The Environmental Impact Of Web3

Assessing the environmental impact of a broad ecosystem is not simple. When trying to measure the carbon footprint of the internet, one has to consider all the layers that are part of this system. Web3, like the traditional web, has layers, so the only way to analyze its sustainability is by segments.

The motivation for the evaluation of web3 is obvious: if web3 represents an evolution of web2, it must also be more sustainable.

In this article we will first define what web3.0 is and what its layers are. Then we will assess what its environmental impact is and if there is any prospect of it being carbon neutral in the future.

What is web3?

To understand what web3 is, we need to understand that in recent years the internet has been classified into 3 stages of development: web1, web2 and web3. Web1 occurred in the 1990s, when there were no smartphones and websites were basically static, with only text and a few images. Web2 dominated the 2000s with responsive websites, portable devices (smartphones, tablets, smartwatches), allowed users not only to consume content but also to create. The web2 also represented the complete integration of life in society on computers: from finance to personal life.

So, when we use the word “internet” today, we are referring to web2.0. But the 2020s are being marked by the rise of a new internet, web3.0, which represents the decentralization of everything.

Decentralization is not having a central agent responsible for major decisions. Bitcoin was the first project to succeed in this sector. The way Bitcoin manages to be decentralized is through a distributed architecture in which each segment has many agents interacting with each other in search of consensus.

For example, for a transaction between Bob and Alice to take place on the bitcoin network, it needs to be verified, validated, and recorded. The people responsible for validating the transactions are the miners, who compete among themselves to be elected for this service. Whenever a miner does his job, he receives a reward in bitcoins.

After a miner has created a new block in the network containing valid transactions, the other miners will check that everything is indeed correct. If there are any inconsistencies in the information, that block of transactions is rejected and another miner will be selected to redo the job.

Besides miners, there are full nodes, which are the agents that have a complete copy of the entire blockchain, that is, a faithful history of all transactions that have ever occurred on the network. Full nodes also check whether new transactions that are added are legitimate and transmit the new state to their neighboring full nodes, so that quickly the whole network is updated with the latest status.

So, in summary we can say that the Bitcoin architecture is composed of mining machines, storage machines (full nodes), and devices that make transaction requests (this is the highest layer, which Bob and Alice participate in).

The web3 players

Before we assess the environmental impact of the Bitcoin network, it is critical to point out that Bitcoin does not represent web3 alone. Web3 is made up of many independent projects that also operate in the decentralization sector, not just financially, but in any aspect.

Ethereum, for example, allows not only financial transactions, but also the execution of smart contracts, which is giving rise to a whole new world (the most modern concepts of NFT, DeFi, decentralized social networks, etc. are possible to exist in blockchain and distributed ledger technology (DLT) thanks to programming languages, and the first project that managed to accomplish the feat of allowing programming on the blockchain was Ethereum.

Note: blockchain technology is not the only technology that allows decentralization, so the term DLT ends up being broader.

After Ethereum, many other projects have emerged with the same purpose. And there are still other DLT projects focused on more specific sectors such as the internet of things, cloud file storage, infrastructure, and the list goes on.

What all web3 projects have in common

Despite differences in architecture and functionality for users, there are some basic principles that all web3 protocols have:

• Data storage layer
• Consensus layer
• End-Use Layer
• Data Traffic Layer

1. Data Storage Layer

In the case of Bitcoin, the data storage layer represents full nodes. In the case of Ethereum, this layer also represents full nodes, the difference is in the content that each node stores (there is more information in the case of Ethereum).

In the case of file-focused protocols like Filecoin and Arweave, this layer represents the storage of images, videos, and various files that users send.

2. Consensus Layer

This is the main layer that ensures the security and validation of everything that occurs on the network. In the case of Bitcoin it is represented by the miners through the Proof of Work (PoW) protocol. Ethereum also uses a PoW protocol today, but it is migrating to the Proof of Stake (PoS) protocol, we will talk about this later.

Each project has its own consensus protocol, but the vast majority use some variation inspired by PoW or PoS.

3. End-use layer

The end-use layer are the devices where users will manipulate their personal wallets and make the requests that will later be transmitted to the network.

For this transmission to occur, the data traffic layer is required.

4. Data Traffic Layer

This layer can be understood as the traditional internet, which uses 3G/4G/5G connections. Most web3 projects depend on the basic internet infrastructure for data transport, although there are also projects working specifically on this sector to offer alternatives, but this is still a very incipient sector.

