the negative effects on climate, the Crypto Climate Accord was created that aims to erase cryptocurrencies’ legacy of climate pollution. It seeks to transition all blockchains to renewable energy by 2030 or sooner. It sets a 2040 target for the crypto industry to reach “net zero” emissions, which would involve reducing pollution and turning to strategies that might be able to suck the industry’s historical carbon dioxide emissions out of the atmosphere.
There are several major sustainability problems facing DeFi today. The problems span across most coins and tokens, which universally results in negative consequences for the climate when mining, transferring, or even holding your digital assets - most of these problems concern Layer 1. For simplicity and exact data, we will explain the main climate threats using Bitcoin and Ethereum as the prime example on L1.
While Bitcoin and Ethereum are the most popular digital currencies in the world, the energy consumption needed to mine and maintain them gets far less attention. Bitcoin alone has roughly the same carbon footprint annually as Hong Kong, while Ethereum’s annual carbon emissions rival Lithuania’s.
There are three main ways in which cryptocurrencies leave a major carbon footprint - mining using non-renewables, transactions leading to high CO2 emissions, and increasing electronic waste.
Blockchain's Impact in Perspective

2.2. Non-renewable Energy

Ethereum’s annual electricity consumption stands at 48.7 TWh - about as much as the country of Iraq. This translates into 23.2 Mt of CO2 emitted, which rivals the annual footprint of the Dominican Republic. Similarly, Bitcoin mining, which requires a tremendous amount of energy leading to high levels of carbon footprint, is well on its way to equal the annual carbon emission of 98.9 megatons (Mt) CO2 produced by the London city in 2021. The Bitcoin algorithm demands increasing amounts of computational power to validate transactions. If it were a country, its annualized estimated carbon footprint would be comparable to New Zealand at about 37 million tons of carbon dioxide. All in all, Bitcoin consumes 1% of global electricity.
While some have proposed that this could be offset by renewable energy sources, research suggests that almost half of the world’s Bitcoin mining capacity is situated in southwest China, where power is cheap, less taxed and supplied by coal-fired plants. The Cambridge Center for Alternative Finance estimates that coal accounts for 38% of the cryptocurrency miner power.

2.3. Greenhouse Gas Emissions

ETH transactions produce vast CO2 emissions compared to other payment methods. 40.4 kgCO2 from a single ETH transaction is about as much as the carbon footprint of 89,563 VISA transactions or 6,735 hours of watching Youtube.
A single BTC transaction has a carbon footprint of 359.04 kgCO2 – equivalent to the carbon footprint of 1.1 million VISA transactions or 59,840 hours of watching YouTube. The energy usage of a single transaction is equivalent to the power consumption of an average U.S. household over 25.91 days. Every single bitcoin transaction arriving at an exchange has a carbon footprint of approx. 300 kgs. That’s roughly the same as the CO₂ emissions of a two-way flight from London to Paris.
The growing usage of energy also adds to greenhouse gas emissions. Bitcoin’s annual consumption is estimated at around 77.8 terawatt-hours, up from 9.6 terawatt-hours in 2017, according to Digiconomist. Another index, compiled by the Cambridge Center for Alternative Finance, estimates a higher figure of around 108.4 terawatt-hours.

2.4. Electronic Waste

A single BTC transaction produces the equivalent to 1.77 golf balls worth of waste and represents about 135 grams of e-waste per Bitcoin transaction. However, the majority of e-waste associated with Bitcoin arises from mining-related causes. The reason for this is that most cryptocurrency mining is done with specialized (singular purpose) hardware, which becomes obsolete roughly every 1.5 years. Electric batteries rely on rare natural minerals and metals such as lithium, cobalt and cadmium, which are harmful to the environment when processed incorrectly or dumped.
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