To many people, cryptocurrencies are the sole embodiment of energy-guzzling, carbon-emitting computing power – and there’s a solid argument to be made for that.
Mining tokens based on proof-of-work algorithms is indeed a power-hungry process. But it doesn’t have to be this way.
Green cryptocurrencies are an emerging class of cryptocurrency tokens that aim to address the energy and sustainability issues that come with traditional cryptocurrencies.
The proof of stake model, for instance, is a great step in the right direction.
Although eco-friendly coins are yet to dominate the market, they are gradually building momentum, so it may be a good moment to consider them as your next investment.
Before you start your journey, here are five facts you didn’t know about green cryptocurrencies to help you get up-to-speed.
Why Bitcoin Creates A Large Carbon Footprint
Bitcoin is the most popular cryptocurrency, and most of the crypto market’s value is tied up in this coin.
However, it is also infamous for its immense carbon footprint. Bitcoin’s energy consumption is estimated to be around 120 terawatt-hours per year, with the highest exceeding 200 TWh.
At this point, this isn’t anything new. But what is new is the increasing awareness of why this is such a problem.
The main reason is that the “mining” of Bitcoin is done through a process called “proof of work” (PoW), which requires a tremendous amount of computing power for a relatively small reward.
Proof Of Stake As The Next Big Thing
Many web pages have proof of stake explained as a way of avoiding the same energy- and carbon-intensive process as Bitcoin.
In this model, “mining” is replaced by “staking,” which requires much less computing power – instead of competing on often valueless computing tasks, token holders are able to earn rewards for simply holding the coins.
While this is a less energy-intensive process, it still leaves the question of sustainability.
As for now, the market for green cryptocurrencies is still developing, so it’s virtually impossible to make any precise predictions.
However, some sources claim that the staking process is up to 99% less energy-intensive than Bitcoin’s, which, without a doubt, is a great step in the right direction.
Another bonus is that proof of stake is much faster than PoW while also requiring much less hardware, which is something that the computer component market will appreciate.
The Emergence Of Renewable Energy-Based Cryptocurrencies
The energy-intensive process of “mining” Bitcoin made it difficult for people to find a balance between large-scale mining operations and the environment, ultimately leading to bad PR for the entire cryptocurrency market.
But the emergence of renewable energy-based cryptocurrencies is changing this narrative. Estonian WePower is possibly among the most successful green coins.
The team behind it has developed a platform to provide consumers with a decentralized, cheaper electrical grid.
They have partnered with an independent energy provider and created their own cryptocurrency, allowing consumers to buy into their program.
While this may sound like implementing cryptocurrencies and blockchain into other industries just for the sake of it, there is a clear benefit – people are able to buy renewable energy at a much lower rate, creating a scenario in which the blockchain technology actually makes a positive impact in people’s lives.
Exploring Carbon Reduction Projects
The climate crisis is indisputably one of the biggest challenges of our lifetime, and many organizations are looking for ways to reduce their carbon footprint.
Enter crypto carbon credits. While the idea of carbon credits isn’t new, the implementation of cryptocurrencies and blockchain to the process and opening it to individual companies are.
Crypto carbon credits are based on the same principle as traditional carbon credits – a company reduces its emissions, and as a result, they are rewarded with a certain number of credits that can be transferred to other companies.
Alternatively, those companies can allocate a certain amount of funds to the organization that created the carbon credits.
They can even use the credits to purchase goods or services aiming to reduce the impact of climate change.
Green Cryptocurrencies In Carbon Offsetting
As for today, blockchain-based carbon credits are limited by the lack of infrastructure needed to operate them on a larger scale.
This doesn’t mean that green cryptocurrencies can’t be used in combating climate change, though.
In fact, some organizations are already exploring ways to use tokens as a way to minimize the carbon emissions created by their own operations.
In short, carbon offsetting is a preventative action to balance out high levels of carbon emissions that involves contributing to a project or organization that works to lower carbon emissions and have a positive environmental impact.
As such, implementing green coin transfers into campaigns such as the Purus Project or the Carbon Neutral Fund could be a great way to ensure that the funds are being allocated in the most efficient way in order to reduce the impact of climate change.
The question of whether using Bitcoin to fight climate change is a good idea or not is still up for debate.
But one thing is certain – green cryptocurrencies backing away from the resource-intensive image of Bitcoin are slowly but surely emerging.
Final Thoughts
It is safe to say that digital currencies are now not a matter of choice but of necessity.
However, the high resource use of cryptocurrencies such as Bitcoin created this notion that tokens, in the form they are today, are not efficient enough to replace traditional payment systems.
But green cryptocurrencies are challenging this perception, and it is possible that, soon enough, they will become a significant driving force behind the blockchain revolution.
Whether through proof of stake-based tokens, renewable energy-powered coins, or carbon offsetting projects, eco-friendly coins are slowly gaining momentum, and it may be a good idea to start paying attention to them.
Ella Marcotte
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