Let’s say you have ever discussed the Web3 movement or cryptocurrencies over dinner. If so, it’s possible that family members have told you that blockchain technology and Bitcoin (BTC) are bad for the environment and that there’s no such thing as a “green crypto”.
It’s time to dispel one of the most widespread falsehoods in the modern era. Blockchain technology doesn’t harm the environment. Certain blockchain transactions need less energy than a single Google search, despite the fact that consumers aren’t ready to hear it.
Yes, Bitcoin is undoubtedly not an environmentally friendly investment. However, this doesn’t mean that contemporary networks have to be portrayed negatively. In fact, a lot of blockchain networks are carbon neutral—probably more than your neighborhood bank can claim.
This post will examine what constitutes a sustainable cryptocurrency project and highlight the efforts being made by leading networks to combat the impacts of global warming and climate change.
What Characterizes an Eco-Friendly Blockchain?
Legacy blockchains that consume a lot of energy have frequently been compared to ferocious beasts that leave enormous carbon imprints on the earth.
Although Bitcoin’s annual TWh statistics aren’t helping the environment and resemble the statistics of a small country, it’s absurd to think that every one of the blockchains and cryptocurrency assets is bad for the environment. It’s only about Bitcoin. Even though, due to its ability to facilitate quick, inexpensive, and anonymous transactions, Litecoin (LTC) is one of the most widely used altcoins for payment – additionally facilitating activities where people risk money, such as gambling on best-rated Litecoin betting sites in 2024 – it’s particularly labeled as a blockchain with high carbon emissions. According to research from Binance Square, before partnering with tech firm Metalpha Technology Holding Ltd, Litecoin ranked fourth among blockchains with the most CO2 emissions per transaction in 2022, behind Bitcoin, Polygon (MATIC), and Bitcoin Cash (BCH). The energy utilized per transaction (kWh) for Litecoin was 18.52, and the tons of CO2 per transaction were 0.01389.
Numerous networks in the sector are fervently committed to energy efficiency. For instance, compared to older networks, sustainable blockchains such as Cardano (ADA) and Solana (SOL) use a lot less energy for each transaction. This results in a lowered demand for power networks and a lessened reliance on fossil fuels, not to mention lower electricity costs from crypto mining and/or staking.
Consensus is one of the key components of blockchain technology that affects energy consumption. Transactions are added to the network and verified in this manner.
An environmentally conscious blockchain often has a wider sustainability vision in addition to the technical part. This could entail offsetting carbon emissions, purchasing carbon credits, and promoting renewable energy sources. The proportional size of the network must also be taken into account; smaller networks with lower utilization statistics may consume less energy, but their resilience to stress remains uncertain.
Proof-of-Stake versus Proof-of-Work
The majority of discussions about green cryptocurrency center on the consensus method employed to protect the network. Current Proof-of-Stake (PoS) networks use tens of thousands of times less energy than older Proof-of-Work (PoW) blockchains including Bitcoin and pre-merge Ethereum (ETH), which claim massive electrical consumption.
For what reason is that the case? Let’s quickly review what PoW and PoS are.
- PoW: Imagine a massive digital mine where innumerable cryptocurrency miners are working nonstop to solve challenging arithmetic problems. The first person to figure it out gains cryptocurrency incentives and gets to add a block to the blockchain. Due to the high processing power requirements of the Bitcoin mining process, there’s a significant energy consumption and carbon impact.
- PoS: Validator nodes in a proof-of-work consensus are selected to build blocks according to the quantity of coins they own and are prepared to “stake”, or lock up, as collateral. Comparable to a digital lottery, the more tickets (or coins) you own, the higher your chances are. What makes PoS so appealing? It’s an alternative that’s more ecologically friendly and energy-efficient because it significantly lowers the requirement for processing power.
