2017 was a wild ride for crypto. Over the last year, we saw record-breaking growth for assets across the board, with some coins such as Ethereum and Ripple appreciating more than 20,000%. Initial Coin Offerings especially capitalized on the hype, as developers and entrepreneurs found a way to tokenize just about everything in 2017. But all that activity comes at a price, and it’s not the usual price that comes to mind when we observe such booms. It’s energy costs.
On September 30, 2017, a single Bitcoin transaction could power 7.5 homes in the US for a day.
At the end of 2017, this figure grew to 10.5 US homes per day.
This trend should raise concerns and be ample reason for community members to raise the alarm. Furthermore, as the space continues to grow in both users and ICOs, the electricity consumption needed to process all these transactions will only increase exponentially.
Currently, blockchain protocols run on Proof of Work or Proof of Stake algorithms, the means by which transactions are processed on the network. A proof-of-work (PoW) system is meant to deter denial of service attacks and other abuses on the network. To insulate against these attacks, the network encourages competition among its miners, the individuals responsible for processing transactions.
Conversely, the Proof of Stake (PoS) concept allows a currency’s stakeholders to validate block transactions according to how many coins they hold. This means that the more of a coin is owned by a validator, the more transaction power he or she has.
While we all look forward to Proof of Stake’s evolution, the most popular cryptocurrency is still Bitcoin. It operates using a Proof of Work algorithm, and Bitcoin mining will voraciously consume electricity for the foreseeable future.
This situation calls to mind the tension between our global society’s dependence on fossil fuels versus our shift to renewable energy sources such as solar and wind energy. The debate has raged for decades, but fossil fuels, like Proof of Work, shows no signs of early retirement.
In light of this impending crisis, one company has tackled the problem head on. 4NEW Limited, a UK-based Waste to Energy treatment plant, launched its presale in the fall of 2017. The presale successfully raised US$30.5 million from US private equity funds in a conventional round of funding, reaching the sale’s soft cap. With this funding secured, 4NEW has also introduced its own cryptocurrency, KWATT. 4NEW’s renewable energy plant is capable of generating 300 million kilowatts per annum, and each of the 300 million KWATT coins will be backed by 1 kilowatt of electricity.
That electricity will be used for bitcoin and cryptocurrency mining. So as blockchain networks take time to become more energy efficient, we can provide a sustainable mechanism through which cryptocurrencies can be transacted in an environmentally responsible fashion.
4NEW has created a utility company solely dedicated to providing energy to blockchain networks, the first of its kind. Thanks to KWATT’s governing structure, coin holders will be able to vote on how energy is allocated. Needless to say, 4NEW has taken a successful first step in tokenizing our civilization’s most sought-after commodity, electricity. This innovation has the potential to change not just the cryptocurrency landscape, but how we manage energy on a global, everyday scale.