Cryptocurrency: How sustainable can it be?
Original article published here.
While cryptocurrencies depend on the use of energy to generate their value, environmentally friendly cryptocurrencies do exist. These green crypto options offer a low carbon footprint — and can even provide real benefits for the environment. Finding the most energy-efficient cryptocurrency can help you to make environmentally responsible decisions about your investment strategies. This, in turn, can promote a greener future for the entire planet. Here’s an introduction to the basics of sustainable cryptocurrency for investors.
Do Cryptocurrencies Use a Lot of Energy?
Some cryptocurrencies use a lot of energy because they require substantial computing power on the part of nodes to solve extremely complex mathematical problems. This is how the nodes provide proof of work (PoW) to support the value of the cryptocurrency. For example, Forbes notes that much of Bitcoin’s energy use can be attributed to its adoption of a PoW verification system.
PoW systems award cryptocurrency only to the computing system that offers the final piece of a computation puzzle, which means that a large portion of the work and energy expended by numerous nodes will be wasted. By contrast, proof of stake (PoS) systems require a small investment on the part of miners, who are then allowed to enter a lottery to verify transactions.
Transitioning from PoW to PoS systems will significantly reduce the energy needed to generate cryptocurrency. For green-conscious investors, finding low-energy cryptocurrency options can provide additional ways to save energy and protect the planet.
Which Is the Most Environmentally Friendly Cryptocurrency?
When determining the environmental impact of various cryptocurrencies, it’s important to note that energy consumption is not necessarily equivalent to carbon emissions. The Harvard Business Review indicates that Bitcoin consumes about 110 terawatt hours (TWh) of electricity per year, which is roughly equivalent to one-half of one percent of annual worldwide energy production. For investors seeking sustainable cryptocurrency, there are some much better choices available in the green crypto marketplace. The following includes 19 of the best options for environmentally friendly cryptocurrencies in the financial marketplace.
Rather than generating value by performing computations or solving puzzles, SolarCoin cuts directly to the heart of green crypto by creating one SolarCoin for every megawatt of electricity generated by solar power through its network. This incentivizes the use of solar power while ensuring a low carbon footprint for miners, investors and solar power proponents.
SolarCoin can potentially be a solid source of income for those who create significant amounts of electricity through the use of solar panels. The relatively low return on this cryptocurrency, however, makes it somewhat less attractive for investors looking to make money in the sustainable cryptocurrency field. SLR is essentially a specialty low-energy cryptocurrency designed for those in the solar power industry.
BitGreen offers an environmentally friendly cryptocurrency, with incentives for green-friendly behaviors like carpooling, biking, and consuming sustainable products. BitGreen can be spent at vendor sites which partner with this eco-friendly crypto. Additionally, BITG is traded on exchanges and operates on a PoS system.
BitGreen is a direct alternative to Bitcoin. While it hasn’t yet achieved the same legendary status, BitGreen does show promise for profitability and sustainability into the future, both financially and environmentally.
Designed specifically to reduce the energy costs of generating crypto, Chia (XCH) is an environmentally friendly cryptocurrency which utilizes farming, rather than mining, to create value. This significantly reduces the cost in energy per transaction, bringing it down to 0.023 kilowatt-hours (kWh) and securing a spot for Chia as a low-energy cryptocurrency option.
Chia coins are farmable on hard drives and use a concept called proof of space (also abbreviated PoS), rather than proof of stake or proof of work. This allows home users to implement a Chia farming project that can earn them coins without using a great deal of energy. The one environmental drawback of Chia is its ever-expanding need for hard drive space and storage, which can create artificial demand for hardware and increase the amount of electronic waste that’s generated in the consumer marketplace.
The ability of individuals with minimal computing resources but plenty of hard drive space to farm Chia has made it a popular cryptocurrency. Chia features a decentralized network, and allows farming through the cloud platform of Amazon Web Services. This is a much more efficient method for generating profits and earning cryptocurrency than that of most PoW platform models.
With a low carbon footprint of just 0.00011 kWh per transaction, IOTA is a truly environmentally friendly cryptocurrency. The system used to generate IOTA operates using the Tangle, a system of nodes that confirms transactions within the low-energy cryptocurrency. Consequently, IOTA works more quickly and with lower energy consumption than many other blockchain producers. As a distributed ledger, IOTA also benefits from partnerships with major retailers like Volkswagen and Bosch to create value in the sustainable cryptocurrency marketplace.
