Standards Development

Scope

Develop methodology for an environmental and sustainability classification of consensus mechanisms of Blockchain and Distributed Ledger Technologies that can serve as a basis for labelling these technologies and crypto assets according to categories of energy consumption efficiency.

Purpose

The purpose of the proposal is to develop a Technical Report for the environmental sustainability of consensus mechanisms for Blockchain and Distributed Ledger Technologies. These document will:

 complement and support the European Securities and Markets Authority’s task of developing draft regulatory technical standards on the environmental footprint of crypto assets (see Article 5 paragraph (11a) Markets in Crypto Assets Regulation).

 feed into a report on /support the creation of energy efficiency labels for Blockchain and DLT according to section 6.4 of Commission Communication “Digitalising the energy system - EU action plan”

 support green public procurements of governmental agencies for blockchain technologies (including future pre-commercial procurements for capacity of the European Blockchain Services Infrastructure). The primarly goal of this NWI is to develop a classification of blockchain-based consensus mechanisms according to their potential impact on sustainability (energy consumption), in order to support regulatory reporting and labelling.

If possible, this work item could be conducted in cooperation with the European Observatory for Blockchain, the International Association for Trusted Blockchain Applications (INATBA) and the ESMA.

Justification:

The London Declaration was approved in September 2021 by ISO members and the IEC Council Board. The document commits the international standard-setting community to contribute to the achievements set out in the Paris Agreement and the United Nations Sustainable Development Goals (UN SDGs) that support the Climate Agenda.

At the European level, CEN and CENELEC, consider the Green Transition as a priority and have identified the digital and green twin transition as a core driver for their joint 2030 Strategy, recognizing that standards are a critical enabler of the solutions needed for the Green Deal transition.

The new European Standardization Strategy, and its five main lines of action: anticipate, prioritize and address urgent standardization needs in a strategic environment developing standards in line with the European political and innovation agenda.

This NWIP is consistent with the ambition of the European Green Deal, the REPowerEU Plan, the Sustainable Finance Agenda, and the European Digital Single Market Strategy

More concretely, Blockchain and Distributed Ledger Technologies, as digital enabler technologies and their applications, have a great potential for supporting use cases that increase the sustainability of the economy. At the same time, the so-called “proof of work” consensus mechanism (used in large blockchains such as Bitcoin) has raised concerns as it consumes almost as much electricity as small states and ramps up power consumption per transaction as the network grows. Alternative consensus mechanisms are significantly more sustainable, but there is no methodology yet to rank those according to environmental footprint.