Is Crypto Bad for the Environment?

One of the most popular discussions seen on the global level today regarding blockchain technology is ‘are cryptos bad for the environment?‘. As a trillion-dollar industry, these digital assets have managed to go mainstream in a very short span of time and become a popular investment vehicle. However, with the rising popularity, there has been a surge in critical comments too, which have been flooding media outlets – are the detractors simply jealous they missed the boat, or does crypto damage the climate?

While cryptocurrencies as a concept have the potential to solve several modern-day problems, they have downsides when it comes to energy usage. So, while it can be said with assurance that they have positioned themselves as legit and investable assets, the underlying problems surrounding them further threaten their growth.

The Cryptocurrency Environmental Impact Debate – Overview

Some of crypto’s downsides are things that can potentially be reversed. However, it makes sense to think that a sector as large as the blockchain world will need time to pivot its current way of operating. Despite this, pressure from the concerned parties has reached a boiling point, and rightly so.

The downside being talked about here is cryptocurrencies’ effect on the environment. Surely, it takes the highest precedence in the current situation, where global warming has already started to impact the planet negatively. But is the industry really deserving of the criticism it faces today?

Before we review the environmental effect of crypto and judge it to be positive or negative, it is vital that we understand the concept of what these assets exactly are and their relation to the environment.

What is Cryptocurrency?

A cryptocurrency or crypto is a digital currency that is created to act as a medium of exchange through a secure computer network. This network isn’t reliant on a particular bank, government entity or similar organization to manage or maintain it. In simple terms, cryptocurrencies can be considered money, but without an authoritative figure such as the Federal Reserve or the government.

This concept, which eliminates the need for intermediaries of any kind to carry out transactions was one of the most revolutionary technologies that were actualized and popularized in the past decade. A huge chunk of the pro-crypto masses speculates cryptocurrencies to be a new face for economies all over the world.

In crypto, coin ownership is recorded on something called the ledger, which is completely transparent and open for everyone to see. Ledgers are computerized databases that use strong cryptography to secure transaction records, verify the transfer of coin ownership and control the creation of additional coins.

These assets do not have a physical form, which means it doesn’t boast of an intrinsic value as such. Thus, it is dependent on the people or the community who decides to see it as an object of value. They generally use decentralized control, meaning complete autonomy for the investors in terms of taking decisions as opposed to CBDCs, where the central bank would have major control.

The first cryptocurrency that managed to successfully take over the entire industry by storm right after it launched was Bitcoin. Released as an open-source software in 2009, Bitcoin was created by an anonymous person called Satoshi Nakamoto. Following Bitcoin, thousands of newer tokens flooded the market; and were called alternate coins or altcoins.

Some altcoins too were soon to take over the market, and spike in value and community. Ethereum is currently the number one altcoin in terms of market cap and is one of the most popular cryptocurrencies in the industry. It is second to Bitcoin and is speculated to have the potential to even overtake the latter at some point due to the variety of use cases it boasts of.

What is Crypto Mining?

Cryptocurrency mining is an aspect that is vital to the sustenance of the currency’s ecosystem. Several cryptocurrencies, including Bitcoin, use mining to generate new coins and verify new transactions. Blockchains – the virtual ledgers that record cryptocurrency transactions – are verified and secured by decentralized networks of computers across the world.

Computing power on the network is rewarded with new coins for contributing to the network. A virtuous circle is created by the miners maintaining and securing the blockchain, the blockchain awarding the coins, and the coins providing an incentive to maintain the blockchain.

In simpler terms, the competitive process that verifies and adds new transactions to the blockchain for a cryptocurrency that uses the proof-of-work (PoW) method is called cryptocurrency mining. This competition may be won by any particular miner, who will receive a share of the cryptocurrency and transaction fees as a reward.

