Green cryptocurrencies are developing and using a combination of methods to become carbon neutral and environmentally friendly.
What you will learn
The Crypto Climate Accord is working to fully power crypto projects with renewable energies.
The Internet of Things and smart contracts offer ways to improve monitoring of carbon credit systems.
“Pre-mining” provides a more energy-efficient way of conducting an initial coin offering.
Decentralization, scalability, and security are cryptocurrency’s three core tenets. So where does the environment fit in?
Investors are looking more and more at companies’ environmental impacts. A 2022 Deutsche Bank report shows that over half of investors consider climate change the greatest deciding factor for investment placements. According to the study, 78% of investors want their investments to have a positive impact on the world.
Media scrutinizes digital currencies’ carbon footprint, and for good reason. Bitcoin, the first cryptocurrency, reportedly has emitted over 200 million tons of carbon dioxide since its launch in 2009. That 13-year total surpassed the amount of emissions of the nation of Colombia in 2018, researchers said.
In September 2022, the White House released its study on the “Climate and Energy Implications of Crypto-Assets in the United States.” They found that global crypto assets result in 110 million to 170 million metric tons of carbon dioxide a year. That’s about 0.3% of global greenhouse gas emissions. But they also recognized that blockchain technologies used in environmental markets have great potential to help mitigate global warming.
Thankfully, other cryptocurrencies aren’t so energy intensive. What are the green alternatives to Bitcoin?
Environmentally friendly cryptocurrencies, “Green Crypto,” and other sustainability projects work to minimize their impact on the climate crisis. And with more investors prioritizing the environment, green crypto has a lot of room to grow. In this article, we’ll explore some of the ways eco-friendly cryptocurrencies are expanding.
Green cryptocurrencies are digital currencies that prioritize energy efficiency, often with the aim of carbon neutrality. These forms of eco-friendly cryptocurrency use a combination of methods to become carbon neutral.
Originally, most cryptocurrencies used consensus mechanisms known as “proof of work.” The PoW system, still used by Bitcoin, is often criticized because it creates an arms race in computing power. Crypto farms continue to expand their operations, increase their annual energy consumption, and regularly overhaul their computing equipment.
Now, most cryptocurrencies are validated on a proof-of-stake blockchain system. By using a pure proof of stake instead of PoW consensus mechanisms, the mining process’ carbon footprint shrinks like crazy.
Before the Ethereum Merge, the energy required to run Ethereum’s original PoW system was 78 terawatt-hours per year. After the Merge, changing to a PoS system, Ethereum’s carbon emissions dropped by 99.992%.
Green crypto projects can go beyond using proof-of-stake to reduce their carbon emissions. As the economy pushes for greener investment strategies, green crypto is challenging Bitcoin’s precedent of high energy consumption. Strategies for making crypto eco-friendly are now seeing results. Let’s look at some examples.
Whether it’s a PoS or PoW consensus mechanism at work, one way to minimize climate impact is using renewable energies. For classic PoW mining operations, the energy source depends on location. The environmental impact depends on whether mining occurs in a hydropower or coal-based region, a renewable energy or a pollutive region.
The Crypto Climate Accord is one environmentally friendly organization dedicated to decarbonizing the crypto sphere. It's working to fully power crypto projects with renewable energies, exclusively. As of now, CCA has over 250 signatories who have committed to achieving net-zero emissions by 2030.
One of the most popular methods of decarbonization is to purchase carbon credits to offset emissions. Carbon credits are far from a perfect system. Researchers are still investigating the ways in which the offset system can be tightened and made more effective.
Jim Hourdequin, one of the world’s largest carbon offset salespeople, is also one of its largest critics. Poor regulation can result in carbon sequestration projects failing to change their forest management, rendering their credits ineffective.
With the Internet of Things, decentralized blockchain, and smart contracts, there is great potential to better monitor carbon credit systems. As more and more green cryptos rely on carbon credits to reach net-zero emissions, regulation can become more robust.
One example of carbon credit monitoring with blockchain technology is Tree Defi, which trades tokens representing real planted trees. Then owners can earn profits from their trees’ Co2 absorption.
Tracing the energy consumption across many different nodes within a decentralized platform is tricky. It’s difficult to calculate how much electricity is used in all crypto transactions. But for many cryptocurrencies, continual creation or “minting” of new coins is an ongoing energy expense.
“Pre-Mining” is when a currency creates a set number of tokens before the initial coin offering to the market. By already creating most of the tokens, they won’t expend energy to mint more. It's a more energy efficient system. XRP, for example, pre-mined its coins before its initial exchange offering.
This method does come with some risk, because pre-mined coins are more centralized. The central authority is the currency’s creators. They can use pre-mined coins to reward developers and prove its functionality. After that, they open the initial exchange offering to the public on the blockchain. This requires more trust in the coin’s creators and has the potential for “Pump and Dump” scams.
More digital currencies are touting environmental advocacy. How can you know if a currency is truly green, or only “green-washing” themselves for branding? Here’s how some crypto organizations are prioritizing the environment.
IMPT.io is a new platform exclusively for buying, selling, and trading carbon credits. Their platform is an accessible way for businesses to amass carbon credits to become carbon neutral or carbon negative. Their system allows you to earn a yield on your credits. They also offer collectible NFTs for those who opt to burn their carbon credits. They’ve pre-mined coins that are now available for pre-sale.
Solar Coin is a program that rewards people and businesses for installing solar technology. They want to reward those who are producing the most electricity, renewably. With their 40-year plan of providing solar users with coins, they want to further incentivize and economize the solar industry. They want to do more than limiting their pollutive energy usage, they are encouraging everyone to have a lower carbon footprint.
Now more than ever, there is a pressing need for quality data in carbon markets. Hedera recognizes that distributed ledger technology is a great means to collect hard data without corruption. Offering rapid transaction speeds (100,000 per second) and low fixed fees, Hedera works towards the lowest total electricity consumption possible. Fully carbon neutral and pledged to go carbon negative, Hedera set its sights on net zero emissions from its founding.
Cardano is a digital currency operating on proof of stake. It was founded by a co-founder of Ethereum, and its blockchain, Ouroboros, was the first peer-reviewed, verifiably secure blockchain protocol. It is also suited for developing smart contracts and dApps, offering a transaction speed of 1,000 per second. When someone buys units of Cardano, they become a member of the network without requiring new coins to be minted.
IOTA is an eco-friendly blockchain technology that offers many services, including the IOTA Tangle. Tangle logs environmental data which empowers evidence-based solutions for natural resource management and policy interventions. Also, IOTA ecosystem researcher Amir Abbaszadeh Sori found that each IOTA transaction uses only 0.11 watt hours. That’s low — comparable to the numbers for Visa or Mastercard.
The use of fossil fuels needs to be mitigated as much as possible. Crypto projects can have massive energy requirements, leading to huge amounts of electricity consumed. Eco-friendly crypto needs to keep diversifying both for the sake of the planet and for technological advancement.
Supply-chain management systems, distributed energy resources, and carbon sequestration efforts are all realms that could be aided by DLT. Hedera is not only committed to carbon negativity, but it also offers flexible, fast, and affordable smart contract services. It’s an ideal platform for green developers as well as an excellent green treasury for eco-investors.
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