Evaluating the carbon footprint of each layer

The data traffic layer is already in operation. Its environmental impact can be measured by the amount of submarine cables, antennas, and data centers. There is the impact of manufacturing these components, the impact of installation, and the impact of electricity use.

Regarding electricity use, adding up the data transmission consumption worldwide of the entire Internet, this amounts to something between 260-340 TWh (about 1.4% of global electricity use).

Web3 today represents less than 1% of the data transmission of the traditional internet.

As for the end-use layer, corresponding to the devices (smartphone, notebook etc. ) that make the transaction requests, it is also used for the most different purposes, not only for web3. It is even possible to state that if web3 did not exist, there would be little impact on the production of these devices, since devices geared exclusively or mostly for blockchain applications are still very few on the market.

We can come to a similar conclusion about the storage layer, which uses traditional computers and servers. In fact, there are few datacenters dedicated to the web3 in terms of data storage, since the full node concept consists basically of one computer per node, and it does not make much sense to create a large facility for this purpose, except in the case of renting virtual machines, where different users hire space in cloud services. But these exist for the main purpose of serving web2.

Where is the web3 environmental problem

The real point of criticism of web3 is in the consensus layer. When you read news that the bitcoin network consumes more energy than some countries, this is because of the Proof of Work protocol.

PoW mining consists of computers performing many calculations. These calculations are attempts to “guess” a correct number, like a lottery. The first one to get it right wins the right to mine a block.

Every 10 minutes a new block is mined in the network and the work begins again. The more computing power a miner has, the more chances he has to mine a block.

This is why Bitcoin has such a large energy consumption today. As the network grows in usage and popularity, the financial value of Bitcoin increases by the growth in demand, which encourages more miners to participate.

The image below shows the evolution of hash rate in recent years. Hash rate is a measure of computational power in Bitcoin’s PoW:

Currently, the energy cost of Bitcoin’s PoW today is about 200 TWh, which is comparable to the total consumption of Thailand. Bitcoin’s carbon footprint is approximately 114 Mt CO2 per year.

The trend is that this energy consumption will only increase over time.

However, Bitcoin advocates argue that there has been increasing use of clean energy. According to the Bitcoin mining council, almost 60% of the energy cost of Bitcoin mining today is from sustainable energy.

Another widely used argument is the reuse of wasted energy, a common event in hydroelectric power plants.

Green alternatives to the Proof of Work

The Proof of Stake (PoS) protocol works differently from PoW. Instead of computers trying to hit a number, PoS draws the miner from the amount of tokens he owns. The more tokens an agent has, the more likely he is to be chosen.

This explanation is quite simplistic and does not take into account several security and decentralization aspects present in PoS protocols, but the basic concept is based on this.

Since there is no need to look for random numbers, there is no actual mining. The “miners” in a PoS protocol are just called “validators” because of this. PoS protocols are considered sustainable. The energy cost of a machine participating in PoS is similar to that of a laptop.

In the case of PoW, specific computers have been created to do the job, the so-called ASICs. A modern ASIC consumes up to 3000 W/h, and a mining farm contains dozens of these machines.

This is another important detail of the PoS protocol. There is no “mining farm” concept, because to increase the probability of being chosen to validate a block, a pool just needs more delegated tokens, not more computers.

So, in addition to the energy operation advantage, there is also an infrastructure advantage.

So why doesn’t Bitcoin change its protocol to PoS? There is a very large theoretical and cultural clash in the Bitcoin community, and this transition is unlikely to ever happen.

However, Ethereum has decided to migrate to PoS, and the vast majority of Web3 projects have also adopted some version of PoS.

Will Web3 be carbon neutral?

With the popularity of the PoS protocol, the trend is for web3 to become more and more sustainable. It is difficult to get to the point of being carbon neutral, but there is no doubt that the real concerns and criticisms of web3 today are due to the use of PoW protocols.

In this respect, it is likely that PoW will be less and less represented on web3. The reason is simple: utility applications require smart contracts, and this is not the focus of Bitcoin.

Thus, the projects that will perform most of the transactions and operations on the web3 will be protocols that use PoS, because smart contracs platforms in general have incorporated this consensus protocol.

Conclusion

Although web3 represents an evolution in relation to web2 in several aspects, when it comes to energy, web3 will probably not be more eco-friendly than web2. Decentralized networks require a complex infrastructure and the implementation of consensus protocols, which in some cases have high energy consumption.

However, much of the concern about the high energy consumption of web3 does not take into account that PoW protocols are losing popularity, especially in more utilitarian projects, and that Bitcoin, in turn, contains an energy matrix that has been continuously using more renewable energy, or even energy that would be wasted in generators.