Looking at FTX

The direct impact of FTX's work

FTX is a crypto company. We allow millions of people to buy, sell, and trade on hundreds of crypto markets and enable the flow of billions of dollars a day. While we aim to be significantly overall beneficial for climate change through the work of FTX Climate, we also think it's important to be mindful of the direct contributions to greenhouse gas emissions through FTX's work. This page provides some thoughts and reflections on that subject.

Background information

Cryptocurrencies are decentralised, they don't have a single person or company that decides who owns what. To solve the problem this creates cryptocurrencies use something called a consensus mechanism - a system that allows everyone to agree who the owner of a virtual currency is. It is also what stops someone from just being able to copy or make their own cryptocurrency in the same way you can save an exact copy of a picture you found online.

Bitcoin and Ethereum both use a consensus mechanism called Proof-Of-Work: a system where computers race to do calculations ("work") for the chance to decide what transactions happened since the last time everyone agreed on who owned what. The computer ("miner") who wins this race is rewarded with some of the cryptocurrency. As the value of these rewards have increased so has the scale of the computers that are used for this, from simple laptops 10 years ago to billion dollar industrial scale operations today. The energy that powers these computers is where the environmental impacts of cryptocurrencies comes from, the computers are pretty cheap so it is mostly a competition of who can use more energy to win this race. When the environmental impacts of cryptocurrency is discussed this is specifically what is being referred to.

However Proof-Of-Work is not the only consensus mechanism, another popular consensus mechanism exists that the vast majority of the other thousands of cryptocurrencies use, called Proof-Of-Stake.

Proof-Of-Stake cryptocurrencies don't compete on how much energy they use, they use the amount of the cryptocurrency the miner has "staked" to determine the say they have in deciding who owns what. They have zero need for high electricity usage, it has no impact on the rewards they receive.

This creates an important distinction in the debate on the environmental impacts of cryptocurrencies. Saying a transaction on the Solana blockchain (proof-of-stake) is bad for the environment is like saying sending an email is bad for the environment. It would be like grouping cars as bad for the environment without making the distinction between electric and combustion engines. You can read more about a recent report that found a transaction on the Solana blockchain uses less electricity than two Google searches here: https://solana.com/news/solana-energy-usage-report-november-2021

Currently over 80% of all deposits and withdrawals on FTX are done using Proof-of-Stake blockchains, meaning they have no meaningful climate or carbon impacts, they are like sending an email.