The idea of carbon credits is nothing new but with societal demands now so great for a cleaner environment, this market is expected to see rampant growth in the coming years. Outcomes from COP 26 already stand to accelerate progress but with the need to ensure there’s no “double counting” when it comes to carbon offsetting, questions are being asked as to how this can be achieved in a truly sustainable manner. The blockchain provides an ideal solution for an indisputable, single ledger, where all parties can ensure liabilities are being met, but this technology is already gaining a reputation for itself as a significant consumer of energy.
This presented a fundamental challenge for the team at CrowdX and we got to work with key stakeholders in the carbon field from institutional investors to validators and grantors of credits known as Pending Issuance Units – or PIUs. They are effectively a promise to deliver a Carbon Unit in future. It is not guaranteed and cannot be used to report against UK-based emissions until verified, but they do allow companies to plan to compensate for future UK-based emissions, and also enable them to make credible corporate social responsibility statements in support of the creation of woodland.
To tackle this, CrowdX has engaged with Algorand, who have fostered an ecosystem of more than 500 global organisations leveraging its technology to deliver next generation financial products, as well as using the Algorand cryptocurrency. Critically, Algorand has been able to announce that its blockchain is fully carbon neutral, not only as a result of it using a fundamentally different approach to other blockchains which in turn removes the need for energy-hungry “mining” operations, but also through the funding of a series of green energy generation ventures.
The Algorand network was designed as the world’s first pure proof-of-stake blockchain, starting with a blank canvas approach so that environmental impact could be minimised at every step. Consensus is based on proof of stake rather than the energy intensive proof-of-work concept, so requires minimal computational power or electricity, giving Algorand a leadership position in minimizing the environmental impact of blockchain technology. Energy requirements for running a network node are negligible, meaning that it’s possible to complete the task on even the most simple of computers. Ultimately, when compared to other blockchains, digital asset creation and transactions on Algorand results in far, far lower carbon emissions.
Critically, what this means is that the blockchain doesn’t have to be seen as an energy-sapping behemoth and can effectively be run as an environmentally friendly distributed ledger. Accountability for carbon emissions and how these are paid for will only become more prevalent in the future, so it’s critical that this itself can be done in a responsible way.
