Crypto investments garnered a lot of attention in late 2021 and early 2022. They became the hopes of many to make their fortunes on the investment markets and, to be quite honest, people did make a very quick bang for their buck.
However, as is with most of these kinds of things, as the novelty has worn off, the environmental impact of these decentralized systems has come to light.
And it’s not good.
Now, before you start panicking, I am not saying that crypto should be avoided. Not at all. If done right, investing in cryptocurrencies could be a really smart investment move for you. But if you want to be as eco-friendly as possible with your crypto investments, you need to dig a little deeper.
This is where green cryptocurrencies come into play.
Sustainable systems, like green cryptocurrencies, have seen a sudden rise in both popularity and availability.
But what are green cryptocurrencies? Does crypto really have a part to play in climate change? And what green cryptocurrency investments should you be watching in 2023?
Keep reading to find out.
*This article is not intended to provide professional financial advice
Why Is Crypto Bad For The Environment?
It is no secret. Cryptocurrencies are bad for the environment and if you want to live a more sustainable life, investing in crypto can be as hypocritical as a vegan wearing leather boots.
But why is an electronic-based money system bad for the environment?
Although all types of economic activity contribute to our cumulative environmental impact, crypto’s carbon footprint is pretty damn high. The issue boils down to the high energy consumption required to fuel the powerful computers used to ‘mine’ crypto coins.
What Is Crypto Mining?
To understand the environmental impact of crypto, and why you should be considering green cryptocurrency as an alternative, you need to know what the process of crypto mining actually is.
Much like mining for gold, crypto mining is the process where the ‘miner’ electronically digs up new crypto coins and puts them into circulation. Now, this is a really simplified description of the process but it is the easiest to understand.
Crypto miners use high-powered computers to solve difficult 64-number long riddles and whoever solves these first will be rewarded with thousands of euros in crypto.
So, the race is on to be the first. This means people are using faster, more powerful computers to be the first puzzle-solver and those energy needs are increasing week after week.
How Much Energy Does Crypto Use?
The estimated annual energy consumption of crypto companies, like Bitcoin, is teetering around a massive 89.5 TWh. The University of Cambridge has a Bitcoin Electricity Consumption Index that keeps track of these averages and mentions that the amount of energy Bitcoin uses each year could boil all of the tea kettles in the UK for 20 years. 89.5 TWh is also more energy than the country of Finland consumes in a single year.
However, there is also a flip side to this. The United Kingdoms’ annual energy consumption comes to 287.3 TWh. So, although Bitcoin and other cryptocurrencies are using a ridiculous amount of energy, they are on the relatively lower end of the country’s ranking of annual electricity consumption list.
But, with the rush to be the first miner to solve the riddle, these computers are only going to get more powerful and more hungry. That greedy energy consumption is only going to increase.
As of right now, this energy consumption is largely powered by fossil fuels, although 50% of all American Bitcoin mining relies on renewable energy sources. So, there is hope.
The Environmental Impact of Crypto Currencies Like Bitcoin
A high percentage of all crypto mining activities rely heavily on the energy produced by our limited fossil fuel resources. As the energy needs of these powerful computer systems increase, the usage of our fossil fuels will also inevitably go up.
For many countries and their commitment to reducing their carbon footprint, the use of fossil fuels is something we are all trying to eliminate.
An article published in Nature Climate Change commented that “Bitcoin emission alone could push global warming above 2c”.
Even though this research didn’t take into account that Bitcoin uses a variety of electricity sources including some that come from renewable practices, it’s a scary thought to be faced with.
But, beyond another carbon tax, what can be done to make a more sustainable shift?
Does Bitcoin Crypto Use More Energy Than Traditional Currencies?
Bitcoin has come under a lot of scrutiny regarding its carbon footprint, so we have a lot of study material to go off. However, many of these figures don’t take into account that, other than the use of high-powered computers, crypto mining has very little energy needs anywhere else.
As for traditional currency, there are a large number of energy-consuming components in the making and circulation of cash and traditional bank-based currencies.
