A recent study carried out by the IMF reveals that design choices are the cryptocurrency ecosystem. The choice of design determines if the crypto is environmentally friendly. Therefore, the IMF has advised central banks to embrace digital assets that are sustainable and efficient.
IMF Conducts Study On Energy Consumption Of Digital Assets
In the research, the international agency assessed the power consumption of cryptos. The study was based on the element of their design. This is because design affects their working mechanisms.
The study aimed to find the ideal design for the development of CBDCs. Furthermore, the financial agency has published the results of the study.
The findings advise institutions to move from PoW-driven digital assets to non-PoW. The report stated that;
“The popular crypto, Bitcoin, consumes over 144 TW of electricity per year. Although recent scalability options reduce the amount of energy spent on each transaction, it does little for the total energy spending.”
However, the IMF agreed that non-PoW crypto assets have high power efficiency. This is higher compared to the conventional financial system.
“Non-PoW crypto assets are able to decrease power consumption more efficiently than PoW. This energy efficiency is due to its ability to save energy on its processing architecture and payment means,” the bank added.
Concluding from the research, the monetary organization advises that;
“Central banks should design CBDCs that are environmentally friendly. This will involve selecting hardware, design and platforms with low carbon footprint.”
Additionally, they should do this straight from the phase of experimentation. This will allow the central banks to know what works and what does not.
Apart from eco-friendly components, the agency advises central banks to look at other features. Some include offline capabilities, compliance, and higher resilience for CBDCs.
According to the IMF, policymakers should consider the impacts of CBDCs and cryptos. They can do this by looking at the environmental impacts of their technology.
In addition, the IMF noted that the world payment system consumes over 47.3 TWh of electricity. This power consumption is similar to what countries like Bangladesh and Portugal consume yearly. As a result, society needs a payment system that uses less amount of electricity.
Iota Foundation Partners With Dell To Develop Carbon Tracking System
The issue of climate change and carbon emissions has been a recent discussion in the crypto industry. Fortunately, a nonprofit ecosystem provider, Iota Foundation, has weighed in on the matter.
The foundation has collaborated with Dell to produce a carbon tracking system. Also, this tracking system will be able to monitor carbon footprints in real-time. BioE’s composting and sustainable energy facility will benefit from the new technology.
Iota Foundation’s leader of sustainability, Mathew Yarger, noted that:
“With this development, we can track and alo verify climate data changes worldwide. Hence, we can address the issue at various levels which was not possible initially.”