Bitcoin and crypto are seen as an answer to a lot of things but climate change is not usually one of them. The debate around its environmental impact is a heated but complicated one. Today we will try to discover green crypto and understand how the industry tackles the challenge of climate change.
Key Takeaways
- The problem with cryptocurrencies’ environmental impact lies in their reliance on energy-intensive mining processes, particularly for proof-of-work cryptocurrencies like Bitcoin. Mining consumes significant amounts of electricity, contributing to carbon emissions and exacerbating climate change;
- Initiatives to make crypto mining more eco-friendly include the development and adoption of more energy-efficient mining hardware, the exploration of alternative consensus mechanisms like proof-of-stake, and the use of renewable energy sources to power mining operations;
- Ethereum became more eco-friendly after the Merge: the transition from proof-of-work to proof-of-stake consensus that reduced its energy consumption significantly. Bitcoin has the potential to become more eco-friendly if it adopts alternative consensus mechanisms or increases the use of renewable energy sources for mining.
What is the problem with crypto and the environment?
When it comes to sustainability, cryptocurrency is not the topic that comes to mind as a shining example. Rather, it’s more infamous for being the opposite of eco-friendly. How much of it is true, anyway?
The eco-conscious make the argument that cryptocurrencies use an exorbitant amount of energy or even waste it. It is true to an extent: to be able to work in a decentralized manner, blockchains opt for computing-intensive algorithms. It is mostly applicable to Bitcoin as the first and most prominent Proof-of-Work (PoW) cryptocurrency. In 2020, researchers set out to dispel the notion in favor of a more nuanced approach: firstly, Bitcoin is not the only power-hungry PoW cryptocurrency. Secondly, when the article was published, Ethereum too accounted for a sizeable chunk of about 12% of the power consumption among the top mineable digital currencies. Thirdly, and most importantly, the power consumption itself is not the root of the problem with cryptocurrency and the environment.
The issue is in the way the energy used in mining cryptocurrencies is produced: the carbon footprint of Bitcoin is not that straightforward to calculate. Assuming all hashing power comes from unsustainable sources is disingenuous, the researchers claim. The use of cleaner sources of energy, as well as renewable energy, is steadily on the rise in crypto mining.
Does it mean that the concerns are unfounded? Not at all. Even though there has been a positive change, it does not negate the impact entirely. Besides, unlike traditional financial systems, which are undoubtedly larger consumers of global electricity and polluters, crypto does not onboard as many users worldwide.
Making Crypto Energy Efficient
The cryptocurrency sustainability issue is not new by any means: even the earliest adopters of crypto, such as Hal Finney, were aware that PoW would only consume more and more energy. A rather widespread argument in favor of adopting Proof-of-Stake over PoW is the environmental one. After all, the PoW to PoS transition that took place in Ethereum in 2022 — the Merge — was planned from the very beginning.
It wasn’t really climate activists or researchers who made the crypto community more conscious about cryptocurrency and the environment. In 2021, at the bull market’s peak, Elon Musk suddenly announced that Tesla would no longer accept BTC payments, citing mining’s energy consumption concerns. Of course, it did not change the perspective of crypto users entirely but the crypto sustainability issue was now something to consider by even more people.
So what is being done for more environmentally friendly crypto? From initiatives to real-world cases, quite a lot! Let’s start with what we have already briefly touched upon already.
Renewable Energy Cryptocurrency Mining
Considering the urgency of climate action, reducing CO2 emissions by using greener sources of energy is the easiest and most timely step for more eco-friendly crypto. While some measures are being proposed and in preparation, others are already in place.
The best-known example of using a renewable energy source is geothermal heat mining in El Salvador. The project is still very much a work in progress even in 2023 but the progress part is noticeable. In addition to geothermal, solar, and wind energy, more unorthodox methods are finding use.
More Sustainable Crypto Mining
Another step toward more green crypto mining is made by repurposing waste for energy. Some of the prospective sources of energy for eco-friendly crypto-mining efforts are captured methane and coal refuse. If not repurposed, these otherwise end up as heat emissions and a source of pollution respectively.
The push for energy-efficient cryptocurrency mining has been quite successful, as almost half of all hash rate capacity is estimated to be more sustainable. And there is barely any reason to not advocate for clean crypto: the benefits of a small carbon footprint range from a better reputation for mass adoption to existential risk reduction.
How Can We Make Crypto Green?
As we mentioned before, the cryptocurrency’s environmental impact is not a new problem. Therefore, to no one’s surprise, solutions have been around for almost as long as crypto itself. How did crypto enthusiasts propose to solve the eco-cryptocurrency conundrum?
Eco-friendly Blockchains
Even though it has proven to be the most secure (provided enough hash rate), Proof-of-Work has always been the most energy-intensive consensus algorithm in cryptocurrencies. Moreover, the more it is geared to be decentralized — with ASIC-resistance, for example — the less energy efficient it is.
