The complex world of cryptocurrency is unsustainable, but some crypto firms are trying to change that. Thankfully, environmentally friendly cryptocurrency is on the rise. Companies including Cardano and Chia are helping the industry achieve sustainability.
The world of cryptocurrency can be complex and a bit mysterious to the average person. There are plenty of online resources you can use to learn about crypto mining and trading.
Now, you can invest in crypto easily with the plethora of apps available on most smartphones. Apps like PayPal and Venmo now have built-in features that allow you to start your investing journey.
However, what the average person may not know is how those transactions are carried out and how much energy is needed to power the world of crypto. To put it simply, cryptocurrency is bad for the environment and will continue to damage the environment unless significant changes toward sustainability occur.
Let’s explore more about the environmental impact of crypto, examples of eco-friendly cryptocurrencies and, lastly, discuss some of the changes needed to make this industry more sustainable.
The Environmental Impact of Cryptocurrency
The Cambridge Bitcoin Electricity Consumption Index provides specific information about the scale of Bitcoin’s electricity consumption. This index tells us that Bitcoin’s energy consumption is off the charts, and mining Bitcoin uses more energy than countries like Sweden or Malaysia does.
Experts say that crypto mining requires this amount of energy because so much mining occurs in China, which relies on coal power, a nonrenewable energy source. The significant negative impact of crypto mining has brought more attention to sustainability efforts in the industry. The issue has become more prevalent, especially with the development of the Paris Climate Agreement.
Participating countries need to do what they can to limit global warming levels to pre-industrial levels, which will take time to accomplish. Making crypto more sustainable is just one way to help meet this goal and create more energy-efficient means of completing blockchain transactions.
Some investors may feel more inclined to invest in environmentally friendly cryptocurrency to be more eco-conscious and support their sustainability efforts.
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Environmentally Friendly Cryptocurrency to Know About
Listed below are five examples of eco-friendly cryptocurrencies that you should know about.
This type of crypto is a proof-of-stake (PoS) blockchain platform that is considered third-generation crypto. It’s designed to be much more efficient and serves as a viable alternative to traditional proof-of-work (PoW) networks. Positioned as a natural alternative to Ethereum, one purpose of Cardano is to provide banking services to the unbanked.
Because of its PoS algorithm, Cardano does not use as much energy as other conventional cryptocurrencies. It requires much less hardware investment, and transactions are still just as secure as when using a PoW network.
A less commonly-known crypto that is also considered more environmentally friendly is Nano. Its value soared back in May 2021 when Elon Musk’s Bitcoin reversal was making headlines. To reiterate, it takes a large amount of energy to mine Bitcoin, whereas there is no mining with Nano.
Because Nano’s process for verifying transactions does not rely on a blockchain, its carbon footprint is fairly negligible, therefore making it an environmentally friendly form of crypto.
Chia was designed to be less energy-consuming, and it has been proven to be successful in that endeavor. The crypto’s value skyrocketed back in May 2021, and the company behind Chia is looking to go public before the end of the year.
The firm behind Chia operates on storage-related blockchain technology rather than traditional PoW networks. Similar to Nano, there is no mining in their verification process.
4. BitGreen/Bitcoin Green
One of the goals BitGreen has is to encourage its investors to engage in sustainable activities, such as using a ride-sharing service or shopping with sustainable or local vendors. They provide rewards when users partake in these activities, and the ultimate goal for BitGreen is to spark policy change.
Bitcoin Green is a more sustainable crypto compared to Bitcoin, which we’ve established is energy wasteful and harmful for the environment.
Last but not least, IOTA is yet another green crypto becoming more prevalent in the crypto industry. Rather than rely on blockchain technology, IOTA uses a cryptography-based verification method called Directed Acyclic Graph (DAG).
DAG allows verifications and transactions to occur in real-time and keep pace with each other, requiring less energy consumption. Not many cryptos use DAG, making it a distinguishing characteristic for IOTA.
Now that you know some green crypto alternatives, let’s explore what changes need to be made to make other cryptocurrencies more efficient and less energy-consuming.
Three Ways Other Cryptocurrencies Can Become More Sustainable
Because of its growing popularity, many will agree that crypto is more than just a trend. It’s here to stay. For crypto to remain, more effort needs to be made to create more sustainable mining methods.
Here are some ways crypto and blockchain technology can change to become more sustainable.
1. The crypto industry needs to set sustainability goals and standards. Generally speaking, the crypto ecosystem is not heavily regulated, meaning emerging startups can use whatever means necessary to get their crypto up and running. However, while this deregulation may prove to be beneficial for some, it does not take sustainability into account.
One effective program trying to spark change within the industry is the Crypto Climate Accord, a private sector initiative looking to decarbonise the crypto and blockchain industries. More initiatives like this could be enough to inspire other crypto firms to use a more sustainable approach to their operations.
2. Crypto firms need to partner with federal or state government organisations. The technology used to power the world of cryptocurrency can also be used in other ways. For example, the United Nations (UN) believes they can capitalise on the transparent nature of blockchain technology. For example, a transparent monitoring system can be used to track and manage resources. If companies are reusing or recycling waste, they can be rewarded for doing so.
3. Expand outside the industry to find viable sustainability solutions. While developing new technologies to support the crypto industry, it’s also possible for crypto developers to coordinate with other sectors to create sustainable solutions.
Take, for example, how crypto interacts with the oil and gas industry. Because oil and gas companies are also looking to be more environmentally friendly, the two sectors can work together to improve internal processes, such as reusing excess oil or gas.
When companies in the oil and gas industry have excess material, they will often flare or vent the oil and gas, releasing greenhouse gases into the atmosphere. Rather than use this disposal process, they can hand over excess oil and gas to bitcoin miners who can use it to power their operations. In Wyoming and North Dakota, lawmakers recently passed legislation that exempts oil drillers from taxes if they decide to participate in this kind of sustainability measure.
Another example worth looking at is how crypto developers store their data. Using some kind of data storage is critical for any developer hoping for success in the sector, as 60% of companies that suffer data loss will shut down within less than a year of the event. However, having excessive numbers of hard drives can lead to negative environmental impacts such as significant electricity use. Cloud-based services can be more sustainable solutions instead.
As these examples show, any means to lower the industry’s energy consumption is a step in the right direction.
Moving Toward an Environmentally Friendly Cryptocurrency Ecosystem
It’s clear that more work needs to be done to create a more sustainable future for cryptocurrency, but much of it remains up to industry leaders and government regulation. It’ll be interesting to see what other sustainability initiatives will emerge as time goes on and if the industry will keep sustainability at the forefront of its missions.
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