Bitcoin may be the king of crypto, but its long-term reign looks uncertain because of its negative impact on the environment.
The amount of electricity consumed by Bitcoin mining in one year could boil enough water for all cups of tea made in the UK for 30 years, according to the Cambridge Bitcoin Electricity Consumption Index. Recent estimates say its carbon footprint is now on a par with the entire country of New Zealand, and growing.
However, there are promising eco-friendly cryptocurrencies that inflict less damage on the planet.
Here are our top 5.
Describing itself as “green money for the digital world”, Chia was created by BitTorrent inventor Bram Cohen in 2017. Chia claims it uses up to 10,000 times less energy than Bitcoin’s mining technology.
Bitcoin is mined using a concept called proof-of-work, where users solve complex equations on energy-intensive computer processors to unlock new tokens. This energy is primarily sourced from fossil fuels. In contrast, Chia uses a proof-of-space approach, which rewards users for housing the coin on empty hard drives. The theory behind it is that anyone sitting at home can download its technology and run it on their computer using storage space. Chia calls this method ‘farming’, rather than mining.
However, some critics say 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.
Cardano was developed by Charles Hoskinson who is co-founder of Ethereum, the second-largest cryptocurrency after Bitcoin. It uses a proof-of-stake system called Ouroboros, which values the percentage of coins a miner holds rather than the processing power they possess.
Hoskinson has said the network uses less energy than 0.01 per cent of Bitcoin’s. Theoretically, the proof-of-stake system could achieve more than four million-times the energy efficiency of a proof-of-work system such as Bitcoin’s. Cardano is not the only cryptocurrency to use the proof-of-stake approach, but it is easily the biggest.
What gives Nano its green crypto edge is its complete autonomy from mining. Instead, it uses a “blockchain lattice” technology where every user is given their own blockchain (rather than all individual accounts being hosted on a central blockchain). Transactions are confirmed by Open Representative Voting (ORV), where representatives who are voted in by members of the network act as validators. This uses significantly less energy and time compared to the power-intensive mining used by Bitcoin.
In addition to its climate-credentials, nano transfers are instant and it is free to trade.
BitGreen was launched in late 2017 as a community initiative to build an energy-efficient alternative to Bitcoin and show that blockchain has the potential to achieve a better world without harming the planet.
In 2019, the BitGreen Foundation was formally incorporated as a non-profit organisation with an ambitious goal of making BITG (the unit of value created by the BitGreen blockchain) an impact-based currency.
BitGreen encourages 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. It’s a circular impact ecosystem: you earn for doing good, and you do good when you spend within the BitGreen community.
Like Cardano, Bitgreen uses proof-of-stake technology, which uses a minimal amount of energy.
SolarCoin is one of the most interesting green cryptocurrencies because it costs less energy than traditional Bitcoin mining, and rewards people who generate solar power with solar coins. Users can claim one coin for every megawatt hour created by solar technology. SolarCoin can be spent and traded like other cryptocurrencies, but the platform’s central goal is to encourage positive environmental action through increased generation of solar power.
The network currently relies on people submitting paperwork to confirm how much solar energy they have generated, but it is working on automating this process.
Is the future green for crypto?
As concerns grow over the amount of energy used in cryptocurrency mining, new initiatives are emerging to improve the sector’s sustainability credentials. These include increased use of renewable energy, more energy-efficient processes and carbon offsetting.
TRG Datacenters says it expects to see the development of new, more eco-friendly cryptocurrencies, as well as major changes in the practices of existing currencies. Bitcoin’s biggest rival Ethereum is changing from the energy intensive proof-of-work system to proof-of-stake this year, and the Change the Code Not the Climate campaign is calling on Bitcoin to follow suit.
More than 250 individuals and companies have joined the Crypto Climate Accord, which aims to decarbonise the industry and achieve net-zero emissions from the electricity consumption associated with cryptocurrencies by 2030.