February 3, 2023

Opinions expressed by Entrepreneur contributors are their own.

Blockchain storage is quickly emerging as a credible competitor to the cloud. A clear advantage of blockchain is that the distributed nature of storage makes it a more secure form of storage compared to storing your data in the cloud.

But blockchain technology is constantly plagued by significant energy consumption and a large environmental footprint. Cryptocurrency in particular has been a sore point among environmentalists. Bitcoin, for example, is known for consuming more electricity in a year than entire countries. At a time when a United Nations agency just reported that the past eight years had been the warmest on record in modern times, the future of energy-intensive blockchain technology may become inseparable from its ability to reduce its carbon footprint. compensate.

Related: The Blockchain Is Everywhere: Here’s How To Understand It

What is hindering the environmental, social and governance (ESG) shift in blockchain companies?

With debates over responsible drinking, companies, including the historically ESG-resistant FAANG, have now turned to commit to clear goals around their ESG goals. Morgan Stanley even stated that ESG-focused metrics could dictate investment over the next decade to understand a company’s growth potential.

But while investment choices are dictated by ESG metrics, we should remember that the ethical choice may be easier for some than others. While some of the largest multinational companies like Apple and Google can relatively easily afford to turn to ESG, that doesn’t necessarily apply to blockchain-focused companies, even the more prominent players.

As institutional investors are more scrutinized than ever for ESG reporting, they remain uncomfortably out of reach for most crypto projects. This, in turn, affects the entire momentum of widespread mainstream blockchain adoption. Companies with dozens or hundreds of servers involved in blockchain in a fragmented ecosystem simply do not yet have the latency to commit to ESG.

Related: How Blockchain Can Help Tackle Climate Change

The blockchain industry needs to target a wider audience

With its anti-establishment flavor, Blockchain, especially cryptocurrency, has found and developed a core niche that is 94 percent GenZ and younger millennials. But for the technology to be adopted and invested en masse, it needs to appeal to a much wider audience.

It is well documented that younger investors are more likely to make riskier investments such as cryptocurrency, which is known for its volatile price swings. This type of risk is not attractive to people who want to save for a home, family or retirement; therefore, many middle-aged and older consumers are not interested.

Even many Gen Z and millennials, the generations identified as the most climate-conscious to date, are choosing not to engage in blockchain technology because of the toll it can take on the environment.

Such a small audience does not lend itself well to large companies or companies looking to make big profits investing in the technology, leading to a halt in developing greener initiatives as many companies in the space may simply be staying afloat want to keep.

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

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

A greener blockchain is possible

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

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

Smaller blockchain companies will need sufficient funding to find relevant solutions to remain environmentally friendly. If we want to take advantage of the blockchain without harming the environment, we need to invest in blockchain and blockchain companies so that they have the money to find these solutions. To reach a much wider audience, focus on ESG initiatives or partner with established cloud companies with ESG leadership.

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