Cardano as a climate-neutral blockchain?

Starting position

The skyrocketing prices make Bitcoin mining more attractive and so electricity consumption for mining increases. Since the beginning of October 2020, electricity consumption for this has almost doubled, to 92.8 terrawatts per year. This is equivalent to the electricity consumption of Belgium or the Netherlands, or almost 20% of the electricity consumption in Germany. Much of the energy is produced in China, mainly in climate-damaging coal-fired power plants. The trend is still rising; at the beginning of 2021, electricity consumption for Bitcoin mining was already 121 terrawatts/year. At a Bitcoin price of US-$ 100,000, 2% of global energy production is expected to be spent on Bitcoin mining, because this high price attracts more miners, but at the same time many miners need more computing power. This is ecological insanity. The Cardano Ada PoS (proof of stake) concept is different. There is no need to solve blocks with complex computing operations and server farms. A simple computer is already suitable for one node in the network. In other words: a tiny fraction of the power consumption of Bitcoin.

Since Cardano’s basic energy requirements are already significantly lower than Bitcoin’s or Ethereum’s, making Cardano the first carbon-neutral blockchain is a realistic goal. Achieving this goal would increase Cardano’s attractiveness and add another unique selling point that would differentiate Cardano from other crypto projects as an advanced Blockchain 3.0 project.

A carbon neutral Blockchain can be achieved e.g. through the following steps:

1. the corporate structure that develops and technologically provides the Cardano Blockchain should cover its electricity needs from renewable energies.

2. the decentralized infrastructure (~ 2,100 stakepools) should rely on renewable energies.

3. if 1. and 2. are not fully implementable, compensation measures (e.g. financial support for the development of renewable energies, afforestation measures or similar) from community funds can close the balance gap.

I have no information on the coverage of electricity demand at IOHK and its data centers. However, this goal would be easy to implement in principle, as it only requires central decisions by the company’s management.

The survey

Regarding the decentralized stakepools, we published a survey to the stakepool operators on Twitter, and also launched calls for participation in the Telegram channels and on Reddit. For statistically relevant data, we would have needed participation from around 300 pools. Unfortunately, only 71 pools participated. The result was as follows:

Initially, we were positively surprised that around 44% of the participants stated that they already rely on renewable energies. However, we assume that this share is estimated too optimistically, as the followers of our pool specialized in climate protection may be particularly interested in this topic and therefore pools with a similar attitude participated disproportionately. If we assume a more realistic ratio of 1:2, about 700 pools would currently be powered by 100% renewable energy, and about 1,400 pools would be powered by conventional electricity mix (although this already includes a share of renewable energy).

Cardano: rough calculation

Based on this assumption, we can perform a rough calculation on the electricity demand, resulting CO2 emissions and necessary compensation measures for the Cardano blockchain at stakepool level. This calculation does not claim to be very accurate, but it can help to identify the basic trend and derive helpful measures.

If we roughly assume that a modern multi-core PC, which is sufficient to run the blockchain, has a power consumption of around 150 watts and each pool has a blockproducer node and 2 independent relays, this results in a power requirement of 450 Wh per pool. This power consumption can be reduced by about 30% by using synergies in central server infrastructures, cloud servers, etc., so that we can roughly assume 315 Wh per pool.

This corresponds to approx. 2,760 kWh each year per pool (i.e. the power consumption of a 2-person household in Germany). With 1,400 pools, this corresponds to ~ 3,863,000 kWh each year, i.e. the electricity consumption of approx. 3,000 inhabitants.

In order to determine the resulting CO2 emissions, it would be necessary to know in which countries the servers are located and what the composition of the local electricity mix is. As an approximation, we assume CO2 emissions of 0.6 kg/kWh (currently around 0.4 kg/kWh in Germany) and arrive at an estimated CO2 emission of around 2,320 t CO2 per year. In order to compensate for this CO2 emission, an amount of around €53,300 per year would have to be paid to Atmosfair (https://www.atmosfair.de/de/kompensieren/wunschmenge/), for example. According to various sources, the compensation costs are around 22 – 23 € per ton of CO2. Per pool operated with conventional energy, this corresponds to an amount of less than 40 € per year for compensation measures. In my opinion, this is a manageable effort to make the Cardano Blockchain the first climate-neutral Blockchain!

Consequences

Our stakepool CO2POOL [CO2P] has therefore founded an initiative that aims to do just that. In the portfolio list of Adafolio.com, we have founded the Cardano „Climate Neutral Blockchain Group“ (CNBG). The prerequisite for inclusion in the list is:

1. operation of own servers with 100% renewable energies

2. donations of at least 30% of the pool fees (margin) for climate protection measures.

Currently there is only one other pool on the list besides us, but we hope that other pool operators will share our approach and join the list. By the way, we reject the use of nuclear power, because this is not a sustainable technology that solves problems, but creates new ones. Some pool operators who advertise climate protection think different, so it is worth asking carefully, if you don’t want to support the use of nuclear power.

Currently our pool has – not least due to the delegation of IOHK, which expires at the end of April – an active stake of 6.8 million Ada and currently only 25 delegators. With this we already manage to produce blocks regularly and to donate about 500 € each quarter from our pool income for climate protection (current quota: 50% of the pool margin). The next donation is scheduled for the end of March. Our delegators receive – as with all other pools – rewards of around 5 – 6 % annually. Our activity for climate protection is therefore not at the expense of the delegators.

If only 10 – 20 pools follow our example and donate a comparable amount for climate protection, then the climate-neutral Cardano blockchain can soon be a reality. But this will also require Ada delegators to vote with their feet. If delegators explicitly support pools with their Ada delegation that run on renewable energy, without coal and nuclear power, and / or promote climate protection measures, then we can achieve a lot together. If in doubt, ask the operator of your stakepool how they feel about these issues.