The High Energy Cost of Cryptocurrencies and How ZorroSign Stays Green with Hyperledger Fabric

It has been a long-running criticism of cryptocurrencies that the data mining required to produce coins consumes an astonishing amount of electricity.  “Bitcoin uses more electricity per transaction than any other method known to mankind,” said Microsoft founder, Bill Gates, in a live-streamed Clubhouse session with CNBC’s Andrew Ross Sorkin on February 24, 2021.  “And so it’s not a great climate thing.”

 

With the public blockchains used for cryptocurrencies, mining coins requires complicated mathematical processing on high-end graphic processing units (GPUs), consuming energy both for calculation processing and cooling those GPUs down under heavy load.

 

“Scientists from the University of Cambridge Judge Business School recently built an interactive analysis tool to calculate the real energy cost of bitcoin cryptocurrency,” notes Caroline Delbert in a recent article in Popular Mechanics.  “Using their energy use model, the researchers found that bitcoin mining uses more energy each year (130.00 terawatt-hours [TWh]) than the entire country of Argentina (125.03 TWh).”

 

Public Cryptocurrency Blockchains v. Private Enterprise Blockchains

An important distinction to make is that cryptocurrencies run on public blockchains—where anyone willing to mine can be an end-user (node), the process of mining is one of the highest areas of energy consumption, plus validating each new transaction across the broadly distributed network requires massive computing power.  Together, this architecture “makes Bitcoin extremely energy-hungry by design, as the currency requires a huge amount of hash calculations for its ultimate goal of processing financial transactions without intermediaries (peer-to-peer),” explained Alex de Vriews in a 2018 Joule article. “The primary fuel for each of these calculations is electricity. The Bitcoin network can be estimated to consume at least 2.55 gigawatts of electricity currently, and potentially 7.67 gigawatts in the future, making it comparable with countries such as Ireland (3.1 gigawatts) and Austria (8.2 gigawatts).”

 

In contrast, private blockchains that are used for business applications (apps) do not require the mining of coins—private blockchains are not used for cryptocurrencies—nor do they support wide-open end-users (nodes) where huge networks require more computing power to validate each new transaction.

 

“The early blockchain protocols such as Bitcoin and Ethereum used proof-of-work consensus mechanisms, which required a lot of energy-intensive ‘mining’ of cryptographic puzzles. The creators probably never imagined them to become as popular as they did, or that they would consume as much energy as whole countries,” says Si Chen, part of the Climate Accounting and Certifications, Energy Working Groups at Hyperledger.  “Enterprise Private Blockchain Platforms like Hyperledger Fabric do not run on Proof-of-Work consensus that is power hungry.”

 

ZorroSign Uses Private Enterprise Blockchain Hyperledger Fabric

ZorroSign has purposefully used the private, permissioned blockchain architecture of Hyperledger Fabric to build our digital platform.

 

Unlike Bitcoin and the cryptocurrency models for blockchain, Hyperledger Fabric is a next-generation architecture “with even lower electricity costs and attendant carbon footprints,” writes Michael Barnard in a CleanTechnica report.  “Hyperledger Fabric centralizes block creation into a single resource pool and has multiple validators in the participants. It’s also not intended as a cryptocurrency platform, although VIVA did create a cryptocurrency with it. It’s an enterprise collaboration engine, using blockchain smart contracts and an externalized payment system where that’s necessary, allowing variants of net 30 terms most blockchain smart contracts don’t support.”

 

A white paper comparing blockchain architectures and their energy consumption requirements, The Energy Consumption of Blockchain Technology: Beyond Myth, was published by Johannes Sedlmeir, Hans Ulrich Buhl, Gilbert Fridgen, and Robert Keller in June 2020.  Their research charted energy consumption of power-hungry public blockchain proof-of-work (PoW) coin mining (far right bar) versus the much lighter energy consumption of enterprise blockchains like Hyperledger Fabric (center bar):