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The hidden cost of cryptocurrency and NFTs

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The hidden cost of cryptocurrency and NFTs

Companies with significant ESG commitments to their shareholders will not be able to hold investments in cryptocurrencies or NFTs while meeting their sustainability goals; public companies with these technologies in their portfolios will be responsible for the emissions created by their investments.

Blockchain has become the essential technological solution to enable traceability throughout the supply chains of in-circuit products, particularly in
food
and
textiles. But in the world of finance, blockchain has become inextricably linked to the rise in popularity of cryptocurrency and non-fungible tokens (NFT).

While blockchain has proven its value as an emerging solution for certain applications, there is more to consider about the technology’s implications – in particular, as we think about the role that future iterations of blockchain will have on the goals carbon reduction for a rapidly changing climate.

This is not to say that these technologies will never be carbon neutral; but in their current iterations, market leaders such as Bitcoin and Ethereum
are not sustainable. New currencies and NFT development processes claim to be “greener” because they are not based on the same “Proof of Work” system that involves huge amounts of computation (and therefore processing power) to produce a single token. Cryptocurrencies that instead use a “Storage Evidence” Where “Proof of Stake”

uses much less energy, as do currencies using a technology called block network

– which does not require
mining. Similar processes are applied to the NFT market in an attempt to achieve carbon neutrality. At this point, however, it’s hard to say whether these technologies, if at scale, would be better – or even worse – for the environment.

Therefore, everyone – from the ordinary individual to the global corporation – should rejoice in the continued evolution of these types of energy-consuming technologies
and how they are created; because, at present, most cryptocurrencies and NFTs are produced by methods that are completely at odds with efforts to mitigate climate change, which affects all living things on the planet.

These technologies require massive computing power to generate, resulting in an outsized and irresponsible carbon footprint. In fact, the process is deliberately designed to be very energy efficient, in order to make it harder to fake a file’s legitimacy. Bitcoin alone consumes as much electricity as a The whole country. The same goes for NFTs, whose security and value rely on power-intensive processes — a single transaction can consume as much electricity as the average household uses over decades.

Each cryptocoin mined uses more energy than any previously mined – and around 21 million Bitcoins have been mined so far. Once mined, the cryptocurrency continues to generate a vast network of computer connections with every transaction. Bitcoin and Ethereum activity combined
consume as much electrical energy as an entire nation — nearly 290 TWh per year.

2023 could be the tipping point for these technologies, as new federal carbon accounting rules are expected to take effect next year. A SECOND
proposal

seeks to improve transparency between funds that claim to consider environmental, social and governance (ESG) factors when making investment decisions. This new regulation will require any listed company to disclose its full carbon footprint and impose carbon offsetting fines on those that do. green their progress.

Companies that have significant ESG commitments to their shareholders will not be able to hold investments in cryptocurrencies or NFTs while meeting their sustainability goals. Companies that continue to adopt NFTs and cryptocurrency will face high carbon offset costs and negative brand perception. And once all publicly traded/reputable companies exit crypto and offload their NFTs to achieve their ESG goals, there will be nothing left to sustain these markets.

Sustainability experts might see it on the horizon; but ideally, individuals and businesses will also have the foresight not to keep pumping extra money into these notoriously energy-intensive technologies until they are truly sustainable. Cryptocurrency and NFTs use mind-boggling amounts of computing power and create significant greenhouse gas emissions, exceeding any current perceived value. Public companies with these technologies in their portfolios will be responsible for the emissions created by their investments. New federal reporting regulations could mark a fork in the road for these digital currency trends.

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