Article from the Times
When Tesla chief Elon Musk said that the electric carmaker will no longer accept bitcoin as payment for vehicles, its value plummeted.
Musk said he was concerned over the impact that cryptocurrency is having on the environment. But are there any eco-friendly alternatives?
In this article, we cover:
- Why is cryptocurrency bad for the environment?
- The environmental impact of cryptocurrencies such as bitcoin
- Is there an environmentally friendly cryptocurrency?
- New eco-friendly cryptocurrencies on the horizon
Why is cryptocurrency bad for the environment?
It is the level of computer processing power required to mine cryptocurrency that is worrying environmentalists.
The mining process uses:
- High-powered computers which compete to verify transactions in return for coins
- Vast amounts of electricity to power complex algorithms
- Non-renewable energy sources such as coal, the dirtiest fossil fuel
Why is bitcoin so bad for the environment?
Bitcoin mining has more of an energy consumption each year than Malaysia or Sweden, according to the Bitcoin Electricity Consumption Index, run by Cambridge University’s Centre for Alternative Finance.
Campaigners claim that the impact is exacerbated by the fact that most of the mining takes place in China, which is heavily reliant on coal power.
Bitcoin has been on a rollercoaster ride over the past 14 months or so. Its price soared during the pandemic; it had gone from about $6,500 in March 2020 to as high as $64,000 before abruptly losing half its value.
It crashed back to earth amid a crackdown in China and amid the fears over its carbon footprint.
If the bitcoin price soars again so too will the amount of fossil fuel involved in the process.
Earlier this year, Tesla announced that it had purchased $1.5bn (£1.1bn) worth of bitcoin.
Musk has since confirmed he will not be selling his investment in the world’s biggest cryptocurrency and will instead wait until a more sustainable method of mining has been found.
Six environmentally friendly crypto currencies
Environmentalists and Musk agree that the “mining” of bitcoin uses a worrying amount of fossil fuels.
However, there are alternative, eco-friendly cryptocurrencies that inflict less damage on the planet.
These could potentially allay concerns surrounding cryptocurrency and the environment.
Smaller currencies may often appear to have a lower carbon footprint, but that may simply be because there are fewer transactions. However, there are digital assets that are more energy efficient – which means their environmental impact is reduced.
These cryptocurrencies seem to be the most efficient in terms of their energy requirements, according to research from TRG Datacenters:
- IOTA (0.00011kWh)
- XRP (0.0079 kWh)
- Chia (0.023kWh)
Here we outline six cryptocurrencies that are more environmentally friendly than bitcoin:
1. Chia
TRG Datacenters says chia is a good example of a sustainable cryptocurrency that has been designed to be less energy intensive.
The “farming” process used by chia employs hard drives – a concept known as proof of space – rather than the mining, proof-of-work approach used by bitcoin, which relies on computer processors.
Important points about chia:
- Chia coins can be farmed on the hard drives of laptop or desktop computers – and unused space can be utilised for “plots”.
- Once the software is fully downloaded, your computer does the plotting for you and starts farming chia.
- This approach makes it easier for home users to farm chia, because it doesn’t rely on such huge amounts of electricity as mined cryptocurrencies.
- However, some critics still claim that chia isn’t as eco-friendly as it claims because it has led to a significant surge in demand for computer hardware and growing levels of e-waste.
2. IOTA
IOTA uses the “Tangle”, an alternative form of technology that does not require miners.
It is maintained by smaller devices and, as such, has lower energy requirements.
3. Cardano
Unlike cryptocurrencies such as bitcoin, cardano uses a proof-of-stake system called Ouroboros. This requires users to purchase tokens in order to join the network, saving significant amounts of energy.
Important points about Cardano:
- Developed by Charles Hoskinson – co-founder of ethereum, the second-largest cryptocurrency after bitcoin – it can achieve 1,000 transactions a second compared to up to seven with bitcoin.
- Ouroboros is the first peer-reviewed blockchain based protocol, which means, it is claimed by cardano, that it can be scaled to global requirements without sacrificing sustainability or security.
- Cardano is arguably the most well known of the green cryptocurrencies and at the time of writing was the fifth-largest cryptocurrency.
- According to TRG Datacenters’ analysis, its energy use is 0.5479 kWh.
4. Nano
TRG Datacenters also highlighted nano, even if it was not included in the energy-use listings.
Important points about nano:
- While the digital currency runs on a proof-of-work basis, like bitcoin, it strives to reduce the waste that is often associated with crypto transactions.
- It uses an Open Representative Voting protocol to reduce energy use and increase efficiency.
- In addition to its eco-credentials, nano transfers are instant and it is free to trade.
5. Solarcoin
This is a global and independent sustainable cryptocurrency designed to promote the creation of solar energy by rewarding generators with solar coins.
Generators can claim one coin for every megawatt hour created by solar technology.
6. Bitgreen
This eco-friendly cryptocurrency was launched as a green alternative to bitcoin.
Like solarcoin, it seeks to encourage positive environmental behaviour by rewarding users for actions including drinking sustainable coffee, car-pooling and volunteering. It can be traded on exchanges or spent with bitgreen’s partners.
New eco-friendly cryptocurrencies on the horizon
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