First things first: Cryptocurrencies aren’t 'green', and never will be.
While there are plenty of efforts to reduce the carbon footprint of crypto mining, it won’t be completely sustainable in the long run. As of June 2021, Bitcoin alone has roughly the same amount of annual carbon footprint as the whole country of Morocco.
With the industry growing exponentially in terms of investment value and the number of investors, these numbers will increase even more. However, it doesn’t mean that other cryptocurrencies aren’t trying. Some cryptos try to depend less on fossil fuels and use more renewable energy sources such as solar, wind, and geothermal.
It’s possible to reduce your personal carbon footprint and invest in cryptos at the same time. You just have to know which cryptocurrencies use eco-friendly methods that won’t impact the environment harshly. Here’s a list of the greenest cryptocurrencies this 2021.
TRG Datacenters — a research data centre based in Houston — revealed the most popular eco-friendly cryptocurrencies based on the kilowatt-hour (kWh) consumed per transaction. Some smaller cryptocurrencies that don’t offer any information aren’t included in this list.
Aside from the above list, some smaller cryptocurrencies are also great green alternatives. Since they’re smaller in value and number of investors than their competitors, then they're worth your research and see if they fit in your portfolio.
Do note that this is in no particular order.
With sustainability being a big concern, crypto investors and traders now promote cryptocurrencies with the environment in mind. They often say that cryptocurrency is more energy-efficient than other investment types. However, these claims may not be true at all.
Often, backers of cryptocurrencies can deceptively say that they’re eco-friendly. That’s why it’s important to do some digging and factor in these things:
Alex de Vries, a data scientist and founder of Digiconomist, says people should research how cryptocurrencies are mined. Usually, a cryptocurrency that uses proof of work (PoW) uses more energy than those that use proof-of-stake or storage (PoS). Although, PoS isn’t energy-efficient by any measure.
A cryptocurrency that mines using PoW like Bitcoin encourages miners to lend their computing power to crack the encryptions. As these can be difficult to decipher over time, so much effort and energy are required to solve them. This is a security feature of Bitcoin, so no one dares to manipulate the system. However, this same feature also makes it unsustainable.
On the other hand, a cryptocurrency that mines through PoS can be up to 99.95% more energy-efficient, according to de Vries. Instead of cracking the encryption, minders are required to use their own shares of cryptocurrencies to validate transactions. This rewards those who provide accurate information and punish those who provide false information.
The caveat is, PoS is likely to incentivise the overuse of hard drives. This creates an e-waste disposal problem, which can be as harmful to the environment as mining through PoW. Still, cryptocurrencies that mine using PoS can prove to be greener and more eco-friendly.
Another important thing to consider is the energy sourced in mining these cryptocurrencies. Mining cryptos through PoS doesn’t make much of an environmental improvement if it uses fossil fuel as an energy source. It’s worth taking into account which energy sources are used to run these mining operations, regardless of their methods.
However, this is easier said than done. Some large mining operations disclose their energy sources, but this can be inaccurate most of the time. What’s more, some smaller operations don’t publicly declare their energy sources used. Even if they use renewable energy on hardware, you never know if they use harmful energy to power other parts of their operations.
That’s why cryptocurrencies try to be more eco-friendly and greener. Supporters of Bitcoin have said that cryptocurrencies are now mined using renewable energy sources. However, researchers from the University of Cambridge found that these claims are false. Bitcoin is still mined using harmful energy sources like fossil fuel.
Once you decide to start your crypto journey, it’s important to remember that you’ll harm the environment in one way or another. It’s worth taking this into consideration before pooling your money in the crypto market.
Greenwashing is a common practice for all kinds of industries — not only with cryptocurrencies. This is advertising a product as eco-friendly and sustainable, even if it isn’t. It’s especially prevalent nowadays as a lot of people become extra wary of their energy consumption.
What’s more, there’s always a conflict of interest between increasing the value of crypto and sustainability. Whenever the value of crypto goes up, there’s always an increase in activity, driving up energy consumption. During the price increase this February, Bitcoin saw an increase of more than 163% in energy consumption, from 265 TWh to 433 TWh.
Leigh Matthews, Head of Research at LeafScore, says “Just because a coin's founders or super-fans say it's ‘green’ or offer up comparisons to Bitcoin doesn't make it so.” Ultimately, there’s no absolute way to tell whether a crypto is greenwashed. It’s up to you to decide.
Cryptocurrency is here to stay for good — there’s no question about that. Sustainability is also bound to get bigger and more mainstream — there’s also no question about that. Sustainability and cryptocurrency shouldn’t be separate factors. That’s why cryptocurrencies need to develop more environmentally friendly mining processes.
Cryptocurrencies need to adapt to the greener standards to grow the industry without hurting the environment. In December 2020, Ethereum launched Beacon Chain, marking the shift in their network. Ethereum 2.0 now stores, manages, and mines through PoS. It’s running alongside the original chain, with full implementation in 2022.
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