How Can Cryptocurrency Be More Environmentally Friendly

 

More than 15,000 cryptocurrencies exist worldwide and although cryptocurrency in and of itself is not dangerous for the environment, it has a big energy consumption problem.

Units of cryptocurrency are produced through the energy-intensive process of mining. This involves the use of the proof-of-work consensus mechanism which refers to a form of cryptographic proof in which a certain amount of computational power is proven to have been expended. As a consensus mechanism, it is used for validating transactions, preventing fraud, and mining new bitcoins. It is used by cryptocurrencies like Bitcoin and Ethereum among others. This process was designed to be energy-intensive in order to prevent security breaches but comes at a cost. Because of the dependence on high amounts of energy, mining is now responsible for 0.6% of global electricity consumption. 

Bitcoin alone is estimated to consume 127 terawatt-hours (TWh) a year which is more than many countries, including Norway. In the United States, cryptocurrency activity is estimated to emit from 25 to 50 million tons of CO₂ each year, on par with the annual emissions from diesel fuel used by US railroads.

It’s a difficult conundrum for consumers who are gravitating more and more towards environmentally friendly initiatives as Crypto though dependent on high amounts of energy, works well as a payment method and means of investment satisfying consumers’ desire for convenience and digital interaction.

It is vital that the crypto industry is decarbonised to be able to achieve a safe climate future. The good news is that the crypto industry can make changes to lessen its environmental impact and can still give businesses and consumers the same much needed benefits.

Here are four ways that crypto and sustainability can work together:

Sustainability Starts With Smart Technology
Transitioning towards more sustainable crypto mining doesn’t have to be difficult. Many of the technologies that can be used to lay the path toward sustainability can be found in our own homes. In the same way that smart thermostats and smart lighting systems can be used to keep an eye on excess energy usage in our homes, smart technology can minimise waste in the crypto-mining process. Instead of moving toward a big, undefined and in some cases intimidating goal of sustainability, using smart tech can make setting sustainability goals and milestones a whole lot easier. This way crypto miners can see how far their current energy consumption is above or below where they started in real-time.

Proof of Stake Systems Is Key to Wide-Scale Change
Many of the top cryptocurrencies on the market currently use proof of work (PoW) to validate transactions. Using this method to validate transactions involves solving complex puzzles to complete verifications, and validators competing to solve the same puzzles. This process is known as mining and is highly energy intensive.

However, Ethereum the top cryptocurrency in the market after Bitcoin which currently requires traders to solve complex mathematical equations to receive Ether, is leading the way toward a shift in the crypto industry. Ethereum plans to cut its energy usage by a massive 99.95% by transitioning to a proof of stake system.

Although PoS systems still offer tokens as rewards, validators are chosen at random. Instead of rather inefficiently working on the same complex puzzles, validators need to put up a small amount of their cryptocurrency as collateral for a chance at getting selected.

Fraudulent transactions are prevented with this collateral and the use of multiple validators while also getting rid of the energy-intensive competitive element of mining.

Renewable Energy Can Lower Carbon Emissions
Another way that the cryptocurrency industry can improve sustainability is to embrace renewable energy. Traders can move toward solar energy, wind energy or other eco-friendly options rather than consuming huge amounts of fossil fuels.

There are some crypto mining companies that are already leading the way toward renewable energy-based mining such as Genesis Mining and Aspen Creek Digital Corporation.

Although renewable energy could increase the cost of mining, renewable energy systems are likely to become a practical solution for all mining companies as they improve and become more widely adopted.

Availability of government subsidies for renewable energy in some countries may also contribute to more sustainable cryptocurrencies in the future.

Carbon Offsets Present an Immediate Alternative
One step that the cryptocurrency industry can take to make a difference immediately is to offset their carbon emissions. Transitioning to proof of stake and renewable energy systems will most likely take lots of time and money whereas contributing to carbon offsetting projects such as tree planting projects and landfill management will have an immediate effect. These projects can help anyone in the crypto industry cancel out their carbon footprint and create a greener world.

There are some eco-friendly cryptocurrencies following a similar ethos to this that reward users for their green actions. Solarcoin, for example rewards solar energy generators, while Bitgreen rewards users for carpooling, volunteering, and even drinking eco-friendly coffee.

Investors can encourage crypto companies to go green by choosing sustainable options over traditional coins like Bitcoin.

The Future of Cryptocurrencies
Despite a huge rise in the popularity of cryptocurrencies, if action is not taken soon to make the crypto industry more sustainable consumers may shun crypto in the future.

More and more people the world over are demanding sustainable business practises and however valuable and convenient cryptocurrency is, interest in it will decline if the industry continues to use excessive amounts of energy.

One of the most effective ways for the crypto industry to become more eco-friendly is to transition to proof of stake systems, By using renewable energy sources, mining companies can also further reduce their impact on the environment.

While the industry transforms the way it operates those people who are interested in crypto can contribute to carbon-offsetting projects and opt to invest in eco-friendly cryptocurrency options.