Methodologies

Energy Consumption

Energy consumption refers to the total amount of electricity used for transaction validation and maintaining the integrity of a blockchain ledger. The consumption varies based on the consensus mechanism:

• Proof of Work (PoW) networks (e.g., Bitcoin) require substantial computational power, leading to high energy usage due to mining activities. Specialized mining hardware (ASICs) operates continuously, consuming significant electricity.
• Proof of Stake (PoS) and Proof of Authority (PoA) networks rely on validators rather than intensive computations, resulting in substantially lower energy consumption.
• Energy consumption assessments consider network hashrates, hardware efficiency, and regional electricity prices. Layer 2 solutions, which operate on top of base-layer blockchains, require a separate but related calculation.

Renewable Energy Consumption

This indicator evaluates the share of energy used from renewable sources, expressed as a percentage of the total energy consumed by the blockchain network.

• Identifying miner locations in PoW networks is challenging since mining operations are often undisclosed for competitive reasons. Public filings from mining companies, data from blockchain explorers, and network node mapping help estimate energy sources.
• PoS and PoA networks allow better visibility into node locations, enabling more accurate renewable energy usage estimations.
• The calculation involves matching geographic energy consumption data with local renewable energy grid statistics, accounting for variations in regional electricity sources.

Energy Intensity

Energy intensity measures the average electricity consumption per validated transaction, expressed in kilowatt-hours (kWh). Unlike a simple division of total energy by transaction count, a hybrid approach is used to allocate energy consumption fairly:

• Holding-based allocation: Considers how much energy is used to maintain network security rather than processing transactions. In PoW, miners receive rewards partly based on block subsidies, meaning that currency holders indirectly fund energy consumption.
• Transaction-based allocation: Attributes energy consumption to transactions by dividing total network energy usage by the number of transactions. However, this method can be misleading, as energy is also used to secure the ledger.
• Hybrid allocation: A combination of both approaches, considering factors like mining rewards, transaction fees, and network participation.

GHG Emissions, Scope 1 – Controlled

Scope 1 emissions refer to direct greenhouse gas (GHG) emissions from sources controlled by blockchain nodes, such as mining farms or data centers that generate their own electricity.

• Most blockchain operations rely on purchased electricity, meaning their Scope 1 emissions are generally low. However, if miners or validators operate their own power plants (e.g., using fossil fuels for off-grid electricity), their direct emissions become relevant.
• Scope 1 emissions are difficult to track due to limited transparency in private mining operations. However, large mining firms may disclose this data in regulatory filings

GHG Emissions, Scope 2 – Purchased

Scope 2 emissions account for indirect GHG emissions from purchased electricity, which constitutes the majority of emissions from blockchain networks.

• These emissions are calculated based on network energy consumption and the emission intensity of the local electricity grid where the energy is sourced.
• The assessment follows two methods:
  1. a. Location-based method: Uses the regional grid’s average emission factor to estimate emissions.
  2. b. Market-based method: Incorporates data from energy contracts and renewable energy purchases (e.g., green energy credits).
• The final reporting standard uses only the location-based approach to ensure consistency.

GHG Intensity

GHG intensity measures the average greenhouse gas emissions per validated transaction, expressed in kilograms of CO₂ equivalent per transaction.

• This metric is derived using a hybrid allocation approach, similar to energy intensity.
• Scope 1 and Scope 2 emissions are combined to determine the total network emissions, which are then allocated proportionally to individual transactions.
• The methodology ensures that emissions related to maintaining the blockchain’s security and processing transactions are appropriately distributed.

Generation of Waste Electrical and Electronic Equipment (WEEE)

WEEE refers to electronic waste generated from outdated or decommissioned blockchain-related hardware, such as mining rigs, GPUs, and validation nodes.

• In PoW networks, mining hardware (ASICs) typically has a lifespan of around five years before it becomes obsolete or unprofitable.
• In PoS networks, validators and nodes run on general-purpose computing hardware, such as servers or cloud-based infrastructure, with a replacement cycle of about three years.
• The calculation involves estimating hardware turnover rates, total device weight, and overall network equipment usage.

Non-recycled WEEE Ratio

This indicator measures the percentage of electronic waste that is not recycled.

• The assessment relies on regional e-waste recycling rates, which vary by country.
• Blockchain networks with geographically dispersed operations pose challenges in estimating exact recycling rates, so proxies from national and industry-level reports are used.
• Countries with stricter environmental regulations tend to have higher recycling rates, influencing the overall estimate.

Generation of Hazardous Waste

Hazardous waste is a subset of WEEE that contains toxic materials, such as lead, mercury, and cadmium, commonly found in electronic components.

• The hazardous waste content is calculated based on hardware composition reports from manufacturers and regulatory documents (e.g., EU RoHS Directives).
• The methodology identifies the weight of hazardous materials per device, combines it with hardware turnover rates, and aggregates the total waste volume generated by the network.
• If specific data is unavailable, comparable hardware types are used as proxies.

Impact of the Use of Equipment on Natural Resources

This indicator assesses the environmental impact of blockchain hardware across its lifecycle, including production, usage, and disposal.

• Production phase: Mining hardware manufacturing relies on critical raw materials, including rare earth metals and silicon, contributing to environmental degradation and resource depletion.
• Usage phase: Blockchain infrastructure consumes electricity and cooling water, particularly in large-scale data centers. Bitcoin mining, for instance, has been linked to high water consumption rates in certain regions.
• Disposal phase: Electronic waste from decommissioned devices can contribute to soil and water pollution if not properly recycled or disposed of.
• Water footprint assessments are based on energy consumption and regional water intensity factors, helping estimate the total water usage associated with blockchain operations.