One of the biggest concerns around the rise of cryptocurrencies has been their environmental impact. Crypto mining takes a lot of electricity, and this has led to a sharp increase in energy usage at crypto mining farms around the world, which in turn has created a large carbon footprint from these activities. An estimate from the University of Cambridge is that Bitcoin would be among the top 30 energy consuming countries in the world if it were considered as one, highlighting the scale of energy usage that crypto mining needs at this time. Thus, many investors and traders have been resisting calls to invest in crypto, citing its environmental impact, and this is therefore something that the industry has been looking to resolve for quite some time. Thankfully, there are now some solutions and innovations in the pipeline, with some others just having been launched as well, that provide a ‘greener’ alternative to regular cryptocurrencies, while even the likes of Bitcoin have received support from noteworthy people in terms of its ‘green’ credentials.
One such example is the smart contracts platform Algorand (ALGO), which has recently announced a partnership with carbon offset platform ClimateTrade, to launch a sustainability program that would make the blockchain network ‘carbon negative’. This program will notarize Algorand’s carbon footprint and lock the equivalent amount of carbon credits in a ‘green treasury’, which should help achieve Algorand’s goal of being carbon negative. The blockchain is already carbon neutral since it uses a proof-of-stake (POS) algorithm, instead of the energy-intensive proof-of-work (POW) algorithm used by Bitcoin and some other cryptos. POW algorithms use a lot more energy than POS ones, since they rely on unending calculations to mine crypto; essentially needing ‘brute force’ on powerful computers to create new tokens, while POS networks validate new blocks by allowing users to ‘stake’ existing tokens, which results in these algorithms needing much less power, both in terms of energy and computation.
There are even a few ‘green’ coins being launched, with Chia (XCH) being the latest such project that has been created. Chia has been created by the inventor of BitTorrent, Bram Cohen, and it is based on the so-called ‘proof of space and time’ algorithm, which is emerging as an alternative to the POW and POS algorithms that are the standard for the crypto industry. Rather than needing large energy inputs or computers with high computational power, farming Chia only needs high capacity solid state or hard drives (SSDs and HDDs, respectively), which makes it more energy efficient and secure than the existing algorithms. Thus, Chia is aimed at allowing people sitting at home to be able to use their regular computers and laptops to mine it, which is not possible for other cryptos, which need mining farms and industrial-grade facilities and equipment to be mined. However, there are some concerns around this as well – namely that the popularity of Chia mining in China and neighboring countries is leading to a shortage of HDDs and SSD, creating spikes in their prices, in a similar manner to how graphics cards became more expensive due to buying pressure from crypto mining enthusiasts. However, this is still a lot more sustainable and efficient than crypto farms, and only time will tell if Chia can become a success on the back of its supposed positive environmental impact.
There are some other crypto tokens as well which are looking to tackle this problem. One such venture is SolarCoin (SLR), which was created to reward solar energy producers and provide an incentive to other producers to install solar panels and thereby increase solar energy production. It provides users with SolarCoins for every megawatt of electricity that is generated through solar energy, and the project has rewarded over 10,000 solar installations for this, totaling over 200 megawatts of electricity generated through solar panels. The project aims to incentivize solar energy for 40 years, targeting 97,500 TWh of energy generation.
Mining of Bitcoin and other cryptos can also become more energy-efficient. Many producers are based in countries such as Norway and Iceland, where almost 100% of energy production is renewable, and since the goal of mining crypto is to maximize the number of hashes (computations) per kW of electricity, renewable energy sources such as hydro and solar power are the most efficient, since they are far cheaper than traditional energy sources. We are seeing this elsewhere in the world as well – Iris, which is an Australian firm that uses renewable energy to mine Bitcoin, has recently managed to raise double its intended amount in a funding round, reaching $31 million, which shows that investors are taking these concerns seriously.
All these examples show how crypto and blockchain usage is slowly moving to be more sustainable and energy-efficient, and it is worth keeping an eye out for some of these projects in the near future.