Blockchain has been under the spotlight in the past year like never before. The utopian vision of a global digital financial revolution, more accessible and fair, that would replace the traditional international financial system has grown exponentially. But this same growth has created a set of problems.
From the intense use of energy and its carbon footprint, to the vulnerability and volatility revealed after the May 2022 Luna crypto crash, and a recent report that questions its decentralization, the blockchain now faces a new set of challenges.
Can blockchain transactions be green, transparent, fair and safe? Some new blockchain startups say, “Yes.” They are pushing the limits coding new innovative algorithms that might just be the future of blockchain.
The blockchain’s green energy problem
Global Investor Group reported on July 6, 2022, on the findings of the new study of the reg tech firm CUBE. According to the report, regulators are neglecting the environmental impact of crypto mining.
CUBE explored about 15,000 data points from global regulators and issuing bodies over the last four years. Their findings are shocking. While regulators are thinking big picture for crypto, with government and banks leading the way, discussions around crypto sustainability make up less than 0.1% of regulatory issuances.
As climate change mitigation policies become top-ranking priorities for all countries, cryptocurrencies’ carbon footprint have come under intensified pressure. The Cambridge Centre for Alternative Finance says that bitcoin, with a total yearly consumption of 145 terawatts hours, uses more energy than Argentina, a country of more than 47 million people.
If bitcoin were a country it would be in the top 30 energy users worldwide, the BBC reported. And other cryptos are on the same path. Ethereum uses as much energy as Switzerland with about 62 million terawatt hours of yearly consumption.
According to the Bitcoin Mining Council—which only uses voluntarily disclosed data—57% of the energy used for crypto operations comes from renewable sources, Roland and Berger reports.
The new blockchain startup movement
A new movement of tech startups is developing sustainable blockchains. Some of these tokens have feeless transactions as well as faster times of operations compared to mainstream cryptos. All of these startups share common ground. They all agree that the key to a green, fast, and decentralized blockchain is found in the algorithm.
Cardano—running an alternative to proof-of-work (PoW)—and Nano, a peer-to-peer open source crypto with a very low carbon footprint. Chia, BitGreen and IOTA are also some of the big names of this new blockchain movement.
Another startup in this new trend is HELO blockchain from NuPay Technologies. HELO claims to have virtually zero carbon footprint and free transaction fees. They also claim to have the fastest algorithm in the world.
TechRepublic spoke to Sarah Robertson, SVP of Operations at HELO, to understand what fuels the movement and how traditional blockchain operators can evolve.
Robertson said that alternatives for the consensus algorithms used in the blockchain need to be looked into. Currently, and unfortunately, the blockchain is based on Proof of Work (PoW) networks. PoW models, where thousands of computers compete to solve the next “problem” and forge a block, are the largest factor of energy consumption.
“Simply changing the consensus algorithm used to operate is not feasible, as all functions of the blockchain are based upon this,” said Robertson. To bring down the carbon footprint the entire industry would need to shift to adopting new systems.
Like other green crypto alternatives, HELO blockchain uses a different consensus algorithm to keep energy consumption to the very minimum. HELO calls its algorithm Proof of Ethic™.
“Proof of Ethic does not rely on making heavy mathematical computations for as long as possible, using expensive computer hardware,” Robertson explained.
She added that it is coupled with multiple other ingenious computer algorithms and mechanisms, to keep the carbon footprint to an extreme minimum.
A fair and decentralized crypto environment
A recent report commissioned by the Pentagon’s research arm DARPA, revealed that the blockchain’s nodes are neither decentralized, updated or secure.
Nodes are created by participants of the blockchain network. These manage, communicate and verify every transaction. In the HELO blockchain, nodes must adhere to a strict and structured behavioral system in order to perform various actions related to the decentralized network.
The HELO blockchain algorithm is based on a principle of absolute probabilistic equality. This means each node, or participant, has an equal opportunity to generate the next block without the need for heavy capital investment. It is designed to avoid centralization and create an accessible and egalitarian consensus.
As crypto went global, the crypto mining sector industrialized. Massive clandestine crypto mining hubs, crypto operations linked to criminal activities, and the use of energy from non-renewable sources became top concerns.
To address these issues, HELO developed an algorithm where computational speed does not play a factor.
“Purchasing additional computing hardware will not increase a user’s chances of reward in HELO. Staking does not play a factor, meaning that additional funds held in the blockchain will not increase a user’s chances of reward,” said Robertson.
This new, disruptive and creative approach is designed to make the blockchain more decentralized, relying on all nodes participating in the network at equal levels. “This means that no group of people can have more control or influence than others,” Robertson assured.
Speed of blockchain transactions
Another point users around the world are still struggling with is the time it can take for blockchain transactions to go through. To push a block through on Bitcoin, there needs to be 1 MB of data. This could take two seconds or five minutes.
“For sensitive data transfer or large payments, no one wants to be waiting and wondering when their transaction will be complete,” HELO said.
But HELO has more than complaints about the speed issue. They claim to have the fastest processing payment algorithm system in the world, running at about 6,250,000 transactions per second (TPS).
As a rough example, Bitcoin is capable of processing about 7 TPS, Ethereum is capable of 20 TPS, Solana is normally at 1,000 to 3,000 TPS, and Cardano’s Layer 2 solution—dubbed as “the fastest blockchain in the world”—if implemented, in theory does about 1,000,000 TPS, Nathan Trudeau, CTO of HELO said.
“We believe this will be revolutionary for the industry by providing a never before seen ability of a blockchain that users can count on,” Robertson said.
Recoding the blockchain?
The blockchain, cryptocurrencies, NFTs and digital assets continue to grow everyday. The technology, now global, is out of the bag and unlikely to return to the shadows of its early days. However, from its use of energy to the very algorithm that runs almost all transactions, the blockchain is far from being perfect.
Can the blockchain be recoded? Unfortunately, there is no simple answer to the question. Most of the components, consensus algorithms, and mechanisms of the blockchain would need to be updated.
“It is not impossible but would be extremely complex,” Robertson said.
Like most startups, the HELO community grows slowly by the day, now reaching a couple thousands. However, the first cryptocurrencies started out the same way, with just a couple of thousand of users.
Is this how the future of the blockchain begins? Will startups developing disrupting and innovative crypto solutions go mainstream? While the answer is unknown, one thing is certain, the idea of a greener, faster, and more equitable blockchain is an attractive one.