Mining is generally carried out in three ways:

• Cloud Mining – In this method, people who wish to generate income rent cloud mining services and carry out the process in hopes of getting rewards in the form of cryptocurrencies. While this is an easy method, the ROI for the same may not be as one expects. Due to this, the Cloud Mining method is being abandoned by many as compared to before.
• Individual Mining – This is for those individuals who wish to start mining cryptocurrencies from their homes or within their own comfort. One can simply purchase a specialized miner hardware and connect it to the internet to start mining right away. However, as the network of top cryptocurrencies grew drastically in the past few years, it might not be the best option to consider individual mining at this point unless there is a higher risk appetite. Individual Mining can be done in a profitable setting if a newly launched cryptocurrency uses the PoW consensus. But unfortunately, this isn’t the case with a majority of the tokens being created today.
• Mining Pools – Currently, this is the most popular and widely used method of mining cryptocurrencies. In Mining Pools, organizations collectively put together their resources to acquire expensive and a wide range of mining hardware. These pools are also open to the general public, as anyone can add their computers to the network in this method.

While the profits or rewards for individuals within these enterprises may not be as hefty as Individual miners, it provides a more reliable setting, which is why Mining Pools are being set up all around the world today.

Is Cryptocurrency Bad for the Environment?

At a glance, this may be a very straightforward question. But there are multiple aspects of the industry that needs to be considered to determine the effect these digital assets – NFTs have also been criticized for their environmental impact – have on the world and its climate.

The whole idea of cryptocurrencies being bad for the environment stems from the amount of energy it requires to function. Bitcoin, the frontrunner cryptocurrency and the second biggest cryptocurrency Ethereum both operate based on the PoW consensus, where miners have to solve complex puzzles using high-end computers. These computers consume an extremely huge amount of energy, which puts the future of cryptocurrencies in a tight spot.

Infact, Bitcoin’s annual energy consumption is almost the same as in entire countries like Argentina and Ukraine. Bitcoin produces more than 36.95 megatons of CO2 annually, which indicates a direct negative impact on the environment. Infact, it is speculated that within the next 30 years, Bitcoin may contribute to increasing global temperatures by at least 2%.

Bitcoin is a concept that was launched by an anonymous party, which means while one can criticize its use, it may not be possible to point hands. The same isn’t the case with Ethereum, which has a large organization consistently working to develop the project further. Ethereum too has faced harsh criticism for a long time due to the staggering amounts of energy consumption and carbon footprint it leaves behind.

Ethereum is a cryptocurrency project that has gained massive popularity over the years and is undoubtedly the top choice for anyone entering the space. However, it has one of the highest consumption of energy among a whole lot of other options. According to a study, a single transaction on the Ethereum Network consumes energy that would be enough to power a US household for around 9 days.

To understand with more clarity, a single Ethereum transaction one makes today uses almost the same amount of energy as 150,000 VISA card transactions. This number too is likely to go much higher as the demand for Ethereum is expected to skyrocket in the upcoming years.

All these statistics and data sum up one thing. With Bitcoin and Ethereum consuming more than 152 TWh and 72 TWh worth of energy respectively per year, there is no doubt that the current effect it has on the environment is drastic and indeed, risky for the future. Even though it is a multi-billion dollar industry and has a rather complex use case, this extent of energy consumption cannot be justified to a certain point.

Even Google, the internet giant, which has its network spread over every online sector only consumes over 13TWh per year, which is almost 211 TWh lesser than both the top cryptocurrencies combined. This added with the other existing and upcoming altcoins only drives the figures further up.

In short, there is no denying the fact that cryptocurrencies more or less have a negative impact on the environment at the moment. But this too, as mentioned earlier, can be curbed with time and effort. Since cryptocurrencies are likely to become an asset and a sector entirely that cannot be ignored in the future, the first step towards making the industry greener is to have productive debates and public callouts. – which has led to the emergence of many energy efficient cryptos.

Events that sparked debates on crypto’s environmental effect

A huge number of major organizations and financial institutions have historically stood against the blockchain sector. While the primary reason for opposition by these parties may not be the environment, it surely took up space too. This, however, wasn’t enjoyed by the masses, who were pro-crypto initially.

Awareness of the negative impact on the environment by cryptocurrencies was brought about by some of the most influential figures in the cryptocurrency, tech and financial space. The first incident that sparked major debates about cryptocurrencies with respect to global warming was due to car company Tesla’s founder Elon Musk.

The billionaire, who had previously vouched for cryptocurrencies, and even endorsed a memecoin tweeted about the energy consumption by Bitcoin and how it was a problem. Elon had even gone as far as to add Bitcoin as a payment option for buying his company’s Tesla cars, which later he removed citing these exact reasons.

