A Big Carbon Footprint Compared to What?

Friday 11 June 2021, 6:17 AM AEST - 1 week ago

One often discussed topic lately has been the carbon footprint of blockchain ecosystems. Proof-of-work systems are enormously successful in securing transactions and preventing fraud and collusion, but they consume an enormous amount of energy. Current estimates are that a single bitcoin (BTC, -0.29%) transaction has a carbon footprint of over 350 kilograms (772 pounds) and a single Ethereum transaction consumes about 39 kg.

Compared to centralized transaction processing systems, these are hundreds of times less efficient. The same carbon footprint for a single Ethereum transaction would power more than 80,000 transactions on a centralized credit card payment network. If the desire is to replace all banking systems and small payments with blockchains, we are in trouble. That would be true even after a shift to proof of stake, which is thought to be 99% more efficient. In my view, it is unlikely that blockchains will replace most banking and credit card transactions today. As a result, the comparisons in carbon footprint dont make sense either. As I have previously argued, blockchain transactions offer no benefits and many costs compared with most simple consumer transactions – or even many smaller enterprise transactions, like payroll.

Where blockchain-based transactions have a compelling advantage over alternatives is when they are put in the context of the total carbon required for a complex multi-party transaction thats part of a larger business process. In these scenarios, the alternative isnt an efficient credit card transaction, its the cost and complexity of having a human being in the loop – and the carbon-cost of the working time involved.

The best example I have is a typical business purchase order. There are many estimates out there, but on average, it seems that large enterprises typically spend between $50 and $100 to raise a single purchase order or pay an invoice. Almost none of this is related to the information technology cost. Instead, the big driver is the cost of human time required to verify that the purchase order or invoice complied with the companys rules for payments and any existing contracts. In other words: were talking about labor here. At current average rates in professional and business services, were talking about one to two hours of work.

The real comparison, ...

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