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Can cryptocurrencies and their vast energy use co-exist with Singapore’s green goals?

Can cryptocurrencies and their vast energy use co-exist with Singapore’s green goals?

Bitcoin is the first decentralised digital currency, as the system works based on the blockchain technology without a central bank or single administrator (Photo: AFP/Lars Hagberg)

SINGAPORE: Amid Singapore's push for sustainability, the growing interest in blockchain and cryptocurrency - with its vast energy consumption - may present a conundrum.

Blockchain relies on a vast decentralised network of computers to record transactions. Its most well-known applications are cryptocurrencies like Bitcoin and Ethereum. 

Digital currencies require heavy computing power to solve complex algorithms in a process known as mining, which creates new coins. But they come at a heavy environmental cost. 

According to a Reuters report citing a 2019 study in the scientific journal Joule, Bitcoin production, for instance, is estimated to generate between 22 and 22.9 million metric tons of carbon dioxide emissions a year, or between the levels produced by Jordan and Sri Lanka.

READ: While Bitcoin price surges, ramped up cryptocurrency mining takes heavy toll on the planet

And the energy consumption by the Bitcoin network globally has doubled or even tripled since late-2017, said Professor Benjamin Horton from the Asian School of the Environment in Nanyang Technological University (NTU).

“Now the network uses … between 78 terawatt hours (TWh) and 101TWh, or about the same as Norway,” he added.

BLOCKCHAIN, CRYPTO ON THE RISE

These technologies have gained ground in Singapore over the years.

Since its establishment in 2014, the Association of Cryptocurrency and Blockchain Enterprises and Start-ups Singapore (ACCESS) has seen its membership rise an average of 25 per cent year-on-year, it told CNA.

It now has more than 400 members.

"The future of crypto is bright as more institutions are coming in to service the space, such as DBS and the Singapore Exchange (SGX) with their digital currency exchanges," said ACCESS.

Singapore's status as a blockchain hub is also growing, with numerous government-backed trials and a proactive regulatory stance, said Assistant Professor Dinh Tien Tuan Anh from the Singapore University of Technology and Design (SUTD).

Most recently, in December, authorities launched a S$12 million blockchain innovation programme to strengthen the fintech ecosystem here.

In addition, retail investors are increasingly getting in on the action, spurred by the promise of new highs with digital currencies, experts said.

READ: Commentary: There are good reasons for investing in bitcoin

READ: Bitcoin mania triggers fundraising rush by Chinese players

Despite these developments, blockchain technology can co-exist with Singapore's green plans, said Asst Prof Dinh. The Government launched a Green Plan last month, charting Singapore’s sustainability goals over the next 10 years across various ministries. 

For one, experts believe that energy-intensive cryptocurrency mining is not done on a large scale in Singapore.

In a written parliamentary reply in February, Minister for Sustainability and the Environment Grace Fu said that cryptocurrency mining happens predominantly in markets with a cheap supply of electricity. 

"Conversely, our local conditions are not favourable for cryptocurrency mining," she said in response to a question by MP Jamus Lim (WP-Sengkang) on the environmental cost of digital currencies.

“Our relatively high land, labour and electricity costs, coupled with our hot tropical climate, make it expensive to operate cryptocurrency mining.” 

CAN CRYPTO BE GREENER?

Whether mining is done locally or overseas, experts concede that there will still be an environmental impact.

But they noted that it is a misconception that all blockchain applications and cryptocurrencies are as damaging as Bitcoin, for instance.

“In the crypto space, right now there are so many alternatives to co-exist with a green environment,” said Mr Muoi Tran, a researcher at the National University of Singapore’s Cryptocurrency Strategy, Techniques, and Algorithms (CRYSTAL) Centre.

“Bitcoin is first generation, but we are now moving to the next generation (of green cryptocurrencies) … which are already running and available,” he added.

For instance, he cited blockchain applications that use Proof-of-Stake protocols, instead of the traditional Proof-of-Work ones that require users to solve problems.

SUTD's Asst Prof Dinh added: “Proof-of-Stake doesn’t require you to solve this puzzle, it only requires you to prove you have some money in the bank."

Stacks of computing power gives bitcoin miners a shot at harvesting cryptocurrencies. (Photo: AFP/Maxim Zmeyev)

Another example is that of homegrown blockchain platform Ziliqa, which uses a method called sharding that is more energy-efficient.

Simply put, it involves dividing blockchain workloads for separate sets of nodes, or shards, to handle. Since each node only has to process what is assigned to its shard, less energy is used overall.

Mr Tran likened the concept to a group project, where each student handles a different part of the workload, instead of all of them working on all tasks together. 

“We definitely need better education to let people know about these greener solutions,” he said, adding that government backing for these technologies could gel with sustainability plans.

“(Another) easy way is to encourage renewable energy for mining bitcoin,” said Mr Tran, noting that this is a trend in the US.

Asst Prof Dinh added: “Singapore’s openness to cryptos should drive research on those topics towards more sustainable cryptos that solve these environmental issues."

What bodes well for this need to innovate is the amount of "world-class research" coming out of local universities, as well as a vibrant start-up ecosystem, he said.

"I'm quite positive (we will develop even better solutions) ... because we cannot afford to sustain Bitcoin and Ethereum,” said Asst Prof Dinh.

On whether authorities have considered restricting cryptocurrency mining in Singapore, Ms Fu previously said: "The Government will continue to monitor the development of cryptocurrencies and the risks they pose."

If regulation is required down the line, Prof Horton suggested that policymakers could follow the example of other cities, citing Québec in Canada where a moratorium was imposed on new mining operations.

Alternatively, large-scale miners could be targeted with higher electricity rates, he said.

Source: CNA/cl(gs)

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