The ecological impact of crypto has long been a major concern among investors and onlookers, but is a green crypto really possible?
Green cryptocurrency has become a buzzword in blockchain technology, largely due to Bitcoin’s (BTC) significant carbon footprint. Bitcoin consumes about 150 terawatt-hours of electricity, which is more than the entire country of Argentina, which has more than 45 million inhabitants.
A 2022 report by Sciencedirect revealed that the carbon intensity of power consumed by the BTC network increased from 478.27 gCO2/kWh in 2020 to 557.76 gCO2/kWh in August 2021. Ethereum is just a little behind in energy consumption.
With these concerns, the question on everyone’s mind is whether the industry can transition to a more sustainable and eco-friendly cryptocurrency future.
What is green crypto?
The concept of ‘green crypto’ refers to cryptocurrency projects and initiatives that prioritize sustainability and aim to mitigate the environmental impact of blockchain technology, especially proof-of-work (PoW) consensus mechanisms required by cryptocurrencies such as Bitcoin and Ethereum become
Proponents of more environmentally friendly crypto argue for alternative consensus mechanisms that are more energy efficient, such as proof-of-stake (PoS) or proof-of-authority (PoA). It relies on validators or stakeholders rather than miners solving complex mathematical puzzles, thereby reducing energy consumption.
Additionally, green crypto initiatives can focus on promoting renewable energy sources for mining operations, implementing energy-saving techniques in blockchain protocols, or offsetting carbon emissions generated by crypto-mining activities.
Promising Green Crypto Projects: Most Energy Efficient Cryptocurrency
Carbon neutrality is quite achievable in the crypto ecosystem. Some mining and crypto companies claim to have gone completely green in recent years.
In 2022, a Costa Rican hydroelectric plant made news for offering carbon neutral crypto mining services. The plant powers around 650 computers, mines crypto for 150 customers and uses clean energy. It started mining crypto amid the covid-19 pandemic.
Crypto mining company Bitfarm claims that at least 99% of the power they use to mine Bitcoin is green. The company’s website states that they use 158 megawatts of clean energy. Neptune, a digital-asset-focused network, also markets itself as green, stating that they are “focused on using renewable energy such as solar, hydro and wind to power [their] Bitcoin Mining Operations”.
ADA, the native coin of the Cardano network, is one of the most sustainable cryptocurrencies. Cardano uses PoS consensus, which is highly energy efficient. The blockchain completes 1,000 transactions per second, and uses energy quite well by reducing electricity costs. Research shows that the Cardano network consumes 6GWh of power, thus energy efficiency.
Another eco-friendly crypto-coin is Ripple (XRP), which maintains an excellent ecological standing with an average transaction power consumption of 0.0079 kWh. Some infographics indicate that XRP uses the least power compared to Bitcoin, Ether and Visa. By completing 1,500 transactions every second, XRP significantly reduces its carbon footprint.
Investing in green cryptocurrencies
Theoretically, investing in green cryptocurrencies involves a similar process to investing in any other type of cryptocurrency. Investors should start by researching green cryptocurrencies and projects that align with their environmental goals. A useful technique can be to get a good understanding of the underlying technology of the more sustainable crypto.
Investors should also ensure that their crypto exchange of choice supports the trading of green cryptocurrencies before depositing funds into their exchange account. Once the account is funded, they can buy the green cryptocurrencies that they feel meet their needs.
After buying green cryptocurrencies, buyers can consider transferring them to a secure crypto wallet for storage.
It is also important to remember that cryptocurrencies carry inherent risks, including price volatility and regulatory uncertainty. While a particular cryptocurrency may meet an investor’s sustainability needs, they must also consider factors such as their market expertise, attitude to risk, and portfolio diversification to determine if it is a suitable choice for them. Can crypto go green?
The future of green crypto
Ongoing efforts by many companies, especially mining companies, are focused on reducing crypto’s carbon footprint in the next few years. How can the general crypto ecosystem go completely green?
Changing the consensus algorithms
As mentioned above, PoW is a highly energy intensive system where miners work very complex calculations to release new coins. Cryptographic calculations consume a lot of resources and most have a very high carbon footprint. Machines such as application-specific integrated circuits (ASICs) created to optimize energy consumption and mining processes still use massive amounts of power.
However, newer cryptocurrencies are switching to more developed and energy efficient consensus mechanisms. PoS is the most popular consensus system, it uses significantly less power since block creation, and reward depends on the amount of stake held by network participants.
PoS has evolved into better versions like Delegated PoS, Nominated PoS, Mutualized PoS, and others. Networks like Cardano, Polygon (MATIC) and Polkadot (DOT) use a variation of PoS consensus. The September 2022 Ethereum Merge network update also moved Ethereum from a PoW to a PoS model, which was expected to help reduce ETH’s energy consumption by around 99%.
Alternative energy sources
Another route to more environmentally friendly cryptocurrencies is the use of alternative energy sources, such as solar, wind and hydropower.
For example, SolarCoin (SLR) aims to encourage the use of solar energy by offering 1 SLR for every megawatt hour of energy generated by solar energy. Powerledger (POWR) is part of the Powerledger platform, which facilitates peer-to-peer (P2P) energy trading.
Much like the aforementioned Costa Rican plant, Genesis mining is an Iceland-based mining outfit offering cloud mining services that uses renewable energy for its operations.
Closure
Investing in eco-friendly crypto offers an opportunity to align financial goals with environmental awareness. As the global focus on sustainability increases, the demand for more sustainable crypto projects is likely to grow, potentially offering lucrative investment opportunities.
However, it is crucial to approach these investments with caution, to ensure that a crypto is suitable for investors’ financial as well as their environmental needs and ensure that you never invest more money than they can afford to lose.
Frequently Asked Questions
Are NFTs eco-friendly?
Non-fungible tokens (NFTs), are generated with a lot of energy and are mostly used on the Ethereum blockchain system. According to studies, selling one piece of art on Ethereum has the same carbon footprint as taking an hour-long flight.
Can crypto be made eco-friendly?
Yes, cryptocurrencies can transform their working mechanisms/technology to become more eco-friendly. In 2022, for example, Ethereum, the second most used cryptocurrency, will upgrade to a 2.0 version that will significantly lower its power consumption and adverse environmental effects.
According to TRG Data Centers, chia is a fantastic illustration of a sustainable cryptocurrency token built to be less energy intensive. Instead of mining, or proof of work, the “farming” method used by chia is hard drives, or proof of space.
Which crypto uses green energy?
SolarCoin (SLR) Global, decentralized and unrestricted by any authority is one of the greenest cryptos. Like other cryptocurrencies, SolarCoin can be spent and traded, but the platform’s key differentiator is that it seeks to encourage verifiably produced solar energy, a real environmental activity.
Other green coins include BitGreen (BITG), Cardano (ADA), Stellar (XLM) and Nano (NANO). These cryptocurrencies have low carbon footprints and are therefore considered eco-friendly.
How does crypto affect the environment?
The electricity required for the mining process, which is how new digital currency is created, is the environmental impact of cryptocurrencies that is most obvious. Many types of cryptocurrency rely on mining, but most people only think of Bitcoin mining.
The energy required for mining, especially Bitcoin mining, is enormous, and the competition among would-be cryptocurrency billionaires to create the most powerful mining rig generates far more electronic garbage than solid bank accounts.
Disclosure: This article does not represent investment advice. The content and materials on this page are for educational purposes only.
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