What Makes A Cryptocurrency Eco-friendly?
Cryptocurrencies typically require a vast amount of energy to mine. That has raised concerns about their environmental impact, but the recent rise of “green” coins points to a future where the power required for each transaction may not be as significant. Can crypto be genuinely sustainable?
Eco friendly cryptocurrencies are generally defined as those with a minimal carbon footprint and lower energy consumption levels. The average Bitcoin (BTC) transaction requires around 1997 kWh, which is on the higher end of the scale. In contrast, Ethereum (ETH) is not as resource-intensive at 178 kWh, though experts believe further improvements must be made to major coins.
Fortunately, many newer coins are providing exceptional energy-saving gains, suggesting cryptocurrencies can comply with general environmental standards. Perhaps the most exciting is Nano (XNO), initially launched in 2015 as an antidote to Bitcoin’s “scalability” issues. Nano’s energy consumption is incredibly low at just 0.000112 kWh.
Nano’s industry-leading energy efficiency is derived from its use of an Open Representative Voting protocol, even though it still deploys the same proof-of-work model as Bitcoin. The currency is also very fast with instant, free trades, streamlining the whole process.
Experts believe a switch to proof-of-stake mining will realize even more energy savings. Digiconomist founder Alex de Vries states: “A proof-of-stake network can require 99.95% less energy than a proof-of-work network.” This new type of network puts the onus on miners to validate transactions by staking their crypto shares which differs from the more resource-intensive proof-of-work process.
In addition to Nano, several other coins have garnered a reputation for being sustainable. Stellar is a payment network with its own coin, the Lumen (XLM), which is being pushed as a crypto-based alternative to PayPal, helping people move money between currency pairs and cross-borders. The consensus algorithm it uses minimizes energy consumption.
As the demand for environmentally-friendly alternatives continues to grow, more are likely to be created with green-first credentials. The SolarCoin (SLR) is one of these, opting for a process that actively rewards miners with coins when they use renewable energy sources. While it isn’t widely traded yet, this project highlights how founders are being creative with sustainable currencies.
Chia (XCH) is another example of a green currency as it has been built from the ground up to be less energy-intensive. Chia eschews the proof-of-work process for one that uses hard drives in desktop PCs and laptops to farm coins. This approach makes it accessible for home users who wouldn’t otherwise be able to mine bigger currencies. However, critics have claimed those mining Chia still need new computers, which can contribute to e-waste.
Another factor that can make a particular coin eco-friendly is the initiatives that a founder and the wider community undertake to support sustainable mining. SolarCoin is an example of this, as is Nano, as the ambassador ran a Twitter campaign to plant more trees. As crypto’s ethical considerations become sharper-focused, there is likely to be greater adoption of digital currencies that have a minimal impact on the environment.
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