Cryptocurrency, Decentralized Finance, and Cutting Carbon: A Novel Approach

The global tech industry is estimated to be responsible for 1.4% of the world’s yearly carbon emissions, and some predict that figure will rise to 20% in the next five years.

The emergence of the internet coincided with a steady decline in deforestation rates, but the proliferation of consumer hardware and software in the years since has left its own unique footprint.

Enter the Blockchain

Despite its relatively short time on the scene, the cryptocurrency industry already accounts for between 0.6-0.9% of global carbon emissions. Unlike the consumer tech space, hardware is not as ubiquitous in the cryptosphere, with just a relative handful of users running specialized mining rigs.

Innovative hardware solutions naturally address the carbon consumption of the ICT space, but the problem lies in its use of software. Every click, scroll, search, post and purchase on the internet requires energy – not just to execute, but also, in the age of the data economy, to log, analyse and store. Indeed, data centers are already thought to leave the same carbon footprint as the aviation industry.

The same problem exists in the cryptocurrency space, where even automated smart contracts require energy to self-execute and be confirmed by miners on a given blockchain.

That’s why steps have been taken to first measure, and then attempt to offset, the carbon impact of smart contract usage on blockchain networks.

A Marriage of Tech and Finance

Popcorn Network is a defi application that sends a portion of its protocol fees by default to a host of carbon reduction initiatives selected by its own community of users.

Popcorn recently partnered with another carbon-conscious project in the form of Patch, a carbon removal API which allows users to provide contributions to a range of carbon offset and removal projects, which includes the development of negative emission technology, and nature-based carbon sequestration initiatives.

Patch’s data feeds supply Popcorn’s Smart Contract Emissions dashboard, allowing users to view their data usage in real time. In combination with the automatic delivery of protocol fees to carbon reduction programmes, Patch CEO Brennan Spellacy thinks the defi space can work to offset some of the carbon impact caused by the crypto industry at large.

‘Defi has the potential to deliver significant social impact, while still generating returns for users,’ stated Spellacy, who added that his team was ‘working to make this potential a reality by offsetting emissions mapped to running on Ethereum and allocating a meaningful portion of yield to high-impact carbon removal and offset projects.’

Michael Kisselgof, co-founder of Popcorn, said the marriage of passive returns and green-conscious initiatives could be just the right balance of incentives to trigger ‘a new paradigm for banking.’

It’s not just the tech industry that’s looking to rid itself of its carbon impact – most legacy banks have already made pledges to become carbon neutral by the middle of this century.

As the move to greener sources of energy becomes commonplace, expect further innovative solutions to emerge to shoulder the burden.