An International Monetary Fund (IMF) report on energy consumption showed the importance of design choices within the cryptocurrency ecosystem to develop an environmentally friendly mainstream payment network.
In that study entitled “Digital Currencies and Energy Consumption,” the IMF reviewed the energy consumption of crypto assets according to their unique design elements to determine the perfect mechanism for creating central bank digital currencies (CBDCs).
Sharing the groundwork for policy discussions around the environmental effects of digital currencies, the IMF recommended moving away from proof-of-work (PoW)-based distributed ledger (DLT) applications, adding:
“In particular, Bitcoin (BTC), the best-known application of this type, is estimated to consume much energy (about 144 terawatt-hours (TWh)) per year. Although scalability solutions reduce the energy cost per transaction, they do not reduce the overall energy spending.”
Nonetheless, the international organization acknowledged the massive energy efficiency brought about by non-PoW, permissioned cryptocurrency assets when compared to the traditional financial network:
“The potential of non-PoW permissioned crypto assets to reduce energy consumption relative to the existing payment system comes about from energy savings on both core processing architectures and user payment means.”
IMF Supports Green CBDCs
Getting the conclusion from the study, the IMF’s recommendation to the central banks is to create CBDCs with the explicit aim to be environmentally friendly. It means choosing platforms, hardware, and design options with a smaller carbon footprint than the central banks’ legal networks starting from the experimentation phase.
Apart from the eco-friendly components, the IMF recommended central banks feature other components in the CBDCs, such as higher resilience, compliance, and offline capabilities.
Buy Bitcoin NowThe IMF also said that the policymakers would consider the mainstreaming of crypto and CBDCs by weighing the environmental effect of the technology’s underlying design. In that study, IMF estimated that the yearly energy consumption by the global payment network remains at 47.3 TWh; nearly matching the annual energy consumption of economies like Bangladesh and Portugal.
Joining in the effort to address climate change, the Iota Foundation, a nonprofit DLT ecosystem service provider, partnered with Dell Technologies to create an instantaneous carbon footprint tracking system.
https://twitter.com/Dell_Edge/status/1533949500393508864
That initiative will bring about almost real-time tracking of carbon emissions from BioE’s sustainable energy and composting facility. The head of sustainability at the Iota Foundation, Mathew Yarger, stated:
“We’re now able to track and verify data around climate change and how we’re actively trying to address it at a level that’s never been achieved before.”
