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Business leaders who are unsure whether blockchain is right for their business should have conversations about blockchain’s energy consumption. Bitcoin recently made headlines for its ability to consume more energy than other countries or airlines, which raises alarms about whether this is the most popular tech. As the chief product officer for a company currently working on blockchain technology, I am privy to a little secret. Not all chains are to blame.
Blockchain technology is frequently categorized in the “innovative technology that we will eventually use” category within the business world. Because blockchain technology is traditionally built and used by developers. Those with a less technical background might not be aware that there are different types of chains.
These are the key differences between proof of-stake blockchain and proof-of work blockchain. This is why blockchain adoption by companies doesn’t have to be about energy.
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What’s the difference between POS and POW?
Blockchains work differently to traditional IT systems. Different types of blockchains have different effects on the environment depending on their design. When people think about how a blockchain might function, proof-of-work (POW), is what they most likely associate with. This is what drives traditional blockchain mining, where miners are given the task of solving mathematical problems to create new blocks (or data packages) on the blockchain. Because the complex equations require miners competing to solve, this requires huge computational power. Companies that use these computers are then forced to consume a lot of energy.
It is the most widely discussed model in blockchain technology. The proof-of work model is used by the Ethereum and Bitcoin blockchains. The Ethereum Foundation announced that they will switch to the proof of stake model in response to recent concerns. This is much more efficient and energy-efficient.
Proof-of-stake (POS), rather than rewarding participants for solving math equations or giving them tokens to show their appreciation, simply asks those involved in the chain to take a risk and put economic value at stake to prove they are acting in the best interests of the chain. POS can also be used on general-purpose computers. There are many environmental advantages to using POS instead of POW, such as the reduced power consumption and specific carbon neutrality targets by most cloud providers.
POS has many benefits for the environment. It also speeds up the processing of large transactions faster, which is crucial when dealing with participants in capital markets. This allows them to provide more flexibility and agility. It’s my belief that POS will become more popular in capital markets as Ethereum and other big players in the sector embrace it. This should help alleviate concerns over energy use and climate change related to blockchain technology.
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Blockchain is a tool that can help us create a better future
It’s important that you consider the many ways blockchain can help companies support sustainability. Blockchain can be used to help your company fulfill its sustainability commitments before you dive into building your own blockchain chain.
Companies can track their emissions using blockchain technology, which by its nature is immutable and cannot be changed or forgeried. The integration of blockchain technology into the reporting process will ensure that data is correct and hold companies accountable for meeting environmental standards which are becoming increasingly important to customers.
The efficiency gains that blockchain technology brings are not to be overlooked. It’s important to think beyond the amount of energy required to process every transaction. Also, consider how innovative technology can help reduce your company’s carbon footprint. Blockchain can help make capital market processes easier and more transparent. A significant environmental benefit can be realized when outcomes are achieved quickly, with fewer steps, and with fewer people.
Business leaders can show how their company uses blockchain to help sustain the planet. This will change perceptions about blockchain being unfriendly. This may encourage other business leaders to be less skeptical about blockchain and open their minds to the possibility that more innovative businesses will soon use the technology.
Before you start worrying about the carbon impact of blockchain and decide to use it for business, be sure that you are familiar with the various types and their effects on the environment. Blockchain is a tool that allows us all to work together towards a better future. Not because we don’t need it, but because of. Blockchain is the future of technology, and we, as early adopters, have to set an example for responsible use.
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Publited at Sun, 25 July 2021 12:16.47 +0000