Cryptocurrency Energy: Most people have been told how much energy mining Bitcoin uses. A single BTC transaction consumes more than 2264-Kilowatt hours (kWh) worth of electricity, which is enough to boil 1500 kettles. However, it’s not just Bitcoin that suffers from this issue. Other cryptocurrencies that use this evidence of work (PoW) consensus system face the same problem.
A growing number of investors put more importance on companies that focus on the importance of environmental, social and governance principles (ESG), particularly the environmental aspect – creators of crypto may soon need to decide if it is feasible for cryptocurrency energy to become green.
A shift towards a more sustainable cryptocurrency energy market
Growing awareness of cryptocurrency energy use and pressure from influential individuals like Elon Musk (who halted bitcoin transactions at Tesla due to the negative environmental impact of crypto) and government crackdowns in key nations like China are forcing the crypto industry to change.
In light of these events, new and existing blockchain projects are looking at the possibility of switching to less energy-intensive systems for validation to explore the possibility of renewable energy-based mining. Ethereum is among the most well-known examples of a renowned cryptocurrency project moving from a PoW to an actual Proof-of-Stake ( PoS) system to reduce its overall energy use by 99.95 per cent.
In contrast to PoW, PoS selects validators by the number of native tokens locked away in staking smart contracts. The more tokens one puts away, the higher chance of being chosen as a validator by PoS to add more information to the Blockchain.
Like mining, validators will receive freshly minted tokens in exchange for their efforts. One of the major advantages of this system over crypto mining is that hardware requirements are much smaller, which means there are more validators. It, in turn, increases a project’s decentralization and enhances the network’s security. It also comes with the benefit of reducing the energy needed to power the network.
There is also a growing number of financial incentives to reduce the sustainability of cryptocurrency, as environmental policies become more important in investors’ decision-making process and regulators expand their attention to cryptocurrency usage.
Is it possible for crypto to become more sustainable?
Crypto advocates and developers are putting forth efforts to ensure sustainability for the Blockchain and the cryptocurrency ecosystem. Organizations such as that of Crypto Climate Agreement, such as the Crypto Climate Accord, are working towards a goal of using all blockchains powered with sustainable energy sources by the year 2025 and even drafted a 32-page auditing document for assessing the impact on the environment of cryptocurrency. In a recent report that Bitcoin Mining Council released a report that Bitcoin Mining Council surveyed 32 per cent of its network and reported that its users were mining using the use of a 67% renewable energy mix.
There are a variety of factors that affect the environment and sustainability of the use of cryptocurrencies. Energy usage is among the most frequently mentioned; however, it’s not just that one cryptocurrency uses the most energy. It is also important to know the mix of power sources it originates from.
What percentage of mines are powered by renewable energy sources, if they exist? What kind of validation system do they employ? What is the amount of physical equipment needed to create new coins?
Repurposed and renewable power for mining.
Mining operations such as Equinor and Crusoe Energy have used unused conventional power stations or excess gas from drilling that normally burns off to generate electricity for mining operations. Some critics have pointed out that this does not reduce harmful emissions; it simply shifts them to a different sector and may encourage further drilling.
Other attempts have been to utilize wind or solar turbines to run mining completely by renewable energy sources. The Houston-based tech company Lancium For instance, Lancium recently announced plans to invest 150 million dollars into the development of renewable mine infrastructure in 2022. While this is admirable in principle, building a renewable plant to generate electricity for a cryptocurrency energy that could suddenly plunge to a low value may not be financially feasible. Bitcoin’s value is generally high even as it fluctuates in value. However, other cryptos may not be enough to justify the cost of constructing entirely new energy facilities to mine the coins.
To remedy these shortcomings, The developers of the latest blockchain and crypto-currency systems are looking at more energy-efficient designs.
Which cryptos are eco-friendly?
Certain newer cryptocurrencies have integrated renewable energy into their operation system, combining it with different verification methods to produce a cryptocurrency energy that consumes less energy than its predecessors.
- Cardano can be described as a PoS cryptocurrency based on a peer-reviewed, decentralized blockchain created with the help of one of the co-founders, Ethereum. Users purchase Cardano units to be part of the network rather than mining new coins, which means it consumes an order of magnitude less energy than a cryptocurrency like Bitcoin. This arrangement also allows Cardano to expand to handle increased demand without an enormous increase in energy consumption.
- Stellar is a low-energy blockchain network that utilizes its cryptocurrency lumen (XLM) to enable worldwide payments. Its consensus mechanism is quicker than proof-of-work and proof-of-stake. It is based on a trusted group of nodes to verify transactions. It is possible to trade fiat and cryptocurrency via Stellar. Stellar network, and use it to transfer things like remittance transactions across borders without paying high fees or long time-to-transaction.
- Nano is a second low-energy crypto which has been around since. It doesn’t depend on mining but instead uses “blockchain lattice” technology that creates user blockchains that are accessible to all users that are part of Nano. Nano network. Transactions are validated through open representative voting (ORV), in which representatives elected by group users serve as validators. Users can transact peer-to-peer using their blockchains instead of relying on the network’s Blockchain, thereby reducing the amount of time and energy.
- Hedera Hashgraph is a cryptocurrency that can compete with major payment processors such as Visa regarding transactions in a second while using less energy than Bitcoin. The transactions are handled in parallel, not linearly, which makes Hedera quicker than other currencies like Bitcoin. The company promises as many as 100,000 transactions per second to be processed on its network. The developers of Hedera are also using the network to create sustainability projects, such as its Energy Transition technology for tracking energy consumption.
- Gridcoin utilizes the power of computers not linked to the network to conduct scientific research using its Berkeley Open Infrastructure for Network Computing (BOINC). It utilizes proof-of-stake, and users are rewarded using the proof-of-research algorithm. Gridcoin was launched in 2013, and a few of the current projects that draw the network’s power are mapping out its Milky Way galaxy map via MilkyWay@Home.
These are only a few cryptocurrencies being designed with sustainability in the back of their minds.
The advancement of consensus mechanisms and the focus on using renewable energy sources could reduce the environmental impact of Blockchain and cryptocurrency with widespread adoption. There’s still the issue of electronic waste from mining operations that are no longer in operation to address. However, cryptocurrencies that are not PoW would shortly reduce the demand for bigger and more powerful mining equipment, possibly cutting down on garbage.