Bitcoin and similar blockchain technologies consume more electricity than entire nations, and may prevent the world from achieving the climate change mitigation targets under the Paris Agreement, a study has warned.
The study, published in the journal Energy Research & Social Science, evaluates the financial and legal options available to lawmakers to moderate blockchain-related energy consumption and foster a sustainable and innovative technology sector.
Researchers recommend an approach that imposes new taxes, charges, or restrictions to reduce demand by users, miners, and miner manufacturers who employ polluting technologies, and offers incentives that encourage developers to create less energy-intensive/carbon-neutral blockchain.
"Digital currency mining is the first major industry developed from blockchain, because its transactions alone consume more electricity than entire nations," said Jon Truby, an assistant professor at Qatar University.
"It needs to be directed towards sustainability if it is to realise its potential advantages," said Truby.
"Many developers have taken no account of the environmental impact of their designs, so we must encourage them to adopt consensus protocols that do not result in high emissions," he said.
"Taking no action means we are subsidising high energy-consuming technology and causing future blockchain developers to follow the same harmful path," he added.
As a digital ledger that is accessible to, and trusted by all participants, blockchain technology decentralises and transforms the exchange of assets through peer-to-peer verification and payments.
Blockchain technology has been advocated as being capable of delivering environmental and social benefits under the UN's Sustainable Development Goals.
However, Bitcoin's system has been built in a way that is reminiscent of physical mining of natural resources - costs and efforts rise as the system reaches the ultimate resource limit and the mining of new resources requires increasing hardware resources, which consume huge amounts of electricity.
"The processes involved in a single Bitcoin transaction could provide electricity to a British home for a month - with the environmental costs socialised for private benefit," said Truby
The study evaluates various blockchain technologies by their carbon footprints and recommends how to tax or restrict blockchain types at different phases of production and use to discourage polluting versions and encourage cleaner alternatives.
It also analyses the legal measures that can be introduced to encourage technology innovators to develop low-emissions blockchain designs.
The specific recommendations include imposing levies to prevent path-dependent inertia from constraining innovation.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)