Cryptocurrency brought us to the new era of Web3. It’s a place where your digital identity matters, the internet goes into decentralization, and blockchain makes everything transparent. Web3 also includes an idea about decentralized finance or DeFi. This concept enables money exchange without intermediaries such as banks or governments. And cryptocurrencies play a vital part in this exchange.
Cryptocurrency is digital money that doesn’t have a physical form. That’s one of the main differences between crypto and fiat money, such as the dollar or euro. Unlike fiat money, crypto doesn’t rely on banks — it uses decentralized systems to record transactions. As the first part of the “cryptocurrency” word implies, digital money uses cryptography techniques to exclude fraudulence during transactions.
Cryptocurrency can bring benefits to the world. Their nature makes it impossible to counterfeit digital money. Moreover, blockchain technology registers all crypto transfers. Thus, a person can’t use the same amount of cryptocurrency for double transactions.
Another advantage is people don’t need to open a bank account to use cryptocurrency, and it’s good news for developing countries where banking technologies are not widespread. If sending crypto doesn’t involve banks in the process, a person shouldn’t pay transaction fees. Credit cards are also unnecessary for using crypto.
Digital money has a chance to make the world better and help emergent nations to decrease poverty. However, it doesn’t mean crypto has no weaknesses at all. The biggest one is that cryptocurrency affects the environment negatively.
How does crypto hurt the environment?
Over the years, the first-ever cryptocurrency named Bitcoin has become a “digital gold.” It’s not just beautiful words — as of this writing, 1BTC costs $38,635.72 on Binance. This is not the limit — on April 14, 2021, you had to give $64,800 just for one coin created by Satoshi Nakamoto! No surprise that Bitcoin is the most desired cryptocurrency in the world.
Despite its vast popularity, Bitcoin receives tons of critics as it harms the environment. One of the ways to earn rewards in Bitcoins is to verify other Bitcoin transactions and record them on the blockchain. This process is called mining. In 2009, it was possible to mine Bitcoin with a simple CPU chip. Such chips were a part of ordinary graphic cards on personal computers. The mining process didn’t require extreme electricity consumption, and miners could use the same electricity as office workers using their PCs.
Today, the situation has changed. The record of one Bitcoin transaction in a blockchain consumes enough power for a single house for almost a day. Intel CEO Patrick Gelsinger even called it a climate crisis. The ever-growing footprints from Bitcoin raise concerns that the whole crypto-industry destroys the environment.
To mine Bitcoin is possible with using the Proof-of-Work and Proof-of-Stake consensuses. Unfortunately for the environment, the PoW consensus is the most popular among Bitcoin miners, mainly because it rewards more than the PoS consensus. The PoW mechanism verifies transactions and solves complex algorithms to find a Bitcoin transaction that’s not recorded in blockchain yet. Modern algorithms are so hard that miners need high-powered computers to operate them. Such equipment consumes lots of energy just for verification, and miners cant’ re-use this energy for other purposes.
The chances to make green cryptocurrency
Specialists from the crypto industry are aware of the problem in Bitcoin mining and looking for new ways to make green cryptocurrency. For example, a crypto exchange KuCoin offers discounts to those miners who use renewable energy sources.
Despite his criticism over extreme power consumption, Patrick Gelsinger offers his strategy to solve the problem. Intel is going to produce a new mining chip that will be eco-friendlier. The company believes that its latest product works 1000 times faster than ordinary Graphics Processing Units — GPUs.
Another option is to use Proof-of-Stake for mining green cryptocurrency. When using the Proof-of-Work mechanism, your success depends on your equipment’s power. Also, in the mining method with the PoW consensus, there is only one winner who can validate the transaction and earn crypto for it.
Another situation is in the PoS mechanism. All you need to do is stake your tokens in a staking pool. The more cryptocurrency you offer, the more chances to gain rewards. Everyone who stakes tokens in the pool is a validator. Then, the system chooses one validator who proposes a block of transactions. But the system adds the block to the blockchain only if other validators verify and approve this transaction. When the transaction is in the ledger, all validators receive transaction fees. The size of rewards depends on how many tokens you stake in the beginning.
The founders of the second popular blockchain ecosystem — Ethereum — are also thinking about improving its impact on the environment. That’s why they’ve launched new upgrades, after which the blockchain will consume less computing power and energy. After the changes, the Proof-of-Work mechanism will be turned off. Thus, only the Proof-of-Stake consensus will be available for earning new ETH coins. This is what makes Ethereum green cryptocurrency.
An example of a green cryptocurrency
Cardano is a new cryptocurrency that is eco-friendly and sustainable. It uses the Proof-of-Stake mechanism to verify transactions, which means that it does not require the use of energy-intensive hardware like Bitcoin does. This makes Cardano much more environmentally friendly than other cryptocurrencies. Additionally, all Cardano-based tokens are sustainable as well. For example, World Mobile Token uses solar panels for its infrastructure and is committed to using renewable energy wherever possible. Cardano is a great choice for people who care about the environment and want to support sustainable practices.
SollarCoin is another example of an eco-friendly cryptocurrency. These currencies are important because they provide an alternative to traditional banking systems that are damaging to the environment. We need to start moving towards more sustainable methods of conducting business, and cryptocurrencies are a great way to do that.