An energy consumption study by the International Monetary Fund (IMF) has shown the importance of design choices in the crypto ecosystem to create a green core payment system.

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in study titled “Digital Currencies and Energy Consumption,” the IMF studied the energy consumption of cryptoassets based on their individual design elements to evaluate the ideal mechanism for the development of Central Bank Digital Currencies (CBDCs).

Estimates of energy consumption (in kWh) per transaction for the main processing of various payment systems. Source: IMF.
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Sharing the basis for policy discussions on the environmental impact of digital currencies, the IMF recommended moving away from Proof of Work (PoW) Distributed Ledger (DLT) applications, adding:

“In particular, Bitcoin (BTC), the most famous application of its type, is estimated to consume a lot of energy (about 144 terawatt hours (TWh)) per year. While scalability solutions reduce the energy cost per transaction, they do not reduce the overall energy cost.”

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However, the international organization has acknowledged the high energy efficiency of non-PoW permitted crypto assets compared to the traditional financial system:

“The potential of cryptoassets without PoW permission to reduce energy consumption compared to the existing payment system is associated with energy savings on both the main processing architectures and users’ means of payment.”

Concluding from the study, the IMF recommends that central banks “design CBDCs with the express purpose of being environmentally sound.” This means choosing platforms, hardware and design options with a “lower carbon footprint than legacy central bank systems” right at the experimentation stage.

In addition to environmentally friendly components, central banks have been encouraged to include other features in CBDCs such as compliance, greater resilience, and offline capabilities.

The IMF also indicated that policymakers will consider integrating a cryptocurrency or CBDC after weighing the environmental impact of the technology’s underlying design. In a study, the IMF calculated that the annual energy consumption of the global payment system is 47.3 TWh, which is roughly the same as the annual consumption of countries such as Portugal and Bangladesh.

Iota Foundation joins Dell to develop real-time carbon tracking system.

In partnership with Dell Technologies, the Iota Foundation, a non-profit provider of the DLT ecosystem, has partnered with Dell Technologies to develop a real-time carbon footprint tracking system to help fight climate change.

The initiative will track carbon emissions from the BioE sustainable energy and composting facility in near real time. Matthew Yarger, Head of Sustainability at the Iota Foundation, declared:

“Now we can track and verify data on climate change and how we are actively trying to address this issue at a level that has never been seen before.”