No wonder there has always been a push for the green blockchain and the solution was found rather quickly. Instead of using electricity and computing power as resources backing the consensus, why not opt for alternatives? For instance, network participants can contribute memory, bandwidth, or even monetary incentives to support the network.
The latter proposal is how the Proof-of-Stake (PoS) consensus works. It does not require nodes to crack cryptographic problems but instead requires them to stake tokens to start validating blocks. The monetary incentive is still there but slightly differently: instead of investing in mining equipment, you are supposed to invest in the native token of the network.
One of the best examples of ecological cryptocurrency shift in recent history is the Ethereum Merge in 2022. Prior to moving to PoS, Ethereum was powered by Proof-of-Work: it was responsible for 12% of power consumption in top PoW blockchains. Moreover, since ETH was mined best with GPUs, it was also responsible for a considerable amount of e-waste (worn-down hardware that is difficult to recycle or dispose of). The Ethereum ecosystem houses thousands of protocols, tokens, and most of the NFT market. After the Merge, it became a much more energy-efficient crypto platform, not to mention becoming more attractive for eco-conscious investors.
Even though PoS coins are generally low-energy crypto, it doesn’t mean zero power consumption. You would still need some resources to keep a node working. Nevertheless, it is still nothing in comparison to PoW mining, so any PoS blockchain is a more eco-friendly blockchain.
Carbon Neutral Crypto
PoS may be the more eco-friendly crypto consensus algorithm than PoW but there is no taking away that it is also more prone to centralization. Smaller PoW coins may not have the environmental impact of Bitcoin with their current adoption rate but at BTC’s scale could be even worse. Nevertheless, solutions to compromise between these issues have been proposed.
Hybrid-consensus-powered coins like Nano (XNO) use PoW to an extent but still are examples of more sustainable crypto than pure PoW. In this case, it is achieved by its block-lattice technology: each user has an account chain of their own. Other coins like Mina (MINA) opt to take the major part of computation off-chain, achieving unprecedented lightness of the blockchain itself. Spinning up a full node on Mina requires a measly amount of resources and is basically free. A far cry from the behemoth that is Bitcoin and its blockchain!
Some of the lesser-known coins and tokens use carbon offsets to earn the status of environmentally friendly cryptocurrencies. Carbon offsetting implies the purchase of carbon credits or funding activities that compensate for a certain amount of emissions: e.g. planting trees. However, in reality, throwing money at climate change is not a genuinely helpful measure.
There Is No Planet ₿ — Is Green Bitcoin Possible?
With all the actions taken for more environmentally friendly cryptocurrency, is Bitcoin sustainable yet? Unfortunately, no, more green Bitcoin mining that is emerging in the 2020s is a hopeful sign.
Intriguingly, some climate activists and crypto enthusiasts alike deem Bitcoin renewable energy mining an inefficient measure. At one point, Greenpeace ran a campaign “Change the Code, Not the Climate”, which even received support from Ripple. Especially with the example of Ethereum in the picture, the world’s most famous eco-activism group demanded key industry players to facilitate Bitcoin’s transition to PoS. With the benefit of hindsight, you can probably guess how it went.
Still, imagine for a moment, what would happen if Bitcoiners supported the idea and made BTC the green coin. At the very least, the ages-old arguments around the environmental impact of crypto would finally stop.
Conclusion
Sustainable blockchain technology has not been a pipe dream for many years already. Even though it would take a radical change to make it common, the long-term benefits of more ethical cryptocurrency cannot be overstated.
What side of the debate are you on? Let us know on the social media: Twitter, Facebook, Reddit, and Telegram. If this article left you wanting more, explore the ChangeHero blog to learn more about the crypto world.
Frequently Asked Questions
What are green coins?
Green coins or green cryptocurrencies are eco-friendly cryptocurrencies that consume negligible amounts of energy for transactions or maintenance. Unlike Proof-of-Work cryptocurrencies, these cryptos do not require costly specialized equipment or dedicated hardware to participate in the network.
What is the best green crypto?
It is hard to gauge the single most environmentally friendly cryptocurrency. Among the greenest crypto are Proof-of-Stake blockchains, as well as networks that use alternative computing resources to maintain consensus.
Is there any green crypto?
There are quite a few green cryptos out there, in the high-cap and low-cap ranges alike. Usually, green blockchains use energy-efficient consensus algorithms like BFT or PoS.
Is Ethereum green now?
As of 2023, Ethereum (ETH) is a more green cryptocurrency than before the Merge — transition from PoW to PoS. By becoming an eco-friendly cryptocurrency, Ethereum also became a cleaner crypto platform and brought benefits and value to many NFT investors and DeFi users.
What is the most green cryptocurrency?
There is no single greenest cryptocurrency out there, since all of them require computing resources and Internet connectivity to work. If there was the definitive most eco-friendly cryptocurrency, it would use an energy-efficient consensus algorithm such as Proof-of-Stake at the very least.
