The rise of blockchain technology and cryptocurrencies has disrupted plenty of industries and day-to-day processes, including our means of purchasing goods and services. Cryptocurrencies, in particular, are popular because they are unregulated, meaning they are beyond the control of any government body. This is made possible by blockchain technology, which manages and records transactions and ensures security of users.
However, cryptocurrency mining consumes immense amounts of energy, causing a huge environmental problem. Because blockchains require transaction verification, based on the proof-of-work algorithm, using them for mining cryptocurrency entails processing power and electricity. This increase in the demand for electricity, in turn, means an increase in fossil fuels.
In 2019, 84% of the world’s energy consumption was supplied by fossil fuels, led by coal and oil. Moreover, just last year, the energy required to mine Bitcoin was greater than the total energy consumption of 159 individual countries. Thus, environmental sustainability in cryptocurrency is crucial if we wish to reap the benefits of the technology in the years to come.
To address that need, here are two ways blockchain technology is made more sustainable, which aspiring crypto investors may find appealing.
Even now, the adoption of green investment vehicles in the market is still hindered by factors such as high transaction costs, or the cost of obtaining a green label certification, and high minimum investment size, or the required minimum value of investment. But blockchain technology opens the doors for addressing these long-standing barriers.
With blockchain, security token offerings (STOs) have recently emerged. These are representations of digital tokens on a blockchain platform. STOs increase both the demand and supply of green investments. On the demand side, the enhanced transparency brought by blockchain encourages more investors and donors, while on the supply side, STOs bring significantly smaller investment sizes and allows small- to medium-sized enterprises to finance projects.
In this way, tokenizing assets, when run on sustainable blockchains, can make a huge difference both in investor portfolios and the environment.
Cryptocurrencies are also making the move towards sustainability. Although many think of Bitcoin as synonymous with cryptocurrency, the world of crypto is so much bigger than that. Since its creation in 2009, more and more cryptocurrencies have been created, key among them being Ethereum and Ripple. And as of January this year, there are an estimated 4,000 kinds of cryptocurrencies around the globe.
Here are just a few of the rising eco-friendly cryptocurrencies.
Unlike traditional cryptocurrency mining, Chia uses the concept of “Proof of Space and Time,” which was created by Bram Cohen, the inventor of BitTorrent. This concept just requires users to install the software in the empty storage of your hard drives, laptops, or desktops. Once the software is installed, you will be allocated an amount of unused disk space to create plots. After the plotting is complete, the software will do all the farming and tracking of rewards for you.
SolarCoin is just like any other cryptocurrency — you can spend and trade it without the need for authorization. However, what sets it apart from the others is that SolarCoin aims to incentivize solar energy. For every megawatt hour generated from solar power, a SolarCoin is produced. Although right now, the network still relies on documentation from users who generate this sustainable energy, there will be innovations in this process in the years ahead.
Although Nano is relatively new, launched in 2015, it is now climbing the charts with its relatively small carbon footprint. Because it uses block lattice technology, transactions are almost instantaneous, only taking as much as three seconds. Also, the Nano platform simply involves the sender and receiver account-chains, instead of powering up an entire linear blockchain just to do transactions.
Stellar aims to seamlessly connect traditional financial institutions and digital currencies. Using the network, you can exchange any fiat money and cryptocurrency. The network’s token, Lumens, is used to facilitate blockchain-based transactions with great efficiency, which then results in a lower carbon footprint. Another notable feature is its open-source protocol, meaning it relies on the authentication of previous transactions rather than running through the whole network as a proof of work.
Believe it or not, the meme-powered cryptocurrency Dogecoin is actually less energy-consuming than its predecessors. With its use of the Scrypt algorithm, it only needs 0.1 kiloWatt hour (kWh) of electricity per transaction. That is significantly smaller than the 650 kWh needed for every Bitcoin transaction. In fact, after Tesla founder Elon Musk stopped supporting Bitcoin because of its environmental impacts, he boosted Dogecoin and even hinted at using it in a more serious manner.
As our awareness on cryptocurrency’s environmental impact increases, we can no longer turn a blind eye and just continue with the transactions we are used to. With our goal of making the world a better and healthier place, we should all be mindful of our actions, and in this age, that includes carefully choosing which technologies and currencies we should invest in. Always remember to spend time researching and weighing your options before committing to, hopefully, an eco-friendly solution.
exclusively written for brickken.net
by Roxanne June