The history of the creation of eco-friendly cryptocurrencies: from nature to wallet
One of the main concerns about cryptocurrencies including bitcoin and ethereum is their lack of environmental credentials.
The amount of electricity consumed by bitcoin mining a year could boil enough water for all cups of tea consumed in the UK for 30 years, according to the Cambridge Bitcoin Electricity Consumption Index.
But are there any eco friendly cryptocurrency alternatives?
Why is cryptocurrency bad for the environment?
It is the level of computer processing power required to mine cryptocurrency that is worrying environmentalists.
The mining process uses:
Why are NFTs bad for the environment?
NFTs are virtual tokens that use blockchain technology to claim proof of ownership of valuables such as digital artwork and virtual property.
NFTs, or non-fungible tokens, run mainly on the ethereum blockchain system, and their generation consumes a large amount of power.
Selling just one piece of artwork on ethereum has a carbon footprint equivalent to a one-hour flight, according to research.
Are there any eco-friendly NFTs?
There are more sustainable systems in the works. The Ethereum Foundation estimates that a new version of Ethereum (called Ethereum 2.0) will use 99.95% less energy when it is complete.
But the switchover is still some years away.
Why is bitcoin so bad for the environment?
Bitcoin mining has more of an energy consumption each year than Malaysia or Sweden, according to the Bitcoin Electricity Consumption Index, run by Cambridge University’s Centre for Alternative Finance.
Campaigners claim that the impact is exacerbated by the fact that most of the mining takes place in China, which is heavily reliant on coal power.
Bitcoin has been on a rollercoaster ride over the past two years or so. Its price soared during the pandemic; it had gone from about $6,500 in March 2020 to as high as $67,000 in November 2021 before abruptly losing half its value.
The bitcoin price has continued to struggle in 2022, and is currently worth around $31,000 as of May 2022.
If the bitcoin price soars again, so too will the amount of fossil fuel involved in the process.
In 2021, Tesla announced that it had purchased $1.5bn (£1.1bn) worth of bitcoin.
But Tesla founder Elon Musk later added he would not be selling his investment in the world’s biggest cryptocurrency and will instead wait until a more sustainable method of mining has been found.
How bad is dogecoin for the environment?
TRG Datacenters in Texas has analysed a range of cryptocurrencies and ranked them according to the amount of energy required to power each transaction.
Dogecoin used 0.12kilowatts of energy per hour (kWh) per transaction, well ahead of bitcoin, which was at the bottom of the table, using 707kWh.
However, critics claim its true environmental impact is difficult to assess because of the complexity of its mining system.
Six green cryptos
Environmentalists agree that the “mining” of bitcoin uses a worrying amount of fossil fuels.
However, there are alternative, eco-friendly cryptocurrencies that inflict less damage on the planet.
These could potentially allay concerns surrounding cryptocurrency and the environment.
Smaller currencies may often appear to have a lower carbon footprint, but that may simply be because there are fewer transactions. However, there are digital assets that are more energy efficient – which means their environmental impact is reduced.
These cryptocurrencies seem to be the most efficient in terms of their energy requirements, according to research from TRG Datacenters:
Which is the greenest cryptocurrency? Below we outline six cryptocurrencies that are more environmentally friendly than bitcoin.
TRG Datacenters says chia is a good example of a sustainable coin crypto that has been designed to be less energy intensive.
The “farming” process used by chia employs hard drives – a concept known as proof of space – rather than the mining, proof-of-work approach used by bitcoin, which relies on computer processors.
Important points about chia:
IOTA uses the “Tangle”, an alternative form of technology that does not require miners.
It is maintained by smaller devices and, as such, has lower energy requirements.
Unlike cryptocurrencies such as bitcoin, cardano uses a proof-of-stake system called Ouroboros. This requires users to purchase tokens in order to join the network, saving significant amounts of energy.
Important points about Cardano:
TRG Datacenters also highlighted nano, even if it was not included in the energy-use listings.
Important points about nano:
This is a global and independent sustainable cryptocurrency designed to promote the creation of solar energy by rewarding generators with solar coins.
Generators can claim one coin for every megawatt hour created by solar technology.
This eco-friendly crypto was launched as a green alternative to bitcoin.
Like solarcoin, it seeks to encourage positive environmental behaviour by rewarding users for actions including drinking sustainable coffee, car-pooling and volunteering. It can be traded on exchanges or spent with bitgreen’s partners.
New eco-friendly cryptocurrencies on the horizon
As concerns mount over the levels of energy used in the mining of cryptocurrencies, new initiatives are constantly emerging to improve the sector’s environmental credentials.
These include increased use of renewable energy, more energy-efficient protocols and carbon footprint offsetting.
TRG Datacenters says it expects to see the creation of new, more sustainable, eco-friendly cryptocurrencies, as well as big changes in the practices of existing currencies.
The company identifies nano, IOTA and chia as pioneers in eco-friendly cryptocurrency, with a commitment to reducing the environmental impact of transactions.
More than 45 companies and individuals in the crypto, finance, energy and technology sectors have also signed up to the Crypto Climate Accord, which seeks to decarbonise the industry and achieve net-zero emissions from the electricity consumption associated with cryptocurrencies by 2030.