Blockchain has been in the spotlight like never before in the past year. The utopian vision of a global digital financial revolution, more accessible and fairer, which would replace the traditional international financial system, has grown exponentially. But this same growth has created a series of problems.
From the intense use of energy and its carbon footprint, to the vulnerability and volatility revealed after the Luna crypto crash in May 2022, and a recent report questioning its decentralization, the blockchain now faces a new set of challenges.
Can blockchain transactions be green, transparent, fair and secure? Some new blockchain startups say, “Yes.” They are pushing the boundaries with coding new innovative algorithms that may just be the future of blockchain.
The green energy problem of the blockchain
Global Investor Group reported on the findings of the reg-tech company’s new study on July 6, 2022 CUBE. According to the report, regulators are neglecting the environmental impact of crypto mining.
CUBE has examined approximately 15,000 data points from global regulators and issuers over the past four years. Their findings are shocking. As regulators envision the big picture for crypto, with government and banks leading the way, discussions of crypto sustainability make up less than 0.1% of regulatory issuance.
With climate change mitigation policies becoming top priorities for all countries, the carbon footprint of cryptocurrencies has come under increasing pressure. The Cambridge Center for Alternative Financing says that bitcoin, with a total annual consumption of 145 terawatt hours, uses more energy than Argentina, a country of more than 47 million inhabitants.
If bitcoin were a country, it would be in the top 30 energy consumers worldwide, the BBC reported. And other cryptos are on the same path. Ethereum uses as much energy as Switzerland with approximately 62 million terawatt hours of annual consumption.
According to the Bitcoin Mining Council – which only uses voluntary 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 free transactions and faster operation times compared to regular cryptos. All these startups share a common ground. They all agree that the key to a green, fast and decentralized blockchain lies in the algorithm.
Cardano – 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 the HELO blockchain from NuPay Technologies. HELO claims to have a virtually zero carbon footprint and free transaction fees. They also claim to have the fastest algorithm in the world.
TechRepublic spoke to Sarah RobertsonSVP of Operations at HELO, to understand what is fueling the movement and how traditional blockchain operators can evolve.
Robertson said alternatives to the consensus algorithms used in the blockchain should 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 blockage, are the biggest driver of energy consumption.
“It is not feasible to simply change the consensus algorithm that is used to work because all the functions of the blockchain are based on it,” said Robertson. To reduce the carbon footprint, the entire industry would have to switch to new systems.
Like other green crypto alternatives, HELO blockchain uses a different consensus algorithm to minimize power consumption. HELO calls its algorithm Proof of Ethic™.
“Proof of Ethic doesn’t rely on making heavy math calculations for as long as possible using expensive computer hardware,” explains Robertson.
She added that it is coupled with several other ingenious computer algorithms and mechanisms to keep the environmental footprint to an extreme minimum.
A fair and decentralized crypto environment
A recent report commissioned by the Pentagon’s Research Branch DARPArevealed that the blockchain’s nodes are not 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 behavior system to perform various actions related to the decentralized network.
The HELO blockchain algorithm is based on a principle of absolute probabilistic equality. This means that each node, or participant, has an equal chance to generate the next block without the need for large capital investments. It is designed to avoid centralization and create an accessible and egalitarian consensus.
As crypto went global, the crypto mining industry became industrialized. Massive clandestine crypto mining hubs, crypto operations linked to criminal activity and the use of energy from non-renewable resources became the top concerns.
To tackle these problems, HELO has developed an algorithm where computational speed is not an issue.
“Purchasing additional computer hardware will not increase a user’s reward opportunities in HELO. Staking is irrelevant, meaning additional funds in the blockchain will not increase a user’s chances of being rewarded,” Robertson said.
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 issue that users around the world still struggle with is the time it can take for blockchain transactions to be processed. In order to push a block on Bitcoin, there must be 1 MB of data. This can take two seconds or five minutes.
“For sensitive data transfers or large payments, no one wants to wait and wonder 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, with approximately 6,250,000 transactions per second (TPS).
As a rough example, Bitcoin can handle about 7 TPS, Ethereum is capable of 20 TPS, Solana normally sits at 1,000 to 3,000 TPS, and Cardano’s Layer 2 solution – dubbed “the fastest blockchain in the world” – when implemented, theoretically does about 1,000,000 TPS, Nathan Trudeausaid CTO of HELO.
“We believe this will be revolutionary for the industry by providing an unprecedented power of a blockchain that users can count on,” said Robertson.
Recoding the blockchain?
The blockchain, cryptocurrencies, NFTs and digital assets continue to grow every day. The technology, now global, is out of the bag and unlikely to return to the shadows of its early days. However, from the use of energy to the algorithm that performs almost all transactions, the blockchain is far from perfect.
Can the blockchain be recoded? Unfortunately, there is no simple answer to the question. Most components, consensus algorithms and mechanisms of the blockchain should be updated.
“It’s not impossible, but it would be extremely complex,” Robertson said.
Like most startups, the HELO community is slowly growing day by day and is now reaching a few thousand. However, the first cryptocurrencies started in the same way, with only a few thousand users.
Is this how the future of the blockchain begins? Will startups developing disruptive and innovative crypto solutions become mainstream? While the answer is unknown, one thing is certain, the idea of a greener, faster and fairer blockchain is appealing.
