Web3 and IP are inextricably linked for brands, consumers, and IP practitioners. Web3 can help to facilitate IP services, such as smart contracts and blockchain-powered trade mark and design databases[1]. Moreover, the creation of a more collaborative online space promotes user-generated content and can give brands new communication platforms and ways to appeal to consumers on a global basis.

Web3 and its blockchain technology has promised its users a decentralised system with improved clarity of ownership for digital assets compared to its Web2 predecessor.  But throughout the increasing value of its largest and leading cryptoassets such as a Bitcoin and Ethereum, blockchain technology has been plagued by questions surrounding sustainability and energy consumption.

Blockchain proof – the process of verifying information on-chain – is a founding principle for blockchain success, and proof-of-work (“PoW”) is its most popular form of verification. PoW uses computers to solve complex puzzles. Solving the puzzle and validating the transaction generates a reward in the form of new coins.[2]

PoW is lucrative and has led to the creation of large crypto mining facilities. Leading companies in the industry, such as Marathon Digital Holdings, have reached a market capitalisation of over $5 billion[3], and whilst this method of proof is technologically reliable, it demands a considerable amount of energy. The Bitcoin network power demand is estimated to be 176 terrawatt-hours (“TWh”) of electricity per year in 2024.[4] For comparison, energy consumption for the 109 million inhabitants of Egypt was recorded at 168 TWh in 2021.[5]

So blockchain has a consumption issue. What is the industry doing about it?

In a recent article, we discussed Ethereum’s move to Proof-of-Stake (“PoS”), known as the Merge:

“PoS instead uses crypto addresses with large amounts of ‘staked’ currency to validate transactions on the blockchain. The addresses pledge currency to validate transactions via smart contracts with a similar reward in assets. The PoS reward mechanism is based on assets staked, rather than the hardware. The key advantage being the use of a fraction of energy required for PoS.”

Data suggests the merge has been a success, dropping consumption from 22 TWh September 2022,  to 0.0058 TWh in April 2024 whilst maintaining value in the market. Whilst this is a great step forward in reducing the burden of validation, more will need to be done to outweigh strong PoW assets such as Bitcoin, and the continued mining they demand.

Blockchain’s sustainability question may be a dark cloud over the industry, but progress with other sustainable development goals should not be ignored. Efforts to reduce inequality and promote financial security have been seen in volatile economic territories, where access to cryptocurrency has helped citizens send remittances, preserve their savings, and fulfill other financial needs. In 2020, 32% of Nigerians and 21% of Vietnamese citizens reported using or owning cryptocurrency. ^[6]

Related Web3 technology such as Decentralised Autonomous Organisations (“DAOs”) have allowed users to tackle climate change.[7] New protocols utilising smart contracts and NFTs, such as Treejer, are  helping to improve transparency in financing conservation projects, connecting tree funders to rural planters across the world.[8]

Other industries continue to overshadow blockchain when considering sustainable development goals – the fashion industry contributes to 10% of the world’s greenhouse gases, despite its lower industry valuation[9] when compared to the market cap of crypto assets.[10] Despite this, clear issues remain within the Web3 and blockchain environment that need to be addressed  without pushing aside the positive efforts made by projects like ClimateDAO and Treejer.

Foundation or “Layer-0” developments such as PoS will be key in moving the industry to a status of positive community development and climate protection at a pace that meets more adoption and utilisation in the years to come.

Web3 technology is still in its infancy, with consumers and companies figuring out its place within their lives and commercial offerings. What is clear, however, is that sustainability is beginning to be considered as part of the technology’s development. In a day and age where issues like supply-chain transparency and greenwashing are important for a company’s CSR, this nod to sustainability will be welcomed by brand owners wondering whether to foray into the Web3 space.

[1] https://www.euipo.europa.eu/en/news/from-web-2-to-web-3-harnessing-blockchain-technology-for-ip

[2] https://www.iamstobbs.com/opinion/this-week-in-web3-ethereum-evolves

[3] https://companiesmarketcap.com/marathon-digital-holdings/marketcap/

[4] https://ccaf.io/cbnsi/cbeci

[5] https://www.eia.gov/international/data/world/electricity/electricity-consumption?pd=2&p=0000002&u=0&f=A&v=mapbubble&a=-&i=none&vo=value&t=C&g=00000000000000000000000000000000000000000000000001&l=249-ruvvvvvfvtvnvv1vrvvvvfvvvvvvfvvvou20evvvvvvvvvvnvvvs0008&s=315532800000&e=1609459200000

[6] https://www.chainalysis.com/blog/2022-global-crypto-adoption-index/

[7] https://climatedao.mirror.xyz/crowdfunds/0xAa66700E2425Da3A29E179F50a9bA6B460E28664

[8] https://www.unicefventurefund.org/story/treejer-protocol-connecting-tree-funders-rural-planters-worldwide

[9] https://www.statista.com/topics/5091/apparel-market-worldwide/#topicOverview

[10] https://coinmarketcap.com/