For quite some time, if you looked up anything about cryptocurrencies, what you found were largely proclamations about crypto ushering in a bright and shiny tomorrow. But if you look up cryptocurrencies today, there is a good chance that you will see people decrying the havoc that the crypto economy is wreaking on the planet.
There are a couple of reasons environmentally minded people might urge you to avoid crypto. One is that over the past few years, a lot more people have become more aware of the salience of climate change. So, the adverse impacts of crypto are simply receiving more attention. The other reason is that there are serious environmental issues involving crypto.
This may leave you feeling divided. On one hand, you want to be part of the economic solution that crypto offers for decentralizing finance and restoring control to the people.
On the other, you do not want to be responsible for contributing to climate change and the damage it is doing to our ecology and society.
Thankfully, you do not have to give up on crypto. In fact, we feel that in some respects, crypto could even be part of the solution to the climate crisis. After all, it is largely big corporations that have gotten us into this mess in the first place. Decentralization with the help of crypto will help to take power back from those who have wronged us and the planet.
But you should try to go about it in a smart, environmentally minded away. In this post, we will share our recommendations with you for taking an eco-friendly approach to using crypto.
But first, let’s delve a bit more into the current environmental problems with cryptocurrencies, as well as talk about how things are already changing for the better.
What are the Negative Effects of Cryptocurrencies on the Environment?
Right now, the environmental issues with crypto are very serious.
Let’s talk about bitcoin mining. There will never be more than 21 million units of bitcoin. To support this cap, mining has become more and more challenging. That means that the amount of power that goes into mining even a single bitcoin has become extreme.
How extreme? Take a look at the Cambridge Bitcoin Electricity Consumption Index. This data shows that bitcoin mining each year takes more energy than some countries consume as a whole within that same timeframe.
What may alarm you even more is that bitcoin transactions have become exorbitant in terms of energy consumption as well. PC Magazine says, “It isn’t just mining that uses lots of power—a single Bitcoin transaction is estimated to burn 2,292.5 kilowatt hours of electricity, enough to power a typical US household for over 78 days.”
Columbia Climate School says, “Globally, Bitcoin’s power consumption has dire implications for climate change and achieving the goals of the Paris Accord because it translates into an estimated 22 to 22.9 million metric tons of CO2 emissions each year—equivalent to the CO2 emissions from the energy use of 2.6 to 2.7 billion homes for one year. One study warned that Bitcoin could push global warming beyond 2°C. Another estimated that bitcoin mining in China alone could generate 130 million metric tons of CO2 by 2024.”
Some countries have not been amused by the contributions of miners within their borders to climate change — especially when they have not been operating legally. In this video, you can watch authorities in Malaysia destroying more than a thousand mining rigs using a steamroller.
Then there is the matter of non-fungible tokens (NFTs). These are all the rage right now, but they have a serious carbon footprint. Columbia Climate School reports, “The average NFT generates 440 pounds of carbon—the equivalent of driving 500 miles in a gas-powered car—producing emissions 10 times higher than the average Ethereum transaction“.
Can Crypto Ever Be Sustainable? (Yes)
At this point, you might be worried that all is doom and gloom — but that is not the case. Actually, there have been some major improvements already for crypto and the environment, and there should be more on the way.
In July 2021, CNBC reported, “New data from Cambridge University shows that the geography of mining has drastically changed over the last six months, and experts tell CNBC this will improve bitcoin’s carbon footprint.”
Those geographical changes go back to the crackdowns discussed earlier by countries like Malaysia and China.
A lot of miners in those countries have had to take their business across international borders. Quite a few have ended up in North America. And thankfully, on this continent, renewable energy is on the rise.
CNBC said, “[Fred Thiel of Marathon Digital] says that most miners new to North America will be powered by renewables, or gas offset by renewable energy credits. Gibbs estimates that bitcoin mining in the U.S. is more than 50% powered by renewables.”
Enough investors are also starting to shy away from environmentally-harmful cryptocurrencies as well that this puts additional pressure on the crypto economy to find a way to adapt and get greener.
In fact, there may be some rapid and dramatic improvements in energy consumption on the way for certain cryptos.
Take Ethereum, for example. There is a detailed page you can read about energy consumption at Ethereum.org. That page explains how Ethereum is switching over from proof-of-work to proof-of-stake in an event called “The Merge.”
The page says, “recent estimate suggested that The Merge to proof-of-stake could result in a 99.95% reduction in total energy use, with proof-of-stake being ~2000x more energy-efficient than proof-of-work. The energy expenditure of Ethereum will be roughly equal to the cost of running a home computer for each node on the network.”
Once the change goes into effect in 2022, Ethereum will actually end up using less energy than Visa for the equivalent amount of transactions!