IOTA has had its ups and downs. It is, however, currently on the upswing, thanks to its robust relationships and its unique and innovative approach to generating value. This makes IOTA a solid buy for investors looking for environmentally friendly cryptocurrency options. It’s also a popular answer to the question of which crypto uses the least energy per transaction in the financial marketplace.
Cardano is an eco-friendly crypto option that expends only 0.5479 kWh per transaction. This makes it one of the most environmentally friendly cryptocurrency options currently available. Cardano relies on PoS rather than PoW, significantly reducing its use of energy and ensuring a low carbon footprint for this green crypto. Some estimates put Cardano’s energy use at just 0.01 percent of that used by Bitcoin for the same type of transaction.
Cardano’s carbon-neutral stance has made it a popular sustainable cryptocurrency, significantly improving its overall outlook. For those seeking environmentally friendly cryptocurrency, Cardano offers a great compromise between sustainability and profitability in the current green crypto environment. As one of the largest crypto platforms, this low-energy cryptocurrency is an outstanding investment option for both risk-averse and green-conscious crypto traders.
When it comes to which crypto network uses the least energy, Nano has a good claim. With an expenditure of just 0.000112 kWh, it’s a significant step down from the energy used by giants like Bitcoin and Ethereum. Nano uses block lattice technology to make its PoW system less costly in terms of energy use. Accordingly, Nano is regarded as one of the top contenders, if not the most energy-efficient cryptocurrency, due primarily to its decentralized network and its low energy expenditures per transaction.
Many industry experts and financial analysts are predicting an increase in value for Nano over the next few years. While the current price point is above $5, this is expected to quadruple (or more) by 2025. If you’re looking for an energy-sustainable crypto option, Nano is an outstanding choice that makes sense now and going forward.
Ripple has become an eco-friendly alternative to many of the larger cryptocurrencies. Because Ripple doesn’t use PoW, it can achieve much greater efficiency in terms of the energy used and the production of crypto. Ripple has pledged to go carbon-neutral by 2030, a lofty goal — and one that sets it apart from many of the other environmentally friendly cryptocurrency options currently available. Ripple’s consensus model requires that each transaction be approved by a group of trusted validators, which reduces the amount of work and energy needed for verification.
Ripple began with 100 billion coins and has been releasing them over time, which makes it a stable addition to any sustainable cryptocurrency portfolio. Additionally, with an energy expenditure of just 0.0079 kWh per transaction, Ripple has earned its place as one of the most energy-efficient cryptocurrency products in the competitive financial marketplace.
DogecoinDogecoin is a decentralized cryptocurrency with a very large community. The name “Doge” originates from internet mem... (DOGE)
Although Dogecoin was initially created as a joke, it’s been cited by Tesla CEO Elon Musk as one of the top cryptocurrencies considered as a green crypto alternative to Bitcoin. Its use of PoW consensus reduces its efficiency compared with some other options in the green crypto environment. In May 2021, Elon Musk stopped accepting Bitcoin in payment for Tesla products. The very next day, however, he announced that he would be collaborating with the creators of Dogecoin to improve its energy efficiency and to make it a more sustainable cryptocurrency for use in investments and transactions.
Dogecoin’s energy use is estimated at 0.12 kWh per transaction, which is far from the most energy-efficient cryptocurrency rating currently. However, Dogecoin is looking to improve its environmental status, and is one of the top seeds in the low-energy cryptocurrency sector. With the help of Elon Musk and other fans of this eco-friendly crypto, Dogecoin may have the staying power necessary to cement its place as an environmentally friendly cryptocurrency.
Stellar Lumens (XLM)
Rather than opting for PoW or PoS, Stellar Lumens (XLM) has circumvented the need for proofs altogether by establishing trustworthy nodes through which it authenticates its transactions. The Stellar network was founded in 2014 as an offshoot of Ripple. This environmentally friendly cryptocurrency platform is rapidly taking its place as a viable alternative to PayPal for financial transactions. Additionally, since the Stellar Development Foundation is a nonprofit funded by public donations, Stellar Lumens eliminates many of the fees associated with network maintenance and cross-border payments.
Stellar is a distributed technology ledger. This means that other currencies can be exchanged on its platform, with XLM being used to facilitate these trades. An open-source consensus protocol speeds the processing of trades and eliminates the need for verification of trades and transactions. Banking institutions in France, India, Ukraine and the Philippines have already engaged with Stellar Lumens, which should help make it a solid choice for investors.