Bill Gates, the founder of Microsoft too, had a say in the matter back in 2021. As an influential figure with a huge following, Bill had previously mentioned his disapproval of cryptocurrencies as a viable investment option. In 2021, he said during a live-streamed clubhouse session by CNBC, that Bitcoin used more electricity per transaction than any other method known to mankind. He stated that considering the current situation, it wasn’t a great thing for the climate.

Another major incident that shook the entire industry, while also raising questions globally was the ban on cryptocurrency mining in China. Initially, China was one of the top cryptocurrency mining nations in the country, with more than 22% of mining powers coming from them on a global level.

Chinese lawmakers banned mining in May 2021, which was a major blow for the companies in the industry and also the market as a whole. However, after this incident, a huge number of organizations started taking to social media platforms and talking about the importance of going green.

Actions being taken to curb the effect

The consequences of cryptocurrency’s effect on the environment have become clearer to the general public as well as the entire investing citizenry at this point. Due to this, there has been a drastic increase in efforts by major projects to bring down energy consumption and develop sustainable cryptocurrencies.

The quickest, and most logical fix to do this would be powering mining activities using renewable energy sources. Cryptocurrencies as we saw above need massive amounts of energy to be mined efficiently, which is one of the biggest issues currently. This can only be solved if mining organizations shift to sources that are both sustainable and help the environment.

However, the energy used for mining activities isn’t the only concern currently. Transactions between cryptocurrencies leaving massive carbon footprints and also taking up further energy is something that cannot be ignored. But what exactly are the methods that can be taken and have there been any attempts to do so?

The answer to both questions is yes. The two top solutions for both issues at hand are Greener Mining solutions and Energy efficient blockchain systems.

Greener Mining Solutions simply imply methods of producing and using energy that is a nature-friendly alternative to the current means. In short, energy sources like solar, wind or hydroelectric options can be used instead of fossil fuels. This plan has already been put into action, as several mining companies have been looking to shift to greener solutions since 2021 itself.

Regions like Texas in the US receive enough sunlight to be able to power the entire state with ease. These are locations that can be tapped into as excellent sources of energy all year long. Companies that realized this were quick to action as Block, the mining company owned by the founder of Twitter, Jack Dorsey decided to shift its operations to Texas this year.

The ethereum mining facility of Canadian company HIVE Blockchain is powered by hydropower in Sweden. In Norway, there is also KryptoVault, which runs on 95% hydropower and 5% wind power. A huge number of mining companies that were previously based in China too have been looking to launch operations in other locations that can provide such energy sources.

These being only a few of the many companies, have been creating a space where blockchain technology can function in a nature-friendly setting. It is also likely that projects that shall be launched in the future may consider adding extra mining rewards for facilities that function on renewable energy sources.

Energy-Efficient Blockchain Systems would be a concept that may easily solve the problem of carbon emissions and energy being burned during transactions by a huge margin. In simpler terms, the concept means to migrate to a consensus mechanism that is nature friendly like Proof of Stake or PoS.

Bitcoin and Ethereum being the top tokens were initially operated through the PoW or Proof of Work consensus, in which miners used to compete with each other to see who can problem-solve the fastest in exchange for a reward, taking up a large amount of energy. But in PoS systems, validators are chosen by an algorithm that takes their “stake” into account. Removing the element of competition saves energy and allows each machine in a PoS system to work on one problem at a time.

Such methods can be used to alter the consumption of energy and reduce carbon emissions which will result in cryptocurrencies being comparatively much more eco-friendly.

Currently, the most popular news that flooded the cryptocurrency industry with promise and positivity around this issue was Ethereum’s Merge event. The event officially marked Ethereum’s transition from the PoW consensus to the PoS consensus, which was appreciated by a huge number of companies and cryptocurrency critics all over the world. This move itself helped the token reduce its energy consumption by around 99% – turning Ethereum into one of the eco-friendly cryptocurrencies in the market.

Surely, companies have been looking to operate their projects without having to cause the environment any harm. This is likely to become less of choice and more of a necessity in the future for several reasons. In fact, there has lately been an introduction of some highly innovative projects that focus on helping the environment entirely in general as well as within the cryptocurrency sector.

