Blockchain and crypto are currently traded as the "green" capital investment for an ecological future - is crypto sustainable?
Author: Sarah Marie Lau
Since its launch in 2009, Bitcoin has advanced to become the best-known and most relevant cryptocurrency and is now even dubbed the "cash of the internet". While this potential was still largely unrecognized when the digital currency was founded, it can no longer be denied today: at the end of January 2022, around 18.95 million bitcoins poured into decentralized, digital cash flows.
So it's no wonder that Bitcoin has a market value of $801.8 million. And thus by far the most profitable of all available virtual currencies. However, as is so often the case, this success story also has its downsides - especially from an ecological point of view. Many are asking the question: is crypto sustainable? In fact, there are solutions with ETH 2.0 and other sustainably oriented cryptocurrencies.
Crypto crux: lack of commitment to resource conservation
Reason for the concerns that bitcoin in the area of sustainability triggers is above all the production of the cryptocurrency. The so-called mining usually takes place with considerable energy consumption. To date, however, this energy has only been generated to a certain extent from renewable resources. The University of Cambridge determined one for Bitcoin energy consumption of 130TWh per year. In practice, this corresponds to a continuous power consumption of 15 gigawatts for the production of digital monetary units.
Means: Valuable resources are wasted on mining the cryptocurrency. And that, although there have long been sustainable alternatives such as renewable resources and energies exist that are in line with the circular economy. A particular problem is the crypto industry's lack of commitment to converting production processes to renewable energies in order to minimize the environmental impact of the industry and establish a sustainable New Normal.
Too little transparency as a security risk
However, it is not only sustainable demands that most virtual currencies cannot meet. There are also increasing concerns about safety and crime. One reason for this is the lack of Transparency on the part of crypto companies and on the other hand their use of decentralized booking systems such as blockchain, which evade any state control. So it comes as no surprise that digital currencies are often associated with cybercrime and the dark web.
Social change as a driver of green tech
Positive development: The spirit of the times and the ever-increasing demand are actually going environmentally conscious consumers also left its mark on the crypto scene. Integrating more and more companies for digital currencies, such as Chia, Nano, Bitter or Solarcoin Corporate Social Responsibility in their corporate philosophy. And thus rely on sustainable commitment, environmental protection and responsibility towards the planet and people.
It is currently particularly important that the pioneering work of a few companies in the Mainstream and to establish it as such in the future. Before that can happen, however, a change of mindset is required. This means that the industry must be made aware of the correctness and the need for sustainable development of cryptocurrencies. Only then will there be enough willingness to convert the abstract crypto network technically and conceptually to a holistically sustainable strategy.
PoS: Future model for crypto transactions with less energy consumption
The introduction of Ethereum 2.0, for example, shows how the transition to more sustainable models can work. This is a series of upgrades intended to make the blockchain-based decentralized software platform more scalable, more secure and more environmentally friendly. As? The modified version converts the network to a proof-of-stake blockchain. And thus lowers the energy consumption, increases the speed and the number of possible transactions and ensures that the network remains secure and decentralized.
The introduction of the greener blockchain version marks the transition from a proof-of-work (PoW) consensus to a proof-of-stake (PoS) model. While PoW refers to the decentralized system that drives the blockchain and requires large amounts of energy to validate transactions and mint new tokens, PoS minimizes the energy consumption. The system allows miners to mine and validate transactions based on the amount of coins. The result: PoS places significantly fewer demands on the hardware than PoW, resulting in significantly lower energy consumption.
As long as the majority of booking systems still depend on complicated computing power, it is difficult to achieve better environmental balances across the entire industry. However, it is interesting to note that the international financial system consumes significantly more energy than the Bitcoin network. The overarching question is probably whether blockchain technology with its advances lays the foundation for a sustainable future financial world lays. And its development should be promoted more in order to establish cryptocurrencies safely, environmentally friendly and on a large scale. Thus, crypto becomes more sustainable.
Top 5 cryptocurrencies with a claim to sustainability
Anyone who wants to invest in crypto sustainably, as well as environmental protection high priority already has some options. These are the top 5 cryptocurrencies that harmonize innovative financial management with sustainability.
Cardano uses the PoS system Ouroboros. This requires the purchase of tokens in order to even join the network. With the result of considerable energy savings. In contrast to Bitcoin, Cardano can also carry out almost 1.000 more transactions per hour, is scalable to global requirements and meets high security standards as well sustainability.
The green version of Bitcoin not only uses PoS, but also promotes sustainability through incentives. Means: Users are rewarded for environmentally friendly behavior, for example for carpooling or less consumption. With the concept, BitGreen wants to establish itself as a contact point for NGOs and ESG corporate groups who want to use the potential of the blockchain.
IOTA uses an alternative form of technology, the "Tangle". This does not require a miner, so that maintenance is also possible for smaller devices. Means: Less energy required innovative tech and sustainable crypto.
4. Solar Coin
Those who use solar energy are rewarded with solar coins. To be more precise, the sustainable crypto company rewards every megawatt hour generated with a solar coin as an incentive for use renewable energies to offer.
Energy relief through PoS. Chia does not use mining or PoW models and is therefore considered a sustainable crypto. It is even possible to store and grow Chia Coins on your home laptop or PC - which is significant less energy consumed than conventional mining. However, the associated increase in demand for hardware and thus the amount of electronic waste is considered problematic.
Is Crypto Sustainable?
As some companies are proving, the green development of crypto technology is already on the right track. What is needed now is a systematic change in the entire industry. A global change that promotes sustainability through investment, innovation and promotes scientific development. More and more successful approaches to renewable energies and green tech show that this is possible. However, making it possible requires commitment. And whether the industry will soon come up with this and catch up with its Green Pioneers remains to be seen.