Mining cryptocurrencies is an energy-consuming process. The way blockchains validate transactions and allow cryptocurrencies to function needs plenty of power, too.
However, does that mean that crypto and blockchain technologies are environmentally destructive? Many people think that is the case.
But if we take a closer look, we will find that the idea of a green crypto space is not only possible — it’s being developed as we speak and already looks promising.
In short, three main factors contribute to high electricity consumption related to cryptocurrencies.
Although high electricity use was not the intended route for cryptocurrencies, nor was it the goal of Satoshi Nakamoto when inventing Bitcoin, as reports show, in 2021 Bitcoin mining alone consumed more electricity than countries like Norway and Bangladesh:
And, as another more recent comparison shows, the kilowatt-hours needed for a single Bitcoin transaction are quite a bit more than the kilowatt-hours needed for 100 000 VISA card transactions.
“The closer Bitcoin gets to its supply limits, the computing power — and therefore energy — needed to mine goes up incrementally. The BTC mining difficulty or amount of computing power being applied to mine Bitcoin reflects that: Bitcoin mining in, say, 2014 — when there were less Bitcoin in circulation — was easier and less energy-consuming than in 2021.” Statista
Bitcoin and other cryptocurrencies are acquired through a process called ‘mining.’ That is a process in which computers, called ‘mining rigs,’ solve complex mathematical problems. In the case of Bitcoin, for example, the fewer Bitcoins remain, the more complex the mining process.
As the mathematical problems become more difficult, the mining process gets tougher because it now takes more time to solve those problems. To solve them faster, miners need better equipment. Such equipment requires high-end materials, for example, advanced video graphic cards and chips — materials in high demand across many industries, meaning they can be hard to find. At the same time, the more powerful the rigs, the more electricity they need to operate, and so the cycle goes. And now, on top of that, imagine thousands upon thousands of people mining cryptocurrencies and thousands upon thousands of validations within the blockchain.
The problem is that much of the world’s energy infrastructure still relies on fossil fuels, regardless of the continuous climate warnings. Either way, alternatives are coming to the rescue. Both established and newly created cryptocurrencies are going green in an inspiring way to address the issue.
While we may never know who Satoshi Nakamoto truly is, perhaps, it’s safe to say they did not foresee that Bitcoin mining would become an entire industry itself.
But as our civilization proves, when an industry gets big enough, it begins to innovate in exciting new ways. The same goes for Bitcoin mining.
57% of crypto mining is done using renewable energy today, and the number is growing.
These energy innovations are not happening in a vacuum — cryptocurrency mining is rewriting the rules on how to run an industry on green energy, and other industries are taking notice.
The mining process has a proof-of-work (PoW) concept — the value is created on the blockchain by a computer correctly solving an algorithmic problem and declaring that to the network.
However, since the invention of cryptocurrencies, the technology and the philosophy about what makes crypto valuable have also evolved. That’s why the proof-of-stake (PoS) concept has become so popular. Since there is no need for mining rigs in PoS, it has gained traction because of how energy-efficient it is, compared to mining or PoW.
Most famously, Ethereum — the second most popular cryptocurrency in the world — has recently shifted from proof-of-work to proof-of-stake not only to be more inclusive to different people with different computer hardware — but also — to make Ethereum a more energy-efficient cryptocurrency.
Because so many other altcoins (cryptocurrencies other than Bitcoin) use the Ethereum Network, this has a radical and revolutionary effect on the entire crypto ecosystem and our planet.
Bringing green thinking into the crypto world isn’t just about changing how the value is created on the blockchain or the technology that fuels its computing power.
Many cryptocurrencies today are being developed with the express intention of either enabling environmental innovations or simply using far less energy in their value and exchange protocols. Below are some examples of success stories.
The smart thinking behind SolarCoin provides an added incentive to those who already generate solar energy in their homes and businesses.
SolarCoin provides blockchain cryptocurrency tokens on the Ethereum Network in exchange for verified solar electricity generation. It essentially pays individuals for generating solar power, adding further value to an already wholesome process.
SolarCoin’s goal is to make generating solar electricity free or even profitable for individuals. It is a grand ambition but represents the fresh thinking we need to keep the environment safe.
Nano uses blockchain programming that eliminates the need for excessive energy use. It is still a decentralized cryptocurrency, but the way exchanges are validated on the network uses far less energy than almost any other crypto asset.
Not only is Nano sustainable, but it is also very practical. When Nano is spent or received, there are zero fees whatsoever for using the network — pretty appealing to plenty of customers and businesses alike.
Changing the game altogether, Chia is a cryptocurrency that abandons the need for mining on energy-intensive computer hardware. Chia simply uses hard drive space for mining and transactions.
While this has had the predictable result of driving up demand for big hard drives, Chia’s choice of technology is not as power-hungry as server rooms packed with graphics cards or dedicated ASIC miners.
Although only created in 2019, Algorand has become a popular cryptocurrency and a shining example of environmentally friendly thinking in the shape of a blockchain asset.
Algorand has used a very energy-efficient proof-of-stake consensus system since the very beginning. Its creators have stated, on numerous occasions, that they want Algorand to be not only a carbon-neutral cryptocurrency — but a carbon negative one.
To meet that goal, Algorand and its team often reach out to corporations worldwide to find ways to drive environmentalism forward. The underlying technology helps ensure Algorand nodes and exchanges generate barely any energy demand. The idea of actually reversing carbon footprints altogether is just as exciting.
While many computer scientists and software engineers are incredibly excited about Web3 today, the fact that so much of that ambition requires blockchain technology has caused some critics to point out that the energy cost of Web3 is far too high.
Not content to let the dream die so soon, Mina was created as a blockchain token solution that uses mere kilobytes of computing power.
Blockchains increase dramatically in size over time. For example, the blockchains of Bitcoin and Ethereum are hundreds of gigabytes today, but Mina’s is locked to never rise above around 22 kilobytes.
To put that into perspective, the document containing this article and its images is larger in size than the entire Mina blockchain file.
Green crypto assets are designed to have far more energy-efficient blockchains, but GreenTrust goes even further.
While the technology powering its blockchain is carbon neutral, the token itself is designed to empower and inspire businesses and individuals to offset their carbon footprints.
The organization behind GreenTrust takes pragmatic steps to improve the environment — for every 600 GNT transactions, they plant a tree.
As concerns about the environment continue to grow every day, we need to ask:
What does the future hold for energy efficiency and cryptocurrencies?
The good news is that the green cryptocurrencies above are just a few examples of the ongoing innovations in energy-efficient blockchain technology development.
However, we need to be cautious — when people think of crypto, they think of Bitcoin first and foremost. The biggest cryptocurrency is also the one that started it all and that means that the spotlight will continue to be on Bitcoin more than anywhere else.
The steps being taken by Bitcoin mining as an industry today toward using sustainable energy sources are remarkably inspiring and, hopefully, they will continue to spread over to other energy-intensive industries, too.
Ethereum’s shift to the more energy-efficient proof-of-stake protocol means that the second most popular cryptocurrency — and all the assets using its network — have already made a significant improvement in that direction.
All that is very exciting, but only consistent innovation will make crypto green through and through, and there is still much work to do.
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