Blockchain has been in the spotlight over the past year like never before. The utopian vision of a more accessible and equitable global digital financial revolution that would replace the traditional international financial system has grown exponentially. But that 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 crypto Luna crash in May 2022, and a recent report that questions its decentralization, blockchain now faces to a whole new set of challenges.
Can blockchain transactions be green, transparent, fair and secure? Some new blockchain startups say “Yes”. They are pushing the boundaries by coding innovative new algorithms that may well be the future of blockchain.
The Blockchain Green Energy Problem
Global Investor Group reported July 6, 2022 on the findings of the new study by regulatory technology firm CUBE. According to the report, regulators are overlooking the environmental impact of crypto mining.
CUBE has mined approximately 15,000 data points from global regulators and issuing bodies over the past four years. Their findings are shocking. While regulators are dreaming big for crypto, with government and banks in the lead, discussions around crypto sustainability account for less than 0.1% of regulatory emissions.
As climate change mitigation policies become top priorities for all countries, the carbon footprint of cryptocurrencies comes under increased pressure. The Cambridge Center for Alternative Finance claims that bitcoin, with a total annual consumption of 145 terawatt hours, uses more energy than Argentina, a country of over 47 million people.
If bitcoin were a country, it would be among the top 30 energy users in the world, the BBC reported. And other cryptos are on the same path. Ethereum uses as much energy as Switzerland with around 62 million terawatt hours of annual consumption.
According to the Bitcoin Mining Council, which only uses voluntarily disclosed data, 57% of the energy used for crypto operations comes from renewable sources, Roland and Berger report.
The new blockchain startup movement
A new movement of tech startups is developing sustainable blockchains. Some of these tokens have sensationless transactions as well as faster trade times compared to traditional cryptos. All of these startups share common ground. They all agree that the key to a green, fast and decentralized blockchain is in the algorithm.
Cardano, which runs an alternative to proof-of-work (PoW), and Nano, an open source peer-to-peer crypto with a very low carbon footprint. Chia, BitGreen and IOTA are also among the big names in 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 with Sarah Robertson, Senior Vice President of Operations at HELO, to understand what’s fueling the movement and how traditional blockchain operators can evolve.
Robertson said alternatives to the consensus algorithms used in blockchain need to be looked at. 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 block, are the biggest power hog.
“It is not possible to simply change the consensus algorithm used to operate, as all blockchain functions are based on that,” Robertson said. To reduce the carbon footprint, the whole industry should adopt new systems.
Like other green crypto alternatives, the HELO blockchain uses a different consensus algorithm to keep power consumption to a minimum. HELO calls its algorithm Proof of Ethic™.
“Ethical proof does not rely on performing heavy mathematical calculations for as long as possible, using expensive computer hardware,” Robertson explained.
She added that it is coupled with multiple other ingenious computer algorithms and mechanisms, to keep the carbon footprint to an extreme minimum.
A fair and decentralized crypto environment
A recent report commissioned by the Pentagon’s research arm, DARPA, found that blockchain nodes are not decentralized, updated, or secure.
Nodes are created by participants in the blockchain network. These manage, communicate and verify each transaction. In the HELO blockchain, nodes must adhere to a strict and structured behavioral system in order 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 of generating the next block without the need for heavy capital investment. It is designed to avoid centralization and create an accessible and egalitarian consensus.
As crypto has gone global, the crypto mining industry has industrialized. Massive underground cryptocurrency mining hubs, crypto operations linked to criminal activity, and the use of energy from non-renewable sources have become major concerns.
To solve these problems, HELO has developed an algorithm where the calculation speed does not play a role.
“Purchasing additional hardware will not increase a user’s chance of reward in HELO. Staking does not play a role, which means that additional funds held in the blockchain will not increase the chance of reward of a user,” Robertson said.
This disruptive and creative new approach is designed to make blockchain more decentralized, relying on all nodes participating in the network at equal levels. “It means that no group of people can have more control or influence than others,” Robertson assured.
Speed of blockchain transactions
Another point that users around the world are still struggling with is the time it takes for blockchain transactions to complete. To push a block on Bitcoin, there must be 1MB of data. This may take two seconds or five minutes.
“For the transfer of sensitive data or large payments, no one wants to wait and wonder when their transaction will be completed,” 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, running at around 6,250,000 transactions per second (TPS).
As a rough example, Bitcoin is capable of processing around 7 TPS, Ethereum is capable of 20 TPS, Solana is normally between 1,000 and 3,000 TPS, and Cardano’s layer 2 solution, dubbed “the fastest blockchain in the world,” if implemented, theoretically makes about 1,000,000 GST, said Nathan Trudeau, CTO of HELO.
“We believe this will be game-changing for the industry by providing a never-before-seen capability of a blockchain that users can rely on,” Robertson said.
Recode the blockchain?
Blockchain, cryptocurrencies, NFTs and digital assets continue to grow every day. The now global technology is out of the bag and unlikely to return in the shadow of its beginnings. However, from its power consumption to the very algorithm that executes almost all transactions, the blockchain is far from perfect.
Can the blockchain be recoded? Unfortunately, there is no simple answer to the question. Most blockchain components, consensus algorithms, and mechanisms 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, now reaching a few thousand. However, the first cryptocurrencies started the same way, with only a few thousand users.
Is this how the future of blockchain begins? Will startups developing disruptive and innovative cryptography solutions become mainstream? Although the answer is unknown, one thing is certain, the idea of a greener, faster and fairer blockchain is appealing.