The sizable energy and computing power needed to process transactions on blockchain, the distributed ledger technology that underpins cryptocurrencies and other business use cases like supply-chain management, has come under scrutiny in recent years.
But — as companies face increasing pressure to meet economic, social and governance (ESG) targets — PriceWaterhouseCoopers has recently developed an assessment framework to help clients evaluate the environmental footprint of their blockchain initiatives.
PwC’s toolset can help companies quantify the carbon footprint of blockchain technology at a time when companies are under pressure to balance demands for sustainability reporting, cost cutting and the need for technology upgrades.
“The current climate in crypto, tech, finance and ESG makes this tool more relevant,” said Scott Likens, trust technology leader at PwC. “As cost-cutting measures are starting in the new year, companies still have to meet announced carbon reduction targets,” he said, noting that PwC’s toolkit can help companies measure, assess and reduce carbon emissions without costly assessments.
Financial services firms are increasingly taking blockchain seriously, particularly to facilitate payments, he noted. As C-suite leaders consider the impact of blockchain initiatives, consensus mechanisms — or the processes by which a blockchain’s nodes reach agreement — are increasingly coming into focus.
“What we want to do is provide a very quantifiable approach to understand true energy usage and then carbon behind that,” said Likens. “We looked at everything from the network, the nodes … where the energy came from, that framework now is usable by anyone.”
The framework is a mathematical methodology that evaluates blockchains and their consensus protocols, he added. PwC is marketing a platform that includes environmental impact methodology; competitive assessments; and blockchain simulation modeling, PwC said.
Minimizing energy usage was one of the core objectives behind the Ethereum blockchain’s so-called “merge” in September from a ‘proof-of-work’ consensus mechanism to a more energy efficient ‘proof-of-stake’ system.
The Stellar Development Foundation, a non-profit organization founded in 2014 to support the development and growth of the open-source Stellar blockchain network, has been working with PwC for a year on blockchain sustainability initiatives.
The foundation used the PwC-developed framework to establish a carbon dioxide removal commitment that will help eliminate their network’s historical carbon footprint going back to 2015.
“We think [the framework] is replicable for the rest of the industry to rely on to be able to create their own assessment of the energy consumption of the networks,” said Denelle Dixon, CEO and executive director at the Stellar Development Foundation.
The tool can enhance transparency, with applications that can extend to other companies, she noted.
PwC would not name any additional partners using the tool, but noted that other clients interested in blockchain sustainability solutions include “cloud providers, consumer market brands moving to Web3, and financial services [firms] as they adopt pieces of blockchain infrastructure.”
Looking to the future, PwC said it plans to continue to partner with lawmakers and regulators to put additional guardrails around blockchain and cryptocurrencies.
“For us, it’s about helping guide that regulation…and helping our clients through it,” said Likens. “This will become more of a pervasive technology, and we want to do it the right way.”