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SINGAPORE: Amid Singapore’s push for sustainability, the growing interest in blockchain and cryptocurrencies, with their high power consumption, may present an enigma.
Blockchain relies on a vast decentralized network of computers to record transactions. Its best known applications are cryptocurrencies such as Bitcoin and Ethereum.
Digital currencies require great computing power to solve complex algorithms in a process known as mining, which creates new currencies. But they have a high environmental cost.
According to a Reuters report citing a 2019 study in the scientific journal Joule, the production of Bitcoin, for example, is estimated to generate between 22 and 22.9 million metric tons of carbon dioxide emissions per year, or between the levels produced by Jordan and Sri Lanka.
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And the energy consumption of the Bitcoin network globally has doubled or even tripled since the end of 2017, said Professor Benjamin Horton of the Asian School of the Environment at Nanyang Technological University (NTU).
“Now the grid uses … between 78 terawatt hours (TWh) and 101 TWh, or roughly the same as in Norway,” he added.
BLOCKCHAIN, CRYPTO ON THE RISE
These technologies have gained traction in Singapore over the years.
Since its inception in 2014, the Singapore Association of Cryptocurrency and Blockchain Companies and Start-ups (ACCESS) has seen its membership grow by an average of 25 percent year-on-year, it told CNA.
It now has more than 400 members.
“The future of cryptocurrencies is bright as more institutions enter to service the space, such as DBS and Singapore Exchange (SGX) with their digital currency exchanges,” ACCESS said.
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 Singapore University of Technology and Design (SUTD).
Most recently, in December, authorities launched a S $ 12 million blockchain innovation program to strengthen the fintech ecosystem here.
Additionally, retail investors are increasingly jumping in on the action, fueled by the promise of new highs with digital currencies, experts said.
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Despite these developments, blockchain technology can coexist with Singapore’s green plans, Assistant Professor Dinh said. The government launched a Green Plan last month, outlining Singapore’s sustainability goals for the next 10 years across various ministries.
For one thing, experts believe that energy-intensive cryptocurrency mining is not done on a large scale in Singapore.
In a parliamentary response written in February, Sustainability and Environment Minister Grace Fu said that Cryptocurrency mining occurs predominantly in markets with a cheap electricity supply.
“On the contrary, our local conditions are not favorable for cryptocurrency mining,” he said in response to a question from MP Jamus Lim (WP-Sengkang) about the environmental cost of digital currencies.
“Our relatively high costs for land, labor and electricity, coupled with our hot tropical climate, make cryptocurrency mining expensive to operate.”
CAN CRYPTO BE GREENER?
Whether mining is done locally or abroad, experts admit there will still be an environmental impact.
But they pointed out that it is a mistake to think that all applications of blockchain and cryptocurrencies are as harmful as Bitcoin, for example.
“In the crypto space, there are so many alternatives right now to coexist with a green environment,” said Muoi Tran, a researcher at the Center for Cryptocurrency Strategy, Techniques and Algorithms (CRYSTAL) at the National University of Singapore.
“Bitcoin is the first generation, but now we are moving to the next generation (of green cryptocurrencies) … which are already working and available,” he added.
For example, he cited blockchain applications that use proof-of-stake protocols, rather than traditional proof-of-work that require users to troubleshoot.
SUTD assistant professor Dinh added: “The proof of stake does not require you to solve this puzzle, it just requires you to show that you have some money in the bank.”
Stacks of computing power give bitcoin miners the opportunity to harvest cryptocurrencies. (Photo: AFP / Maxim Zmeyev)
Another example is that of the homegrown blockchain platform Ziliqa, which uses a method called sharding that is more energy efficient.
Simply put, it involves dividing up blockchain workloads to handle separate sets of nodes or shards. Since each node only has to process what is assigned to its shard, less power is used overall.
Mr. Tran likened the concept to a group project, where each student handles a different part of the workload, rather than everyone working together on all tasks.
“We definitely need better education so people are aware of these greener solutions,” he said, adding that government support for these technologies could fit in with sustainability plans.
“(Another) easy way is to encourage renewable energy for bitcoin mining,” Tran said, noting that this is a trend in the US.
Adjunct Professor Dinh added: “Singapore’s openness to cryptocurrencies should drive research on those topics towards more sustainable cryptocurrencies that solve these environmental problems.”
What bodes well for this need to innovate is the amount of “world-class research” coming from local universities, as well as a vibrant startup ecosystem, he said.
“I am quite positive (we will develop even better solutions) … because we cannot afford to hold Bitcoin and Ethereum,” said Assistant Professor 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 in the future, Professor Horton suggested that lawmakers 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 the target with higher electricity rates, he said.