The efficiency of the Stellar network makes it a popular choice for investors seeking a carbon-neutral cryptocurrency. It also makes it possible to create tokens, which allows for the establishment of sustainability initiatives and incentives. In this way, Stellar Lumens can positively impact the environment far beyond its use of energy to create value.
EOSIO takes a community approach to environmentally friendly cryptocurrency. Using pre-mining to save energy, this public blockchain is based on Graphene technology and uses delegated proof of stake (DPoS) and consensus algorithms to verify transactions. It promotes the fastest and most efficient use of electricity in creating low-energy cryptocurrency for end users and investors. EOSIO is more than 66,000 times as efficient in energy use as Bitcoin, which puts it in the top rank of eco-friendly crypto investments.
In addition, EOSIO recently announced the launch of Bullish Global, a subsidiary that’s dedicated to creating a new exchange for blockchain-based cryptocurrency. EOSIO already offers more than 400 applications, and is responsible for about 85 percent of public blockchain activity across 15 public networks. This alone would seem to suggest that EOSIO is likely to be around for some time as an active and valuable cryptocurrency.
With headquarters in both Singapore and San Francisco, TRON states that its goal is to build infrastructure to decentralize the Internet. Founded in September 2017, the TRON Foundation is a nonprofit organization that manages TRON’s platform and network. Under the leadership of Justin Sun, TRON uses pre-mining to produce eco-friendly crypto, and to allow application creators to share directly through the TRON platform. TRON also uses PoS methodologies to further reduce energy consumption.
TRON has seen some highs and lows since its initial launch. Currently, however, the company’s star appears to be ascending, thanks to its acquisition of BitTorrent in February 2019 — and to its ability to perform 2,000 transactions per secondTransactions per second (TPS) is the number of transactions a blockchain network can process each second or the number o... (TPS) with relative ease. Investors could do worse than to keep an eye on this environmentally friendly cryptocurrency over the next few years.
Weighing in at 18.52 kWh per transaction, Litecoin is definitely not the most energy-efficient cryptocurrency. Created in October 2011, Litecoin was based on Bitcoin’s open-source code. It’s somewhat more efficient than Bitcoin, thanks to its faster block generation rate and its scrypt-based PoW system, which operates much more securely and provides greater privacy for investors and users.
As one of the major players in the cryptocurrency marketplace, Litecoin is worth mentioning as an alternative to Bitcoin since it offers improved energy efficiency. Its established reputation in the financial field makes it a fairly safe bet for investors who are looking for significant returns on their initial investments. For those seeking an environmentally friendly cryptocurrency, however, it’s possible to do better than Litecoin.
On April 22, 2021, Algorand announced that its blockchain had become carbon neutral. Algorand operates based on pure proof of stake (PPoS) combined with smart contracts, which is one of the fastest and most energy-efficient methods for verifying and generating value in the cryptocurrency marketplace. Algorand is currently partnering with a Spanish financial technology firm, ClimateTrade, to create a CO2 marketplace for industries.
With a current target of sustainability and a carbon-negative network in the near future, Algorand looks like a real contender in the low-energy cryptocurrency market. Founded in 2019, the platform had achieved nearly a million transactions each day by the end of 2020. Algorand’s newcomer status, however, may be a deterrent to some investors who may be looking for a safer bet when planning where to put their money. Overall, the green-friendly credentials offered by Algorand are a primary selling point. Profit-minded investors, however, may find other low-energy cryptocurrency options more appealing in the short term.
Another entry in the PPoS sector of the cryptocurrency field, MetaHash is just one component of a four-part project that also includes MetaGate, MetaApps and TraceChain. These platforms work together to create value and to generate MetaHash Coin (MHC), which can be traded or used to pay for transactions. Miners can use relatively low-powered computing systems to participate in the MetaHash network, which ensures a steady supply of support for this low-energy cryptocurrency.
While the speed of the MetaHash network is its primary claim to fame, MetaHash also boasts one of the most secure platforms. With multiple PoS mechanisms, the network integrates multi-layered validation to verify transactions.
