If We Want a Green Blockchain, We Must Invest in It

One of the many criticisms of blockchain technology is how the technology lacks sustainability. Here's what it may take to improve it.

learn more about Par Chadha

By Par Chadha

Opinions expressed by Entrepreneur contributors are their own.

Blockchain storage is fast emerging as a credible competitor to the cloud. One definite advantage offered by blockchain is that its distributed nature of storage makes it a more secure form of storage compared to storing your data on the cloud.

But blockchain technology has been continuously plagued by significant energy usage and a large carbon footprint. Cryptocurrency, in particular, has been a sore point with environmentalists. Bitcoin, for instance, is famed for consuming more electricity in a year than entire nations. At a time when a United Nations agency just reported that the last eight years had been the warmest ever recorded in modern times, the future of the energy-intensive blockchain technology may get inextricably linked with its ability to offset its carbon footprint.

Related: The Blockchain Is Everywhere: Here's How to Understand It

What's preventing the environmental, social and governance (ESG) shift in blockchain companies?

With debates raging around responsible consumption, companies, including the historically ESG-resistant FAANG, have now turned around to commit to definite targets around their ESG goals. Morgan Stanley even declared that ESG-focused metrics might dictate the next decade of investment to understand a company's growth potential.

But while investment choices get dictated by ESG metrics, it behooves us to remember that the ethical choice may be easier for some than others. While some of the largest multinational companies like Apple and Google can afford to pivot to ESG with relative ease, the same is not necessarily true for companies focused on blockchain, including even the more prominent players.

As institutional investors become subject to closer scrutiny for ESG reporting than ever, they remain inconveniently out of reach for most crypto projects. This, in turn, affects the entire momentum of widespread mainstream blockchain adoption. Companies with tens or hundreds of servers involved in blockchain in a fragmented ecosystem just do not yet have the latency to commit to ESG.

Related: How Blockchain Can Help Tackle Climate Change

The blockchain industry needs to focus on a wider audience

With its anti-establishment flavor, Blockchain, especially cryptocurrency, has found and developed a core niche that's 94 percent GenZ and younger millennials. But for the technology to see mass adoption and investment, it needs to appeal to a much wider audience.

It's well documented that younger investors are more likely to make riskier investments — like cryptocurrency, which is known for its volatile price fluctuations. This type of risk does not appeal to those looking to save for a home, family or retirement; therefore, many middle-aged and older consumers have no interest.

Even many Gen Z and Millennials, the generations identified as the most climate-concerned yet, choose not to involve themselves with blockchain technology due to the toll it can take on the environment.

Such a small audience doesn't lend itself well to large companies or those looking to make large profits investing in the technology, leading to a standstill in developing greener initiatives since many companies in the space may just be looking to stay afloat.

There is a need for blockchain technology to prove its use cases beyond cryptocurrencies. This image makeover will likely happen over time as blockchain storage slowly gains wider market traction as a more secure alternative to the cloud.

Related: Solving the No. 1 Issue of Our Time: Using Blockchain Technology to Scale Climate Action

A greener blockchain is possible

The blockchain industry is at a phase where it is perched at the edge of global adoption. It can easily add thousands of users each month. But blockchain companies need funding to secure ESG initiatives and appeal to the widest possible audience for it to move beyond an emerging technology and become mainstream.

Solutions to build an inclusive and sustainable future for blockchain technology are already starting to emerge in projects such as the Green Treasury Initiative by ClimateTrade, which adds to the number of carbon-negative blockchain use cases. Ethereum plans to replace its energy-intensive equipment, which could cut down its energy consumption by 99.95 percent. But offsetting the carbon impact of blockchain networks is likely to remain a persistent challenge for the industry in its quest for mass adoption.

Smaller blockchain companies will require adequate funding to find relevant solutions to remain environmentally positive. If we want to benefit from the blockchain without hurting the environment, we need to invest in blockchain and blockchain companies so they can have the money to find these solutions. If you want to appeal to a much larger audience, you must focus on ESG initiatives or join hands with well-established cloud companies with leadership in ESG.

Par Chadha

Entrepreneur Leadership Network Contributor

Founder, CEO, and CIO of HandsOn Global Management

Par Chadha is the founder, CEO and CIO of HGM Fund, a family office. He also serves as chairman of Exela Technologies and is the co-founder of Rule 14. He currently holds and manages investments in the evolving financial technology, health technology and communications industries.

Related Topics

Editor's Pick

Everyone Wants to Get Close to Their Favorite Artist. Here's the Technology Making It a Reality — But Better.
The Highest-Paid, Highest-Profile People in Every Field Know This Communication Strategy
After Early Rejection From Publishers, This Author Self-Published Her Book and Sold More Than 500,000 Copies. Here's How She Did It.
Having Trouble Speaking Up in Meetings? Try This Strategy.
He Names Brands for Amazon, Meta and Forever 21, and Says This Is the Big Blank Space in the Naming Game
Business News

These Are the Most and Least Affordable Places to Retire in The U.S.

The Northeast and West Coast are the least affordable, while areas in the Mountain State region tend to be ideal for retirees on a budget.

Business News

I Live on a Cruise Ship for Half of the Year. Look Inside My 336-Square-Foot Cabin with Wraparound Balcony.

I live on a cruise ship with my husband, who works on it, for six months out of the year. Life at "home" can be tight. Here's what it's really like living on a cruise ship.

Business News

The 'Airbnbust' Proves the Wild West Days of Online Vacation Rentals Are Over

Airbnb recently reported that 2022 was its first profitable year ever. But the deluge of new listings foreshadowed an inevitable correction.

Business Solutions

Master Coding for Less Than $2 a Course with This Jam-Packed Bundle

Make coding understandable with this beginner-friendly coding bundle, now just $19.99.

Business News

'I Don't Feel Like It's Unreasonable': A-List Actor Refused Service At Hotspot For Not Following Dress Code

Academy Award-winning actor Russell Crowe had quite the afternoon after trying to stop at a Japanese steakhouse in Melbourne, Australia following a game of tennis.