PoS is definitely more energy-efficient than PoW, notwithstanding the claims of certain crypto purists that PoW is a more secure consensus technique. Ethereum’s network energy consumption dropped by 99.9% during “The Merge” when it switched from PoW to PoS, and it uses less energy annually than PayPal.
Leading Green Cryptocurrencies
Through the utilization of renewable energy sources, the adoption of energy-efficient consensus processes, and the mitigation of the environmental impact they have, these digital items are revolutionizing the contemporary definition of cryptocurrencies.
Who are the green trailblazers driving the transition to a sustainable future?
Solana
Unsurprisingly, the leading green cryptocurrency features a greenish branding and logo. Solana (SOL) is based on a novel consensus technique called Proof-of-History (PoH), which is an adaptation of the current PoS paradigm.
With this novel method, validations can be completed more quickly and with less energy usage. Imagine it as a proof system that verifies the chronological order of each transaction with no back-and-forth communication that is commonly observed in other blockchains.
Although Anatoly Yakovenko’s blockchain aggressively encourages partnerships with carbon offset companies and renewable energy sources, the network excels above its competitors due to its extremely low energy usage.
A single Solana transaction uses approximately 719 kilojoules (kJ), based on the Solana Foundation. That’s less energy than it takes to run just one Google search.
When you give it some thought, it’s incredible that you can transmit USD 1 million to anyone instantly over international borders with less electricity than it would take to do a simple Google search. However, many continue to believe that NFTs and digital currencies are harmful to the environment.
Cardano
Another strong contender for the title of the No.1 green cryptocurrency is Cardano (ADA), which was established by Charles Hoskinson, a co-founder of Ethereum. Ouroboros, the world’s inaugural peer-reviewed, verifiably secure blockchain consensus, is the secret to Cardano’s success.
Energy usage is kept to a minimum thanks to this PoS method. Validators are selected according to the quantity of ADA they have contributed to the network, in contrast to a cutthroat cryptocurrency mining race. As a result, energy consumption is drastically reduced without sacrificing decentralization or security. Cardano is allegedly around 47,000 times more energy-effective than Bitcoin, according to some analysts.
Algorand
Algorand (ALGO), founded by famous cryptographer Silvio Micali, was created with sustainability and the welfare of the earth as its top priorities. It wasn’t merely intended to upset the status quo.
A Pure Proof-of-Stake (PPoS) mechanism is the foundation of Algorand. By doing this, the energy-intensive race present in PoW systems is eliminated and every token holder is guaranteed to be able to take part in the block validation. We have a network that isn’t only decentralized and safe, but also extraordinarily energy-efficient thanks to the PPoS concept.
Hedera
Hedera (HBAR), a bit of an outsider in the green cryptocurrency sector, uses the hashgraph as a special consensus mechanism. Low energy requirements and quick transaction rates are provided by this method.
Hedera’s ecological voyage, however, continues beyond its consensus mechanism. In partnership with the Crypto Climate Accord, Hedera has committed to surpassing current levels of carbon neutrality. Hedera is committed to achieving carbon neutrality through credit and offset schemes.
Hedera is possibly the most energy-efficient blockchain, as evidenced by the most recent research conducted by the University College of London Blockchain Center, which found that an average transaction only consumed 0.000003 kWh of electricity. But compared to networks such as Cardano and Solana, the Hedera network is much smaller and experiences less activity related to smart contracts, therefore it doesn’t quite have the utilization to merit the top rank.
Ripple
One of the “original gangstas” of the cryptocurrency field, Ripple (XRP) was one of the first legitimate competitors of Bitcoin, having been founded by Jed McCaleb and Arthur Britto. It goes without saying that the developers worked very hard to make Ripple as environmentally friendly as they could.
Even after all these years, Ripple is still one of the greener cryptocurrencies available. The XRP Ledger escapes the onerous energy costs imposed by PoW chains because of its special consensus method.
Furthermore, Ripple has made a $100 million contribution towards a future that is environmentally friendly. To achieve the goal of making the protocol emissions-neutral by 2023, this entails establishing future carbon offsetting efforts.
