Global IT expenditure is projected to soar to an impressive $3.9 trillion in 2020, marking a 3.4% increase from the previous year, according to Gartner. This surge is largely attributed to the increasing adoption of software-as-a-service (SaaS) across various sectors, with investments in cloud-based solutions expected to rise through 2023. However, this growth brings forth questions regarding its environmental impact.
In a recent discussion, Matt Hawkins, CEO and founder of Cudo Ventures, emphasized the importance of utilizing existing computing resources instead of constructing new data centers and server farms that strain natural resources. Hawkins noted, “The demand for increased computing power is undeniable, but we must prioritize sustainability. With our reliance on mobile devices and extensive infrastructure, we are depleting Earth’s valuable metals. Alarmingly, 30% to 50% of our infrastructure often remains idle. We need to harness the potential of what is already in place.”
Cloud technology enables vast amounts of data to be stored and analyzed efficiently. By leveraging artificial intelligence (AI) and machine learning, financial institutions can simulate various scenarios and assess the environmental consequences of their decisions, according to Hawkins.
Today, data centers consume over 400 terawatt-hours (TWh) of electricity annually—roughly 3% of global demand—with projections suggesting this figure could rise to 20% by 2025. Furthermore, digital infrastructure generates approximately 700 million tonnes of carbon emissions per year, accounting for 2% of global emissions. Experts predict that emissions from IT could soon surpass those from the aviation and shipping sectors.
In particular, Bitcoin’s energy consumption is noteworthy; it represents 0.28% of global electricity use, estimated at 61.76 TWh annually. To put this in perspective, this consumption is comparable to the annual electricity usage of countries like the Czech Republic and Switzerland. If Bitcoin were classified as a nation, it would rank as the 41st most energy-intensive country worldwide.
The considerable energy demand stems from the computing power required for mining, which involves network-connected machines verifying transactions. In response, Bitcoin miners have begun relocating to regions with affordable geothermal energy. Hawkins pointed out, “Bitcoin represents an initial version of blockchain technology, and like any first iteration, it is not the most efficient solution but has catalyzed an entire industry.”
Despite its high energy demands, it is estimated that 25% to 50% of the power used in Bitcoin mining is sourced from renewables. In contrast, Hawkins discussed Ethereum, which he describes as the “first cloud version of blockchain.” He advocates for a shift towards energy-efficient proof-of-stake models that provide reliable data-sharing capabilities for organizations and governments.
Additionally, Hawkins addressed how blockchain can aid in Environmental, Social, and Governance (ESG) reporting within the financial sector. He speculated that digital banks may be more inclined to adopt open and public record systems, as their operations are inherently online. “Neobanks are likely to pioneer this change, whereas traditional banks may lag behind,” he concluded.