The crypto industry has gone through a series of ups and downs recently. Despite a recent major drop in value, there’s no denying that cryptocurrencies will continue to thrive in the future. Besides economics, many are expressing their concerns over the impact of crypto-mining facilities on nature.
In addition, the recent war in Ukraine has disrupted the global monetary system and created an energy crisis, making fossil-based sources more costly than before. This has led many private and public organizations to look for cheaper and cleaner energy sources.
But, with the reluctance of traditional investors and the uncertainty over sustainable demand for alternative sources, decentralized finance (DeFi) and digital assets have entered the spotlight as solutions to create funding and ensure demand. How? Let’s find out.
The Environmental Cost
The worldwide market is facing a significant challenge. Authorities and environmental, social, and governance (ESG) conscious investors are putting pressure on numerous businesses, including the fairly young cryptocurrency market, to decrease co2 emissions.
The Columbia Climate School, for example, has cautioned that the consumption of energy in the crypto business can increase to 6 gigawatts in 2030. This is a staggering amount of growth over current rates and enough electricity to power millions of households. They referred to the miners’ energy use as “disturbing.”
But, regardless of how much governments try, no amount of regulatory pressure can push Bitcoin or other cryptos out of existence. The cryptocurrency market will continue to expand, and it will source energy from a reliable source, which is currently fossil-based.
Also, alternative energy sources do not come easily or quickly without major investments from both governments and private organizations. In addition, overdependence on centralized sources of carbon fuels (e.g., the recent fuel crisis due to the war in Ukraine) can lead to a continuous rise in prices. The solution, experts believe, is to introduce decentralized, renewable energy sources.
Renewable energy is abundant around us and is generated by sunlight, wind, water, and heat. We can guide the crypto mining community towards unlimited sources of nature with no greenhouse gasses.
You may wonder, what is the role of DeFi in all of this?
First, we must admit that the world’s poor response to the energy dilemma is a lack of funding, not of tech. It’s not for lack of ambition, and businesses throughout the world are committed to high carbon-reduction goals. It’s because investors and miners can’t find many initiatives with enough promising profits and impact.
In many cases, two things are missing: first, accurate, actionable data to monitor and evaluate the progress of renewable energy projects, and second, a source of consistent, dynamic customer demand that would make it economically sensible to produce renewable energy in possible places.
By tapping into the innovative power of DeFi open-source developers, we can solve both of those problems.
DeFi & Green, Transparent Funding
The best chance to turn data into useful, actionable information is automated, almost-instantaneous peer-to-peer settlements and the flexibility to establish distinct digital units of different sizes.
For example, unlike analog green bonds, which need many levels of bureaucracy and heavily depend on historical data that takes months, if not years, to create and verify, using DeFi is both fast and effective.
Thanks to crypto technology, we can use blockchain-based monitoring and secure sensors in renewable energy plants to make sure they’re producing a certain level of renewable power and presenting the proof as unique tokens.
Such tokens can serve as collateral for financiers in a DeFi scenario. The strategy provides investors with a level of remote control by including digital assets, cryptos, or digital currencies issued by central banks.
With authorities and ESG-compliant businesses increasing demand for such assets, a large amount of liquidity might emerge for these tokens, forming the broad capital markets required for environmental protection.
Digital Asset: Connecting Supply to Demand
DeFi and digital assets have the potential to reduce the cost of funding for all types of projects. Consider a rural town getting funding via DeFi to develop a solar grid to support a modern farming system. Now, comes the second issue: To have consistent demand that would make it economically sensible to produce renewable energy in possible places.
Consider that economies of scale dictate that the rural grid must have at least 3 MW of capacity to be economically sustainable, but the modern farming system requires just 500 KW. How might such a community with limited electrical requirements make up the difference?
The answer is Cryptocurrency, which may sound odd to anybody who understands the environmental impact of proof-of-work mining. Unlike other energy consumers, crypto miners are not limited to a certain geographic area. Miners will work wherever. They will gladly take any community’s extra energy if it is affordable enough to help boost their profits even higher.
So, it’s a win-win situation. On the one hand, you have a small community that has access to free, clean, renewable energy while selling the excess amount to a crypto miner. On the other hand, crypto companies reduce their dependence on expensive, non-renewable sources and move towards cheaper, cleaner energy, helping themselves and the planet.
How Can Anika Digital Holdings Help?
As you saw in the example, many sources of renewable energy are rural microgrids or even abandoned power plants that have the capacity to produce green energy but don’t have the funding to turn that potential into a reality.
Well, we at Anika Digital Holdings provide financial support for these plants and repurpose them into functioning crypto mining facilities, helping us mine crypto with much higher uptime while not relying on any expensive third-party energy sources.
Thanks to our partnership with Anika Green Energy, we form independent supplies of energy while managing our crypto mining. With a focus on rural communities, we source clean electricity from these areas and give them the resources and support to improve their economy. Our goal is also to advance and promote studies on renewable energy to make your planet a better place to live.