Chia
In the crowded cryptocurrency space, Chia (XCH) stands out as a ray of sunshine, promoting a cutting-edge strategy for sustainability and reinventing the fundamentals of blockchain technology.
In contrast to the conventional blockchains that consume a lot of energy and depend on computer conflicts, Chia presents a novel consensus method called “proof of space and time”. By doing this, customers can use their underutilized hard drive space and do away with the requirement for gear that consumes a lot of power.
The network actively encourages its farming businesses to use renewable energy sources. XCH wants to create a community that is genuinely sustainable and environmentally friendly by promoting the use of green energy alternatives.
Stellar
Placing at the end of our list, Stellar (XLM) makes use of its distinct consensus protocol, the Stellar Consensus Protocol (SCP). This process, in contrast to the energy-intensive PoW, depends on a group of validators who reach a consensus without engaging in protracted computational conflicts. A system that’s extraordinarily energy-efficient in addition to being quick and scalable.
However, Stellar’s ecological voyage extends beyond its consensus process. The network has made no secret of its support for sustainability. XLM seeks to redefine the concept of an environmentally conscious digital asset by actively supporting eco-friendly projects and lowering the overall energy footprint.
Stellar advances this goal by collaborating with a range of monetary institutions and payment gateways, guaranteeing that environmentally friendly methods are not confined to the blockchain but are additionally incorporated into practical financial solutions.
Are Blockchains Actually Environmentally Concerned?
The main complaint leveled against cryptocurrency critics is that the discussion of energy-efficient blockchains and carbon offsets is essentially a virtue-signaling social media marketing gimmick based on selective data.
Making a deliberate effort to lower their energy use is beneficial for both the industry and the environment, even if there is some truth to these claims.
Carbon offsetting demonstrates that the corporation behind a product is mindful of its impact on the environment and is working to alleviate any negative impacts, even though it doesn’t automatically make a particular form of technology more environmentally friendly.
Benefits and Drawbacks of Green Cryptos
Green cryptocurrencies are becoming a vital component of the blockchain space, telling a creative and environmentally responsible story. Let’s review the benefits and drawbacks of environmentally conscious blockchain enterprises.
Benefits
- Favorable to the environment: We’ll say it even though it sounds apparent. Environmentally friendly, or green, cryptocurrency projects contribute to the preservation and upkeep of the surrounding living ecology.
- A smaller carbon footprint: Green cryptocurrency systems are made to use a lot less energy than traditional blockchains, which lowers their carbon footprint.
- Monetary rewards: Green cryptocurrencies may benefit from more benevolent regulatory policies and possible tax breaks as the globe moves toward more environmentally friendly behaviors, drawing interest from investors who are concerned about sustainability.
- More frequent use: Green cryptocurrencies have the potential to gain wider acceptance due to their environmentally sensitive attitude, which can attract a wider range of people, notably ecologically conscious investors and institutions.
- Cutting-edge technologies: Modern consensus techniques and features are frequently included in green cryptos, which improve scalability, security, and transaction times.
- Fights the stigma associated with crypto: The traditional argument that cryptos are hazardous to the environment will gradually fade as more green crypto initiatives come to fruition.
Drawbacks
- New and untested tech: Since many green cryptos are still in their infancy, they may encounter technical difficulties, errors, or vulnerabilities that will need to be fixed over time.
- Volatility of the market: The market volatility of green cryptocurrencies, like that of all cryptocurrencies, may deter investors from making investments in cutting-edge technology.
- Uncertainties in regulations: Regulations are subject to change, and the crypto world is always changing. Despite their benefits to the environment, green cryptos are not exempt from potential regulatory issues.
Why This Is All Important
Sustainability in the cryptocurrency field is crucial in a world where projects are chosen for investment based on their Environmental, Social, and Governance regulations, a process known as ESG Investing.