Only last year, when talks of Bitcoin’s high scale environmental pollution started gaining the spotlight – what with Elon Musk’s tweets acting as a catalyst of sorts – was there finally a surge in people realizing how bad cryptocurrency truly is for the environment.
Bitcoin consumes nearly 240 terawatt hours of energy annually, putting it at par with Thailand, which has a population of 69.7 million people. Producing that energy releases 104.06 megatons of Carbon Dioxide, which is comparable to the Czech Republic’s annual carbon footprint. And this is only one cryptocurrency we’re talking about, even if it’s the largest.
Eco-friendly cryptocurrency has emerged as a sort of ray of hope in this sorry situation of dirty energy business.
But what exactly is eco-friendly cryptocurrency? Is it even real? How is it a worthy option?
Keep reading to know exactly that.
How does Cryptocurrency affect the Environment negatively?
The main negative aspect of cryptocurrency’s environmental impact comes from high energy-intensive activities used for verifying transactions and ‘mining’ new coins.
Mining is the name given to the activity of winning new coins by solving complex mathematical equations. These equations are a result of the encryption which works to protect transaction data on the blockchain. When a ‘miner’ solves an equation, he is rewarded with a brand new coin. This is known as the ‘proof of work’ system.
The said mathematical puzzles get more and more complex over time and as a result, so has the technology needed to solve them.
Miners today use special computers with something called ASIC systems, which improve their chances of solving the equations faster and minting a new coin quicker.
The root of the problem is that these high-tech computers require tonnes of energy to keep running ceaselessly and also to prevent the hardware from overheating through Air Conditioning systems or internal fans.
Mining farms where hundreds and thousands of ASIC systems keep running constantly, trying to mint new coins, require an endless supply of energy, which most often than not comes from cheap resources like fossil fuel.
The incessant rise in the carbon footprints caused by these activities drastically affects the environment.
Out of all cryptocurrency mining costs, the share of electricity costs is around 60 – 70%.
To put that into perspective: Mining one Bitcoin consumes 100MWh of energy, which is the same amount one would require to watch a 65 inch Samsung 4k Smart TV for 98 years straight.
Can Cryptocurrency be Eco-Friendly?
With rising awareness of the serious environmental impact caused by cryptocurrency, efforts are being made to make the process of mining more environmentally friendly.
In response to the objections raised by environmentalists worldwide, pressure from influential people like Elon Musk, and bans in big countries like China, the crypto industry is exploring everything from less energy-intensive mechanisms to migrating, to adapt to the changes.
Eco-friendly cryptocurrency has emerged as an answer to all the environmentally concerned questions thrown at the industry.
There are primarily two requirements for Eco-Friendly Cryptocurrency:
1. Renewable Energy Sources
By substituting clean, renewable sources of energy like solar, wind, hydropower, etc., in place of fossil fuels and coal, cryptocurrency mining can be made into a considerably sustainable process.
In the past few years, many eco-friendly cryptocurrencies have entered the global market. Quite a few of them focus extensively on using renewable sources like solar energy, wind energy, etc., to make mining more energy-efficient.
If renewable sources could entirely replace all the energy requirements in cryptocurrency mining, then the process wouldn’t be as harmful to the ecology as it is today. Other advantages of adopting renewable energy include reduced land pollution, better air quality, and better profit from mining activities.
2. Alternative Consensus Mechanisms
As alluded to above, the proof of work mechanism of mining is a major contributor to high-energy consumption and environmental degradation.
The proof of work system, while making the blockchain transactions decentralized, encourages lakhs of miners to continually keep solving in expectation of winning new coins.
If this system of minting coins were to be replaced with a much more sustainable system, then the mining process won’t be as problematic.
Two examples of more sustainable, alternative mechanisms are:
Proof of Stake Mechanism
The second most used system after proof of work, the proof of stake system is gaining popularity faster. The proof of stake system allocates the responsibility of solving an equation to only one miner who holds/owns the most stake in the cryptocurrency. Hence, it ends up consuming much less energy than the proof of work system.
It does not require specialized computer systems and consumes 99.9% less energy than the proof of work system. Which, even if it’s not considered as secure as the proof of work system, makes it a more sustainable choice.
Proof of Capacity Mechanism
The proof of capacity mechanism works based on the amount of hard drive space available with a miner. The miner who has the biggest hard drive space gets the responsibility to solve equations and mint new coins and validate transactions.
This system involves a two-step process of plotting and mining. It isn’t widely accepted as of yet, however, it is 30% more efficient compared to the proof of work system.