The Best Cryptocurrencies that Help the Environment

Due to the negative feedback received by the standard cryptocurrencies, many new sustainable cryptocurrencies have emerged that focus on environmentally friendly practices.

Ecoterra: Best Eco-Friendly Crypto focusing on Rewarding those who recycle

The current recycling ecosystem is in peril since not many don’t want to partake in this activity. They cite a lack of interest, lack of convenience, and lack of rewards as reasons for their apprehensions. Ecoterra is trying to fix that issue by rewarding those who recycle. 

At the center of this ecosystem exists the Ecoterra app, a decentralized application that plays multiple roles for both individual and institutional users. 

Individual users can use the app to get more than just fiat rewards when they recycle. Every time they recycle and upload their recycling receipts, they get ECOTERRA tokens. These tokens can be staked for more passive gains or be used to access the Ecoterra educational platforms. 

Institutional users can use Ecoterra tokens to get access to an Impact Profile, a recycled materials marketplace, and a carbon offsets marketplace. The impact profile will provide them with tools to get access to ESG-focused customers, the carbon offsets marketplace is to buy and sell carbon credits. And finally, the recycled materials marketplace is to find recycled raw materials by connecting with recycling companies. 

Ecoterra gained attention shortly after the announcement of its presale, which is fast for a project still in the beginnings of its value chain. Participate in this presale project by clicking on the link below. and check out our how-to-buy Ecoterra guide for more information. 

Invest in Ecoterra Now

Cardano: A Proof of Stake Blockchain with Energy-positive Initiatives

Proof of Stake is a more environmentally consensus mechanism powering the blockchain, and many crypto assets have started to embrace it, including the oldest altcoin, Ethereum. Cardano was one of the first crypto assets to implement this consensus mechanism and even now is hailed as one of the greenest cryptocurrencies in the market.

At the time of writing, Cardano has a market capitalization of 12.5 billion dollars and is the 8th biggest cryptocurrency by market cap. The crypto ecosystem’s enthusiasm about this crypto can be seen as the first sign that the world is ready for assets centered around environmental protection.

But how does this crypto save the planet? While the crypto’s POS roots are admirable, it is its tree-planting initiatives that have gotten the environmentalists to appreciate it. So far, it has been successful at planting 1 million trees.

It is initiatives like these that can set the tone of other cryptocurrencies – like offsetting carbon emissions by adding more trees to the environment.

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Solarcoin: A Unique cryptocurrency project focusing on rewarding users for generating energy

Based on the SolarCoin blockchain technology, SolarCoin is a digital token. This platform aims to accelerate the transition to a clean energy economy. As part of SolarCoin’s open community project, solar energy producers receive one SolarCoin (SLR) per one MWh (Megawatt hour) of energy produced.

The token’s value is intrinsically linked to the protection of natural capital because it originates from a solar MWh produced. Consequently, solar electricity generators are rewarded for reducing the cost of electricity production.

Learn more about Solarcoin and its token price here.

Power Ledger: A P2P Solar Energy Market on the Blockchain

Power Ledger is a blockchain initiative to make clean energy accessible. It was founded in 2017 as a P2P solar energy marketplace – allowing users to buy and sell renewable energy. The concept is simple. Users with solar panels connect to the power ledger network and sell any extra energy.

Those accessing the network locally can then buy this excess solar energy. Since the entire marketplace is decentralized, there are no third parties involved – making buying solar energy simple and more inclusive.

At the center of the Power Ledger lies the POWR token. It is an ERC-20 crypto built on the Ethereum blockchain and has a market capitalization of 88 million USD at the time of writing. For those looking for low-cap cryptos with positive outputs for the environment, Power Ledger is potentially a good investment.

Conclusion

Cryptocurrencies are part of an industry that is still in its infancy. Surely, many of the problems and shortcomings faced within the sector need to be addressed and resolved over time. This existing issue of the environment being affected is also likely to be one of the many others that can be expected within the industry in the future.

It is important that projects and companies understand this problem and build their infrastructure accordingly. As a technology that has the potential to take center stage in several industries, the next few years will be an extremely crucial and decisive period for cryptocurrencies.

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