So, yes — crypto has been a blight on the planet from an environmental standpoint. But the situation is not at all hopeless. If crypto miners turn to renewable energy sources and we see other cryptocurrencies adopting validation methods like that discussed above, we imagine crypto could become greener than traditional payment options like credit and debit cards.
How Can You Invest in Cryptocurrencies While Still Protecting the Environment?
Now you understand some of the issues involving cryptocurrencies and the environment. You are also caught up on some of the changes that could lead to crypto becoming much greener in the future. But what can you do today to use cryptocurrencies in an eco-friendly way? Let’s go over some tips.
- Choose Sustainable Cryptocurrencies.
- Plan Your Transactions With Care.
- Be Cautious About NFTs.
Some cryptocurrencies are far more environmentally toxic than others. In our next section, we will offer up some suggestions for some of the greener cryptocurrencies that are out there. Consider using them instead of those that have bigger carbon footprints.
Considering the environmental cost of a single transaction for many cryptocurrencies, it makes sense to try and minimize the number of transactions you make. So, when you can, plan ahead. If you can avoid unnecessary transactions, you will be reducing your environmental impact. Of course, if you choose efficient, eco-friendly cryptos, you will not have to worry about this.
There are supposedly some “green” NFTs out there — but there are apparently some questions regarding whether they are all that eco-friendly. Music Ally explains, “Charity the World Wildlife Fund recently faced the mother of all backlashes after announcing plans for NFTs (using Polygon), and it sparked this blog post from ‘digiconomist’ Alex de Vries, who specialises in providing a “healthy dose of realism” for digital trends in general, and crypto in particular.”
Music Ally continues, “His analysis focused on the way Polygon still operates a set of contracts on the main Ethereum network, and claimed that once that is factored in ‘the carbon footprint of a Polygon transaction is close to 430 grams of CO2… almost 2,100 times more than the optimistic estimate provided by the WWF, illustrating that Polygon is nowhere near as sustainable as claimed.'”
Consider that NFTs are still very much in their early stages, however. In the future, it seems logical that NFTs will find a way to be more eco-friendly, just like crypto as a whole.
What are Some Sustainable Cryptos to Consider?
Now that we have given some general recommendations for how you can be eco-conscious when you are using cryptocurrencies, we want to introduce you to some of the “greener” cryptos you can choose and what makes each of them eco-friendly.
First of all, we are going to mention Ethereum, in a prospective sense. It is true that Ethereum’s current environmental impact is high, but we are optimistic that within the year, we are going to see the massive reduction in energy consumption that has been promised.
Once The Merge takes place, the energy cost of Ethereum transactions should be very reasonable. Plus, ETH is a very popular crypto, so if you are new to this world, it is a good way to get your feet wet.
One of the first cryptocurrencies you will hear people mention when we talk about greener crypto is Cardano. It was actually an Ethereum co-founder who developed it.
Cardano has a few things going for it. First of all, the entire structure of the Cardano network demands quite a bit less energy than many competing cryptos.
For another thing, Cardano is involved with planting trees. In fact, it has planted more than a million of them already. What is more, it is possible to view a public record of the plantings on the blockchain. Basically, the reason that Cardano is doing this is as a tactic to offset the energy that it does need to consume to operate.
The eco-friendly nature of this crypto is reflected in its name, “SolarCoin.” In fact, it is not just eco-friendly—building a greener future is actually part of the purpose of the coin.
The official site for SolarCoin explains, “Solar energy is now the cheapest fuel in over 150 countries. We want to make it free… We distribute SolarCoin as a reward to solar installations. When the value and price of a SolarCoin exceed the production cost of the energy, it becomes effectively free – an event we call the Solarity.”
SolarCoin also explains that it relies on a validation process called proof-of-authority. The site says, “Proof-of-authority does not utilize mining, which in turn requires much less energy expenditure and carbon emissions along with extremely low transaction costs. We estimate the cost the entire SolarCoin project uses less energy than a single home.”
If you install solar for your home or business, you can file a claim with SolarCoin for rewards. Pretty cool, right?
Another exciting project in the crypto world that aims to help create a greener world is Powerledger. This project makes the ERC-20 token POWR available.
POWR is not an all-purpose crypto; it is a token that exists specifically to support the decentralized Powerledger network, which in turn exists to facilitate energy trading.
Why is energy trading important? The rates at which it is possible to gather wind and solar power from any given installation can vary based on weather conditions. But people require consistent energy availability. With a decentralized network like Powerledger, it is possible to trade energy for more consistent, even distribution. The result is an increase in renewable energy grid stability.
