Advancing Climate Positive Crypto

Advancing Climate Positive Crypto

From ETFs to NFTs and DeFi, the cryptocurrency industry is ripe with untapped potential to drive meaningful climate action.
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Questions around the environmental impact of cryptocurrencies ignited a firestorm that ripped through the industry in 2021. As tech giants like Bill Gates and Elon Musk warned of crypto’s massive energy consumption, markets turned up the heat on cryptocurrencies and blockchain networks to mitigate their carbon footprints.


Patch addressed the challenge earlier this year in a Fortune op-ed that offered a simple piece of advice to crypto leaders: invest in climate action now. And in the months following, we’ve dug even deeper into the world of crypto and its massive potential to make (or break) global climate benchmarks.


Breaking down crypto’s climate challenge

Before diving into crypto’s energy consumption, it’s important to understand the difference between “Proof of Work” and “Proof of Stake,” the two most common mechanisms used to establish consensus within decentralized networks.


  • Proof of Work (PoW): A mechanism that secures blockchains by incentivizing miners to rapidly solve cryptographic puzzles for transaction verification. This consensus mechanism uses distributed compute power to maintain security. The network theoretically becomes more censorship-resistant and secure as its hash rate increases, with the tradeoff being large amounts of energy consumption.
  • Proof-of-Stake (PoS): Another blockchain mechanism designed to consume less energy without compromising decentralization or security. In PoS networks, the most active and invested validators are selected to “stake” their own crypto in exchange of validating new transactions for a reward.


The rapid rise of Bitcoin introduced PoW as the backbone of peer-to-peer cryptocurrency exchange. Bitcoin saw a 9x increase in its total monthly electricity consumption from 2017 to 2021, and is now responsible for approximately 0.1% of all energy consumption globally. To its credit, there is evidence that the energy mix of the network includes a significant portion of renewables, though it’s not clear to what extent that energy is net new electricity. And despite Bitcoin’s heavy electricity consumption, not all cryptonetworks are so energy-intensive. 


While the industry still has a ways to go before fully mitigating its carbon footprint, some blockchain systems are now taking matters into their own hands to alter the industry’s blighted reputation. Ethereum, a widely-used blockchain that supports an array of smart contracts, non-fungible tokens (NFTs) and decentralized finance (DeFi) transactions, is in the process of transitioning to a PoS blockchain that could reduce its energy consumption by more than 99%


This move signals a turning point for crypto’s climate narrative, but is just a drop in the bucket of action needed to be taken industrywide. 


Taking Action with Patch

Patch has doubled-down on its crypto-focused endeavors this year, bringing on a number of new partners from across the crypto space—including Purpose Investments, Palm NFT Studio and Popcorn—to mitigate their blockchain-based activities through the power of embedded carbon removal.


Purpose Investments: Creating Efficient ETFs


Earlier this year, investment firm Purpose Investments launched the world’s first Bitcoin and Ether ETFs to provide investors with convenient ways to hold cryptocurrency without a digital wallet. Now, Purpose Investments has partnered with Patch to enhance its ETFs with features that enable users to sustainably invest in Bitcoin and Ether. 


With Patch’s API integration, Purpose can now measure the daily carbon footprint of Bitcoin or Ether holdings and purchase carbon offsets to target net-zero carbon emissions at the beginning of each trading week. 


“We believe in the potential of cryptocurrency, but we can’t ignore the carbon impact of Bitcoin and Ethereum mining. We hope these carbon neutral ETF classes will provide our sustainability-minded investors an opportunity to invest in crypto while addressing the environmental impact this amazing asset can have,” said Som Seif, founder and CEO of Purpose Investments. “We’re extremely proud to offer this innovation and believe it could be the first step toward increased sustainability in the cryptocurrency space, which we care deeply about.”


Palm NFT Studio: Climate Positive NFTs


Palm NFT Studio has baked sustainability into the core values of its platform by operating on an Ethereum side chain protocol that’s far more energy efficient than PoW alternatives. As the NFT market evolves, Palm anticipates owners will want to relocate their creations across marketplaces to attract more bidders—yet this move requires a carbon-heavy bridge to transfer NFTs from Palm’s side chain to mainnet Ethereum.


Users contribute $1 to high quality, high impact carbon removal projects for each NFT that traverse across the bridge. Through its partnership with Patch, Palm is able to expand sustainability beyond its climate-friendly side chain to the broader offering that touches mainnet Ethereum. 


“Environmental sustainability is part of our DNA at Palm NFT Studio, and is really important to the platforms and creators that we are powering,” said Dan Heyman, Co-founder and CEO of Palm NFT Studio. “Patch enables us to deepen our sustainability efforts by neutralizing emissions that can be generated traversing the bridge from the Palm Network to Ethereum mainnet. Patch continues to be a valuable thought partner as we measure our environmental impact.”

 

Popcorn: Decarbonizing DeFi


Popcorn is a new paradigm for decentralized finance that allows users to earn yield on their crypto assets while supporting social impact organizations. The platform was created to offer an alternative method of providing sustainable DeFi, and can now deliver on its commitment to carbon neutrality through its partnership with Patch.


Popcorn has tapped Patch’s API to bolster its Smart Contract Emissions dashboard by measuring and offsetting the emissions mapped to contract executions on the Ethereum network. Through this partnership, a percentage of yield can be automatically contributed to Patch’s portfolio of carbon offset and removal projects, expanding the reach of Popcorn’s social impact to the environmental realm.


"Popcorn ensures eco-friendly performance by offsetting its carbon footprint thanks to Patch, regardless of how many users and total value locked (TVL) we expect to accumulate. This is a new paradigm for banking, allowing us to scale impact while generating competitive returns for our users. We're proud to be DeFi's first yield optimizer to go green," said Michael Kisselgof, Co-Founder, Popcorn.



Advocating for a climate-friendly crypto future

Beyond these partnerships, Patch is also proud to be an inaugural supporter of the Crypto Climate Accord (CCA), which has brought together 200+ companies and individuals committed to achieving a more sustainable crypto industry. With the guidance of Patch’s footprint estimation methodologies and best practices, the CCA is developing the standards and tools that will help signatories reach net-zero emissions from their crypto-related operations by 2030.


This industry was built on fearless innovation—and with the right technologies, a green crypto future is possible. Help us drive this mission by exploring our careers page here.

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