Ethereum 2.0 (ETH)
Ethereum is the second most popular cryptocurrency platform in the world. Launched in 2015, the Ethereum network currently operates on a PoW model, similar to Bitcoin. Over time, the network’s growth has led to both inefficient energy use and slower processing times for transactions, creating higher transaction fees for users and increased use of limited energy resources. It’s estimated that Ethereum mining is responsible for the expenditure of 372 TWh of electricity each year. This amounts to 62.56 kWh per transaction, making the initial version of Ethereum one of the least energy-efficient options in the cryptocurrency marketplace.
This excessive energy consumption, however, is set to end with the rollout of Ethereum 2.0, which is already underway. This upgrade will incorporate sharding, a process that decentralizes and splits up the chains currently on the Ethereum network to reduce congestion on this platform. Ethereum 2.0 (also known as Eth2) will also feature the switch to PoS verification and validation, which is a significant shift from its previous unwieldy PoW methodology. Once this part of the rollout is complete, Ethereum 2.0 will implement smart contracts to streamline its processing systems to an even greater degree.
While Eth2 is unlikely to become a top contender in the green cryptocurrency market, its dominant position and the major changes the platform has planned make it worthy of inclusion on this list. It’s not known how efficient these changes will make Ethereum 2.0 after the transition. However, internal sources are estimating that these alterations to the platform will achieve an increase in efficiency of about 100 percent, which is a significant improvement over the current Ethereum paradigm.
Previously known as Burstcoin (BURST), Signum inherited a legacy of innovation with the Turing-complete smart contracts integral to the platform. Signum uses proof of capacity (PoC), rather than PoW or PoS, and has done so since 2014. This allows Signum to save a considerable amount of active energy, which in turn reduces the use of electricity to generate SIGNA for trading. As Burstcoin, the company reported a low energy expenditure of 0.2 kWh per transaction.
Hedera Hashgraph (HBAR)
Originally designed to handle in-application payments and micropayment transactions, Hedera Hashgraph has evolved to become one of the most sustainable cryptocurrency options. Hedera Hashgraph is powered by a PoS public network that consumes very little bandwidth. This eco-friendly crypto is rated at 0.001 kWh per transaction, which compares very favorably with many other environmentally friendly cryptocurrency options currently available to investors. Hedera Hashgraph is overseen by the Hedera Governing Council, which includes representatives from up to 39 organizations and companies that have included Google, Deutsche Telekom, LG and Boeing.
Hedera Hashgraph has entered into a partnership with Power Transition, producing and developing sustainability projects. These include the delivery of much more efficient energy options to homes in the United Kingdom and the reduction of charging costs at electric vehicle charging stations through the use of the Hedera Token Service, which can make ownership and operation of electric vehicles much more affordable.
Based in Australia and founded in May 2016, Powerledger raised about $26 million in 2017 during its initial coin offering. This renewable energy blockchain platform advertises itself as a modernized and market-driven grid. Powerledger offers consumers a viable choice in the environmental responsibility of the power they use and the distribution of excess energy through sales and trades on the Powerledger platform. Traders can purchase or sell units of electricity known as Sparkz, which allows a more equitable distribution of renewable energy among those participating on the platform.
Powerledger recently announced a partnership with Tata Power-DDL, the largest integrated electricity company in India. This move has spurred added interest in Powerledger and has boosted its sale price to a significant degree.
The democratic approach taken by Tezos allows stakeholders to vote on changes and upgrades based on the number of tokens they hold. Tezos uses a modified PoS system which rewards innovation, compensating those who submit successful proposals for improvements to the platform. With about 400 block-validating nodes, referred to as bakers, the Tezos platform has been chosen by several brands and artists as a market for non-fungible tokens (NFTs). Both Red Bull Racing and OneOf, a music NFT system with the support of Quincy Jones, have elected to distribute their NFTs through Tezos.
Based on open-source blockchain protocols, Tezos is constantly evolving and updating based on input from its users. Tezos estimates its annual energy consumption at 0.00006 TWh, which brings it in well below the figures announced by Bitcoin and Ethereum for the same basic period of time. For investors seeking a greater degree of influence over the way in which their low-energy cryptocurrency is managed, Tezos is a solid choice that looks to have the staying power necessary to produce profits now and into the future.
The Bottom Line
For investors, finding the most energy-efficient cryptocurrency can minimize the environmental impact of these financial outlays. New cryptocurrencies are being developed and released on a continuing basis. By performing the necessary due diligence and investigating the available options, investors can enjoy the benefits of cryptocurrency trading while taking steps to protect the environment at the same time.