Also worth looking into when you are searching for crypto solutions that are environmentally-friendly is Stellar. The Stellar network is extremely efficient. What allows for that efficiency is Stellar’s reliance on a unique validation approach called the Stellar Consensus Protocol (SCP).
Another crypto for which there is a unique, efficient validation method is IOTA, which relies on Fast Probabilistic Consensus.
In this post, you can take a look at some graphed data that compares energy consumption per 100,000 transactions for Visa, MasterCard, and IOTA Trinity. You will discover that IOTA Trinity transactions consume far less power than either of the two credit cards. Indeed, the amount is a mere 0.11 Watt hours per transaction.
Nano is promoted as the “eco-friendly & feeless digital currency.” Consensus takes place via the Open Representative Voting (ORV) system.
Nano writes, “The nano network has a tiny infrastructure footprint. Currently just a few hundred machines are needed to power the network. The energy usage of a single nano transaction has been calculated as low as 0.111Wh.”
That means that using Nano is comparable to using IOTA in terms of energy consumption. Once again, your transactions will demand less power than those you make using your Visa or MasterCard.
As with SolarCoin, it is clear from the name that BitGreen is an eco-friendly coin. BitGreen uses proof-of-stake for validation for efficiency. According to its website, “Bitgreen integrates blockchain technology with a moral determination to address the world’s most critical ESG challenges, and do so quickly, heroically and comprehensively.”
In case you are not familiar with the term “ESG,” it stands for “environmental, social and governance.” Basically, it just refers to investing responsibly with respect to those three considerations. Another name for it is “impact investing.”
BitGreen explains that traditional financial institutions often do not invest in projects that help the environment or social causes. The site says, “We want to change this business-as-usual practice by bringing impact investing on-chain, allowing individuals and institutions alike to channel capital to ESG project finance and Ecosystem Credits markets.”
Partnering with ClimateTrade, Algorand has been working toward becoming the “greenest blockchain” according to this ClimateTrade post. Rather than just operating as a carbon neutral network, Algorand wants to become carbon negative.
The post explains, “To achieve a carbon-negative network, Algorand and ClimateTrade will implement a sustainability oracle which will notarize Algorand’s carbon footprint on-chain for each epoch (a set amount of blocks). With its advanced smart contracts, Algorand will then lock the equivalent amount of carbon credit as an ASA (Algorand Standard Asset) into a green treasury so that its protocol keeps running as carbon-negative.”
Just as Cardano has been planting trees as an offset strategy for its carbon footprint, Algorand has been taking a similar approach. That strategy is to support green projects. Examples include the Vichada Gold Standard Climate Project, the Southern Cardamom REDD+ project, the Oaxaca Wind Project, and the Sumatra Merang Peatland Project.
In place of mining, Chia uses a method called “farming.” Instead of proof-of-work or proof-of-stake, it relies on proof-of-space. If you have hard drive space available and a regular home computer, you can participate in farming Chia. At around .023 kilowatt-hours (kWh) per transaction, Chia is pretty efficient and eco-friendly.
Along with the green cryptos above, some others you may want to check into include TRON, SIGNA, HOT, DEVVIO, HBAR, MHC, ONE, XTZ, and FLOW. Over the years ahead, we expect that the list of green cryptocurrencies will grow rapidly.
Cryptocurrencies Can Help Usher in a Greener Future
With the tremendous energy consumption of bitcoin, it is understandable that a lot of people think that crypto is inherently bad for the environment. But you now can see that the truth about cryptocurrencies and climate change is a lot more complicated — and also quite a bit more hopeful than you might have expected.
Here is a Quick Summary of the Reasons to be Optimistic About Crypto and the Environment:
The mass migration of miners geographically in conjunction with the increasing adoption of greener energy means that soon, a lot more mining should rely on renewable energy sources.
Quite a few cryptocurrencies do not rely on traditional mining or proof-of-work anymore. Others are implementing more efficient validation methods as we speak.
There are crypto networks that not only operate efficiently to minimize their carbon footprints, but offset them by planting trees or supporting environmental projects.
With some cryptos, the energy consumption per transaction is actually less than the energy demanded each time you use an old-fashioned credit or debit card.
Cryptos are helping us all get away from big, centralized institutions. Our corporate oligarchy is largely responsible for the climate crisis we are facing. So, extricating ourselves from that system is essential if we want to build something better for ourselves and our world.
If you have been holding off from investing in crypto or using crypto services because of your environmental concerns, you now know you do not have to do be left out.
You can get started with crypto in an eco-friendly way right now by choosing to invest in cryptos that are minimizing their carbon footprints and finding ways to give back to the environment.
Visit our list of recommended exchanges to buy into green cryptocurrencies now.
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