Cryptocurrencies have become one of the most profitable investments of the century, increasing the number of crypto investors. The huge need for cryptocurrency has resulted in increased production. However, many social activists raise their concerns about the production of cryptocurrencies, leading to economic impacts.
Are cryptocurrencies eco-friendly? What are the environmental impacts of crypto production? If you are keen on knowing more, continue reading the article.
Table Of Contents
- Are cryptocurrencies environment-friendly?
- What are the impacts of cryptocurrency on the environment?
- How do you control the environmental impact of cryptocurrency?
- What is green cryptocurrency?
Are Cryptocurrencies Environment-Friendly?
Cryptocurrencies are virtual currencies built using cryptographic techniques to increase security and eliminate intermediary costs. Cryptocurrency requires tools, the internet, and a global network system to carry out transactions. All this requires a large amount of energy, causing a severe impact on the environment. Thus, most cryptocurrencies are not environment-friendly.
What Are The Impacts Of Cryptocurrency On The Environment?
Cryptocurrency mining is a process in which a cryptocurrency transaction is validated on a blockchain network. It utilises a specialised computer network to add the block to a proof-of-work blockchain, which entails millions of computing machines, resulting in the consumption of enormous quantities of energy.
Cryptomining can result in
- Large consumption of energy.
- Generation of electronic waste.
- Emission of greenhouse gases causes an increase in temperature in the atmosphere.
- Water footprint.
According to Digiconomist reports, the Bitcoin network is responsible for 55 million tons of carbon dioxide emissions per year, which is equivalent to the amount generated in Singapore. ‘Climate and Energy Implication of Crypto Assets in the United States’ reports that Bitcoin requires more energy than all other cryptocurrencies combined together. The energy consumption of Bitcoin is mainly reliant on non-renewable resources; 62% of the electricity used for Bitcoin mining comes from fossil fuels.
Crypto mining generates large amounts of electronic waste, especially in Application Specific Integrated Circuit (ASIC) mining, as hardware becomes outdated after the process. As of August 2024, the Bitcoin network has generated 10.52 kilotons of electronic waste.
To control the heat generated by mining machines and to keep the equipment cool, manufacturers have introduced water cooling. As a result, hot water is discharged into the nearby water bodies, increasing the temperature of the water and affecting the aquatic life.
The energy consumption of Bitcoin has resulted in an increasing emission of carbon dioxide into the environment, resulting in global warming and other climatic changes.
How Do You Control The Environmental Impact Of Cryptocurrency?
It is true that crypto mining results in a large consumption of energy, but it is not necessary that processing cryptocurrency transactions and minting have to be energy intensive. There are many measures to reduce the consumption of energy during crypto mining.
Transition to renewable energy
Renewable energy can be renewed again and again. Using a renewable form of energy reduces carbon emissions. Solar, wind, and hydropower energy are increasingly used in the crypto industry. They are cost-effective and less polluting.
Proof of stake consensus mechanism (PoS)
The proof-of-stake consensus mechanism is an alternative to crypto-mining in which less power is consumed compared to mining. Operation of the crypto network and validation of the transactions are granted based on the amount of cryptocurrency an investor staked.
Implementing carbon credits
Implementing carbon credits for cryptocurrency mining companies can lead to buying carbon credits from other companies. Along with reducing global carbon emissions, this approach results in the utilisation of green energy.
What Is Green Cryptocurrency?
Crypto mining involves a larger consumption of energy, resulting in a huge carbon emission. To reduce carbon emissions and safeguard the environment, a new form of cryptocurrency has been introduced, known as green cryptocurrency.
Green cryptocurrencies utilise proof-of-stake mechanisms to reduce carbon emissions. The Crypto Climate Accord is an eco-friendly organization that helps decarbonize the crypto platform. Green cryptocurrency upholds the integrity of blockchain without causing harm to the environment.
Popular Green Cryptocurrencies
- Chia Network (HCX)
Chia Network is a popular green cryptocurrency that offers improved sustainability and efficiency than conventional cryptocurrencies. In this cryptocurrency, proof of stake (PoS) and proof of work (PoW) are integrated to achieve Nakamoto consensus.
- Nano (NANO)
Nano is a different cryptocurrency that uses a unique voting system to improve efficiency and eliminate the need for mining. As it requires few machines to work, it reduces data storage and increases the speed of transactions.
- Other popular green cryptocurrency includes Cardano (ADA), Stellar lumens (XLM), and Algorand (ALGO).
Final Thoughts
Cryptocurrencies are one of the most profitable investments in the present era; however, the environmental impacts caused by crypto mining cause many concerns. The increased carbon emissions, electronic waste, water footprints, and greenhouse gases affect the environment badly, leading to climatic changes and affecting aquatic life. Green cryptocurrencies improve the sustainability of the cryptocurrencies without affecting the integrity of their blockchain. The rising environmental concern has resulted in a shift in popularity from conventional cryptocurrency to green cryptocurrency.
