Carbon Chain Reaction

Digital assets, including cryptocurrencies, have seen explosive growth in recent years, surpassing a $3 trillion market cap last November and up from $14 billion just five years prior. Surveys suggest that around 16 percent of adult Americans – approximately 40 million people – have invested in, traded, or used cryptocurrencies. There are over 100 countries that are exploring or piloting Central Bank Digital Currencies (CBDCs), a digital form of a country’s sovereign currency. With an uptick in this energy intensive asset class, there are environmental consequences.

In an article by the White House in September, 2022, the President highlights bold steps to address climate change through legislation and policy. The top priorities include protecting communities from pollution, reducing greenhouse gas emissions by 50% by 2030, achieving a carbon pollution-free electricity grid by 2035, and reaching net-zero greenhouse gas emissions no later than 2050.

In this article we will briefly be discussing three main topics that can influence the impact of ESG in Web 3.0.

1. BTC mining

   The carbon footprint of Bitcoin mining is significant, and it is expected to increase as the demand for Bitcoin continues to grow. As of August 2022, published estimates of the total global electricity usage for crypto-assets are between 120 and 240 billion kilowatt-hours per year, a range that exceeds the total annual electricity usage of many individual countries, such as Argentina or Australia. This is equivalent to 0.4% to 0.9% of annual global electricity usage, and is comparable to the annual electricity usage of all conventional data centers in the world. Read more on BTC mining ESG practices here.

2. DeFi

   Decentralized Finance (DeFi) has experienced exponential growth in the past few years. The total TVL in DeFi decreased from $267B at the beginning of January to $53B by the end of 2022, but this volatility is fairly common in emerging fintech.

   A study by the Global Blockchain Business Council indicates that 74% of institutional investors consider ESG factors when evaluating digital asset investments, underscoring the importance of ESG in the DeFi ecosystem. Read more about how the DeFi ecosystem is growing greener here. 

3. Carbon Credits

   As the world pushes towards a greener and more sustainable future, carbon offset projects have emerged as a crucial tool in mitigating climate change. By leveraging cutting-edge technology, these initiatives can drive greater efficiency, accuracy, and accessibility in the carbon market. According to Refinitiv, the global compliance market for carbon credits is massive, amounting to a total market size is US$261 billion. Read more on Carbon Credits as the new (crypto)currency of sustainability here.

The third generation of the internet, now based on distributed technologies, decentralized infrastructure & platforms, and token-related services is getting greener by the day. For more detailed insights, give our other Web 3.0 articles a read.