Here are 5 environmentally friendly cryptocurrencies which are pretty good greener alternatives:
Environmentally friendly cryptocurrencies
1. Solarcoin [SLR]
Launched in the year 2014, SolarCoin is a green cryptocurrency that you can trade and spend like other cryptocurrencies. However, unlike the ones which cause environmental pollution, it is focused on incentivizing a solar-powered planet, by issuing 1 SolarCoin per 1 MegaWatt hour of electricity produced through solar energy.
This unique approach awards cryptocurrency tokens to owners and beneficiaries of solar power systems based on the real how their solar systems perform. Currently, SolarCoin operates by rewarding Solarcoins to participants who upload documentation that is proof of their solar electricity generation. But, this process might one day be streamlined with automated solar array updates.
2. Cardano [ADA]
Cardano is probably the most popular eco-friendly cryptocurrency in the market. It follows a proof of stake blockchain mechanism, the first of its kind to be founded by peer-reviewed research and evidence-based techniques. It was founded by the co-founder of Ethereum, Charles Hoskinson, and can achieve 1000 transactions per second compared to Bitcoin’s 7/second.
With the proof of stake consensus mechanism, Cardano’s cryptocurrency network consumes only 6 GigaWatt hours of energy on an annual basis. A large portion of this energy is also renewable energy. Whoever intends to participate has to buy tokens to join the network.
3. Nano [NANO]
Nano is a ‘feeless’ cryptocurrency, which can also be used for remittances, micro transactions, in-store and online payments, and banking infrastructure. Ever since it started in 2015, this green cryptocurrency has had a relatively small carbon footprint. It is scalable and isn’t dependent on mining.
Nano uses block-lattice technology which facilitates high-performance and fast transactions without the consumption of colossal amounts of energy. There is also an Open Representative Voting (ORV) system, where the account holder votes for a chosen representative, who then works to validate transactions. This leads to a system where mining isn’t required and only 0.00012 kWh of electricity per transaction is consumed.
4. Chia [XCH]
A fairly new environmentally friendly cryptocurrency, Chia, a green cryptocurrency, was created in 2017, in response to excessive energy usage by Bitcoin and Ethereum. It was created by Bram Cohen, who is also the founder of BitTorrent, and has a simple system where ‘farming’ of tokens can be done much more easily than mining other cryptocurrencies.
Chia operates using a unique proof-of-space-and-time mechanism, where tokens are given to those users who have a certain amount of hard drive space and can store certain data for a specific period on it. There is no requirement of specialized systems or huge amounts of energy, to farm chia tokens. Chia uses only 0.16% of the total energy consumed by Bitcoin every year. It’s a simple-to-use, unique, eco-friendly cryptocurrency.
5. EOSIO [EOS]
EOSIO follows a community approach to generate eco-friendly cryptocurrency. It is an open-source blockchain system that is easy to set up and use and costs very little. It was developed by Dan Larimer and Brenden Blumer in 2017 with a special focus on empowering users, “to create and access a wide range of decentralized applications and ecosystems”.
EOSIO operates on a delegated proof of stake (DPoS) mechanism, where a real-time voting and reputation system is used to decide who creates the next block on the chain. Not only does EOSIO facilitate lightning-speed transactions, but it is also 66,454 and 17,236 times more energy-efficient than Bitcoin and Ethereum, respectively. With more than 400 apps already offered, and public blockchain activity across 15 networks, EOSIO proves to have a bright future ahead.
The positive economic impact of cryptocurrency has been nothing short of astounding. From improved cross-border financial transactions and security of data through decentralized systems to fostering business relations across international markets, there are very few economic areas that haven’t benefited from the introduction of cryptocurrency.
By overcoming issues like lack of access to adequate financial services and deficient social trust, cryptocurrency has helped young and tech-savvy populations in developing countries escape poverty and leverage societies. Blockchain transactions have proved to be millions of times cheaper than transaction costs in the traditional economy and are far safer with their decentralized control.
However, that does not mitigate the harmful effects cryptocurrency mining has on the environment. After all, economic development at the cost of environmental degradation can never be a worthwhile solution for the planet and the people living on it.
So, while we adopt newer technologies that make life better and easier, we cannot turn a blind eye to the ecological impact of said technologies. With the introduction and mass promotion of eco-friendly cryptocurrencies, it is clear that people are becoming more and more aware of how tech can end up doing more harm than good in the long run and are consciously making more sustainable decisions when it comes to the IT industry.
With eco-friendly cryptocurrency steadily going mainstream, the future for greener digital currency seems not so impossible.