What Does Eco-Friendly Crypto Mean?
Crypto's energy consumption is an issue in our nowadays situation when almost everyone is talking about sustainability and being eco-friendly. Some highly influential, trend-setting people like Elon Musk, who stopped bitcoin payments at Tesla because of the crypto's environmental impact, want the crypto industry to adapt the concept of being environmentally harmless. Or at least minimize a harmful impact.
Projects are looking for ways to solve the problem, from moving to less energy-intensive validation systems to trying renewable energy-based mining. Look at Ethereum, a leading cryptocurrency project that is migrating from proof-of-work (PoW) to a proof-of-stake (PoS) system to reduce its total energy consumption by 99.95%.
Unlike PoW, PoS picks validators based on the number of the project's native tokens they lock away in a staking smart contract. The more tokens a user locks away, the higher the chance they have of being chosen by the protocol for adding new data to the blockchain.
The selected validators receive a reward for their participation, some amount of freshly minted tokens. The hardware requirements are mainly why this system is better than crypto mining. They are way lower, so more people can become validators. This increases a project's decentralization and improves the network's security. It also reduces the amount of required energy to power the network.
Financial incentives are also growing to improve cryptocurrency's carbon footprint, and environmental policies strongly impact investors' decision-making process. Hence, regulators strengthen their focus on crypto energy use.
For example, the Crypto Climate Accord's goal is to have all blockchains powered by renewable energy by 2025, and they wrote a 32-page audit document about the environmental impact of cryptocurrency. The Bitcoin Mining Council has recently surveyed 32% of its network and claimed its users were mining with a 67% renewable energy mix.
Reasons Why Cryptocurrency Could Be Bad for the Environment
When people mine crypto they:
- Use high-powered computers to compete to validate transactions to get a reward;
- Spend massive amounts of electricity to power difficult algorithms;
- Use such non-renewable energy sources as coal, which is the dirtiest fossil fuel.
Top 5 Sustainable Crypto
Let's look closely at some projects that are trying to minimize harm to our environment while boosting a brand-new economy and building a brighter future.
Solana Coin is considered to be eco-friendly. It doesn't depend on energy to verify transactions because it's a decentralized Proof-of-Stake cryptocurrency.
Instead of energy-consuming mining that affects the environment, the proof-of-stake model simultaneously keeps the Solana network safe and environmentally sustainable.
One Solana transaction uses only 0.00051 kWh or 1837 Joules. That's close to Google, with one search within the engine using just 1080 Joules. The Solana Foundation is still seeking perfection and aiming to make the network even more carbon neutral.
Such innovative features like proof-of-history (PoH) and parallel processing make it truly energy-efficient and eco-friendly. They also pledged to keep Solana carbon neutral throughout 2022 and beyond while maintaining transparency on its energy usage.
On the top, the Foundation participates in related programs that further reduce carbon emissions worldwide.
Thus, they already fund the permanent destruction of HFC and CFC refrigerants, over 10,000 times more harmful to the environment than CO2. They also collaborated with Watershed, which helps other companies measure, reduce, remove and report their carbon status to help further fight climate change.
2. Stellar ($XLM)
It is an energy-saving blockchain network with its native cryptocurrency lumen ($XLM) to process global payments. Its consensus mechanism works faster than proof-of-work (PoW) and proof-of-stake (PoS) on a group of trusted nodes to authenticate transactions. People can trade fiat and cryptocurrencies with the Stellar network and use it as a way to send things like remittance payments across borders without high fees or time-consuming transactions.
Stellar wants to stay a non-profit organization, with no charging for both international or local transactions.
The transactions with XLMs literally cost almost nothing, making energy consumption really low.
It is a PoS cryptocurrency developed by Charles Hoskinson, one of Ethereum's co-founders. People purchase the Cardano units to be network members instead of mining new coins. For instance, it uses orders of magnitude less energy than Bitcoin. The mentioned structure also lets Cardano scale up to meet increased demand without a skyrocketing increase in power consumption.
SolarCoin consumes less energy than traditional Bitcoin mining, and users who generate solar power with solar coins get them as a reward. They gain one coin for a megawatt hour created by solar technology. SolarCoins are spent and traded like other cryptocurrencies. However, the platform's principal aim is to encourage positive environmental feedback through improved solar power generation.
The network currently refers to people submitting paperwork to confirm how much solar energy they have generated, but it is not for long, as it's working on optimizing this process.
POWR was an Ethereum token launched around 2016/17 to power the Powerledger platform. It turned up on Coinbase in November 2021, with the token's price skyrocketing while most cryptocurrencies went down in a market-wide crash.
POWR is used for participating in the Powerledger network and helps secure its other products, such as energy trading, environmental commodities, clean energy tracking, and verification.
The Powerledger platform uses peer-to-peer (P2P) energy trading and is effectively an operating system that tracks energy and flexibility services trading. Powerledger gives us a decentralized network that helps producers track, trace, and trade energy in real-time, making for more firm and flexible energy grids.
Powerledger collaborates with the Midwest Renewable Energy Tracking System (M-RETS) to facilitate the trading of Renewable Energy Certificates (RECs) across North America.
In June 2021, POWR moved to be a customized Solana-based blockchain. The main point behind this move was to take advantage of the Solana code base's scalability. Powerledger also integrated Safecoin's voter subset consensus to cut down the number of administrative type transactions that the blockchain has to process, keeping the platform safe and energy-efficient.
If you are really into the environmental crisis and want to shrink your environmental impact, you can focus on investing in blockchain companies with clean energy goals.
You can also have a look at cryptocurrencies that use proof-of-stake protocols, as using this algorithm cuts down your overall carbon footprint. The matter is that proof-of-stake uses less computing power as there are fewer participants in the network; thus, less energy is used, and less e-waste is created to validate transactions.
Another way to reduce your carbon footprint is to put your money into so-called carbon offset tokens. You can buy carbon credits from companies to fund carbon recapture projects. Such cryptocurrency offsets could drive up demand and prices, which means there will be more money for investors and carbon reduction actions.
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