Published in: BONDGUIDE

Sustainability is gaining ever more importance when it comes to crypto investments and there are two major issues that are the topic of discussions: “On the one hand, energy consumption is a factor that is increasingly being looked at in relation to crypto assets”, said Daniel Knoblach, Board Member at Fair Alpha. “Yet, on the other hand, blockchain technology can contribute a lot to the sustainability of any investment.”

The energy demands of cryptocurrencies have long been the subject of heated debate. “Of course, assets such as Bitcoin or Ether are power guzzlers”, Knoblach added. “It has been pointed out many times that the operation of the Bitcoin blockchain in particular consumes more energy than entire nations.” Some countries, such as China, therefore severely restricted crypto mining initially before banning it altogether. On the other hand, some analysts also attribute a key function to the amount of energy that is required. “Just as it takes enormous effort to mine gold, which then accounts for part of its value, this is also transferred to Bitcoin etc.”, said Knoblach. From a sustainability perspective, however, one thing is certain: cryptocurrencies are energy guzzlers.

“A large number of new crypto and blockchain projects are already being created on proof-of-stake instead of the power-hungry proof-of-work blockchains”, Knoblach explained. “Even Ethereum, the number two crypto, is now looking to switch its verification mechanism to proof-of-stake in the not too distant future.” PoW cryptos require a great deal of energy to solve computational problems, whereas with PoS methods mere possession of the corresponding coins is sufficient. “With the world burning on all fronts, climate protection is critically important and this does not stop at the crypto industry either”, said Knoblach.

New blockchain applications are also contributing significantly to sustainability. “It is critically important to curb the sheer energy hunger of cryptocurrencies”, Knoblach pointed out. “Blockchain technology, however, can be used for much more.” For example, the use of funds from investments or even their direct impact can be measure and made visible by blockchain-based processes. “This allows capital to be directed to where it provides the greatest or most sustainable benefit”, said Knoblach.

In the investment universe, sustainable crypto strategies with both characteristics, energy-saving assets and sustainability-promoting ideas, are an increasingly important component. “It is therefore important to commercialise good ideas in this area quickly”, Knoblach mentioned. Such investments can be accessed fast and relatively easily by way of a Luxembourg securitisation. “Effective and proven solutions, particularly also of trading strategies in relation to crypto and digital assets, are especially important for institutional investors. These can be optimally implemented through securitisation under Luxembourg law”, Knoblach concluded.