Are you aware blockchain technology is significantly changing the finance scenario worldwide? In just the last two years, the number of DeFi users has gone up to five million from just around 91,000! This is major, and has been possible because decentralized crypto assets, including the rising popularity of ‘green crypto,’ bring financial freedom like no other to users.
Bitcoin is the OG crypto that kickstarted the whole decentralized finance scenario. More than a decade later, it has grown so much that it is considered one of the most preferred stores of value for investors worldwide. In fact, Bitcoin has already drawn comparisons to gold for that very reason.
Investing in Bitcoin continues to become increasingly popular among the crypto trading community, but many critics are questioning Bitcoin’s credibility because of its high power consumption. The proof of work mechanism it works upon is causing people to think that Bitcoin does more harm than good. So, what is the truth behind it? Is Bitcoin really a ‘green crypto’ in this crypto revolution?
Impact of Crypto on Environment: What Is The Power Consumption By Bitcoin?
If you participate in crypto trading, you would know Bitcoin works based on a proof of work consensus mechanism. To add a transaction into a block on the Bitcoin chain, miners compete with each other to solve a complex equation or perform an algorithm to verify the transaction. As a reward, the miners get some Bitcoin, and the transaction gets added to the chain.
The whole process of adding blocks to the Bitcoin chain conventionally consumes a lot of energy. According to Techopedia, in May 2023, the total electricity used globally for mining Bitcoin was approximately 95.58 terawatt-hours. This substantial energy consumption is because of mining, where Bitcoin transactions are verified and the network is secure. This energy usage can fluctuate over time due to various factors, such as changes in Bitcoin’s mining difficulty, price, and the number of miners actively involved in the network.
What Makes a Green Cryptocurrency?
Within the crypto trading community, there is a lot of discussion over how to get the energy consumption related to proof of work blockchains to reduce. Especially with Ethereum shifting over to a proof of stake consensus mechanism from PoW stating the environmental issues as a main factor, green cryptocurrency is a concept that is gaining popularity these days.
A green cryptocurrency is one that not only works on enhancing the functionalities of decentralized finance, but also thinks about sustainable ways of adding transactions to the blockchain so it is not energy intensive. Nearly every cryptocurrency today is working on being sustainable and leaving a lesser carbon footprint behind, so as to become a ‘sustainable cryptocurrency’.
Crypto Revolution: A Shift To Greener Approach
Source: Freepik| Impact of crypto on environment, and how sustainable cryptocurrency helps
The crypto industry is undergoing a significant shift towards a greener approach. As concerns about the impact of crypto on environment grow, developers are actively exploring more sustainable alternatives. One notable change is the transition from proof of work (PoW) to proof of stake (PoS) consensus mechanisms. PoS requires significantly less energy consumption, making it a more eco-friendly option.
Ethereum has already launched Ethereum 2.0 with a PoS model, cutting energy usage by 99%. Other cryptos like Cardano, Polkadot, EOS, and Cosmos also adopt PoS, contributing to a more sustainable crypto ecosystem. Additionally, sustainable energy usage for BTC mining has grown nearly 60% in a year, further showcasing the crypto industry’s commitment to adopting a greener approach. These efforts lead to the crypto revolution paving the way for a sustainable cryptocurrency.
Sustainable Cryptocurrency: How Crypto is Going Green
Source: Freepik| How does sustainable cryptocurrency work?
Here are some ways crypto is going on a sustainable journey to become greener:
Green Cryptos
Green cryptos are specifically engineered to be environmentally conscious. Take Chia, for instance, which utilizes a “proof of space and time” consensus mechanism, consuming significantly less energy than traditional mining methods. These eco-friendly designs aim to minimize the environmental impact associated with cryptocurrency operations and promote sustainability within the industry.
Renewable Energy Mining
Sustainable cryptocurrency initiatives extend to renewable energy mining. Bitcoin mining, for instance, is progressively adopting renewable energy sources like solar and wind power. This shift helps reduce the carbon footprint associated with mining activities and promotes a more sustainable approach to sustainable cryptocurrency operations.
Proof-of-Stake (PoS) vs. Proof-of-Work (PoW)
The environmental impact of crypto mining, mainly due to energy consumption, has raised significant concerns. Nevertheless, crypto networks such as Ethereum and Cardano are shifting towards the PoS consensus mechanism instead of the conventional PoW. PoS is more eco-friendly as it consumes less energy.
Sustainability-focused Investment Funds
Investors now have the option to invest in sustainability-focused crypto funds that prioritize projects and initiatives with a strong eco-friendly focus. By choosing these funds, investors can support and promote environmentally conscious practices within sustainable cryptocurrency, thereby mitigating the impact of crypto on environment.
Carbon Offsetting
Certain crypto companies are exploring carbon offsetting solutions in response to environmental concerns. This approach allows these companies to mitigate the impact of crypto on environment and contribute to environmental conservation efforts.
Conclusion
Saying Bitcoin is a green cryptocurrency at the moment with conviction is certainly quite difficult. However, Bitcoin is slowly but surely moving towards becoming a ‘green crypto’ in this crypto revolution, as much for the betterment of the environment as to satisfy the ESG requirements of institutional investors coming into crypto trading. It remains to be seen what other steps BTC will take for a yet more environment-friendly approach
concerning the impact of crypto on environment.
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