According to a CNBC survey, 1 in 10 people invests in cryptocurrencies. Some of the reasons for this are the excitement that these transactions bring, the fact that it’s easy to make trades, and crypto’s potential for short-term high growth. Moreover, many people get cryptos because they are encouraged by friends, family, or social media personalities.
Meanwhile, businesses love using ICOs because these allow them to raise capital very fast, especially if they are start-ups. Despite the lack of ICO regulation and the possibility of ICO fraud, many companies still use this way of raising capital by selling new cryptos.
While crypto trading is great and feels like a game, a lot of environmentally aware people worry that this boost in crypto trader numbers will have devastating effects on the world. Mining cryptos consumes a lot of electricity every year – as much energy as a medium-sized country.
Are cryptocurrencies truly that damaging? And if so, what are some options that are friendlier to the environment?
Cryptocurrencies – Are They Bad for the Environment?
Cryptocurrencies can be extremely damaging to the environment. Due to the way they generate new coins and validate people’s transactions, Bitcoin and Ethereum alone consume a lot of energy.
One of the things that people love so much about cryptocurrencies is the fact that no third party is necessary to guarantee a transaction. However, this is exactly what leads to issues for the environment. Since no middleman is needed for the transactions, every crypto requires a built-in way to make sure nobody can mess with the system.
Therefore, both Ethereum and Bitcoin use what is known as the “proof of work” model. But what is proof of work?
It is a mechanism that adds new transaction blocks to the blockchain of a cryptocurrency. People known as cryptocurrency miners will compete against each other in order to win the right to make blockchain updates – and get some nice rewards in return.
Unfortunately, the proof of work system is not energy efficient.
The mining process for cryptocurrencies requires a lot of computer processing power. Environmentally-aware people are worried because of this. In order to mine cryptos, miners need:
- Large amounts of electricity in order to power the algorithms
- Computers with a lot of power that work to verify all transactions and get coins in return
- Non-renewable energy sources, which include coal
How Bad Are Bitcoin and Dogecoin for Our Environment?
Bitcoin may have a lot of benefits, but it also has some environmental-related disadvantages.
According to the Bitcoin Electricity Consumption Index, Bitcoin mining uses more energy annually than Sweden or Malaysia. What makes this worse is the fact that the majority of the mining activity happens in China, where coal power is more used.
Over the last few years, the price of Bitcoin went up and then crashed. But if the price rises again, the amount of fuel needed for mining will go up as well.
Dogecoin also uses large amounts of electricity. 0.12kilowatts of energy per hour per transaction are used by Dogecoin. This was reported by TRG Datacenters in Texas, which analyzed multiple cryptocurrencies and ranked them based on their energy consumption.
Bitcoin was at the bottom of this list, with 707kWh. So, Dogecoin is a much better option in comparison.
Top 3 Eco-Friendly Cryptocurrencies
If you want to trade cryptocurrencies but you’re also worried about the impact on the environment, there is some good news: there are also green cryptos. They have a reduced impact on the planet and might be better options for you. Here are the top 3 eco-friendly cryptocurrencies:
IOTA is eco-friendly as it uses a different technology that eliminates the need for miners. This technology is called “Tangle”.
Basically, smaller devices are used to maintain it, so the energy requirements are decreased.
Solarcoin is an independently sustainable cryptocurrency. It was made to promote solar energy use. Generators get solar coins if they use solar energy. One coin can be claimed for every megawatt-hour made using solar technology.
Chia was designed to have less impact on the environment as the farming process involves hard drives. This concept is called “proof of space”. The coins can be farmed on the hard drives of a computer or laptop, while space that isn’t used can be used for “plots” instead.
After downloading the software, the computer will start farming chia as it does the plotting on your behalf. So, it doesn’t need high amounts of electricity.
As you can see, there are crypto options for people who want to stay eco-friendly. So, if you care about the future of the planet, you should consider using IOTA, Solarcoin, or Chia.