From printing paper to mining materials for our physical coins, even the running of our bricks and mortar banks contributes to energy usage. However, it’s a lot harder to get an average picture of these energy uses as a whole.
The Alternative: What Are Green Cryptocurrencies?
So, you want to buy in on the decentralised promises of the cryptocurrency industry but you still want to do it as sustainably as possible? Luckily, having the curtains well and truly pulled back on the dirty underbelly of the crypto world has opened the doors for an eco-friendly, green cryptocurrency to enter the market.
With environmentalists all agreeing that cryptocurrency mining uses a frightening amount of fossil fuels every single day, there has been a positive push to clean up the energy use in the industry.
There has been an explosion of green cryptocurrencies on the market recently, many of which are based on new systems that actually reduce the carbon footprint of blockchain mining.
These green cryptocurrency systems are trying to retire the old model of crypto mining – called Proof of Work (POW) which sees high-powered computers being used to solve complete digital riddles to win digital coins.
Instead, green cryptocurrencies are adopting a new method, Proof of Stake (POS). This new method is completely changing the rules and, although it is a tad complicated, it switches the game of gold rush to a game of chance.
In short, you don’t need a high-powered computer to race against the clock. Now, miners will commit “stakes” of tokens to be part of a lottery pot and potentially be the one person chosen to receive a financial token reward.
This leads to a lesser need for high-powered, energy-guzzling equipment and in turn, reduces energy consumption.
Now, although there are some successful green cryptocurrency models on the market, this method has yet to prove itself on a larger scale. However, never underestimate the ability of our technological geniuses when they see something that could improve the crypto industry.
And green cryptocurrencies has to be the way forward.
The 7 Most Sustainable Cryptocurrencies of 2023
With many cryptocurrencies having a nasty carbon footprint, it can be a bit of a minefield trying to figure out which ones are a green cryptocurrency and which ones aren’t.
If you are ready to turn your investments a bit more eco-friendly, here are seven green cryptocurrencies you should look at for 2023.
1. Chia (XCH)
Employing another mining process called Proof of Space, this green cryptocurrency is dramatically reducing its energy consumption. Proof of Space allows Chia community members to earn currency simply by storing data for a specified period. Chia can even be mined in the cloud, reducing space needs for this decentralised currency.
Like other green cryptocurrency models on the market, Chia was created in response to the high energy needs of traditional crypto. Built by the creator of Bit Torrent, Chia uses hard drive space to reduce energy consumption and Amazon Web Services even has a cloud platform where you can farm Chia coin fast and efficiently without increasing your energy usage.
2. Cardano (ADA)
Developed by the co-founder of Ethereum, one of the most popular currencies in the crypto industry, Cardano became the first-ever peer-reviewed digital currency. This super-fast green cryptocurrency can reach an incredible 1000 transactions every single second. To put that into perspective, Bitcoin can only manage a mere 7 in the same amount of time.
Operating a Proof of Stakes model, Cardano offers tokens for purchase so people can join the network and in turn, drastically reduces energy requirements.
3. Nano (NANO)
This particular green cryptocurrency has actually been around since 2015 but not many people have heard of it. Nano uses much less energy than many other cryptocurrencies on the market right now and has become a popular go-to for sustainable investors.
Not only does Nano not need mining to be an effective currency, but it is a very lightweight currency that is also scalable (one of the things you want your investments to be able to do). One of the top green cryptocurrencies on the market, Nano uses a block-lattice technology that minimises its carbon footprint and maintains great energy efficiency.
4. Stellar (XLM)
Originally a part of Ripple, Stellar branched off on its own in 2014 and is trying to bridge the gap between traditional currencies and digital currencies. Stellar Lumens is a green cryptocurrency very similar to PayPal and even garnered most of its seed funding from companies like Stripe and Google.
With Stellar you can invest directly in renewable energy, making it easier to create sustainable investments. This green cryptocurrency uses a tokenised system which lowers its communities carbon footprint.
Stellar was created to host all types of digital currency, so you can easily trade USD, Bitcoin, and even Argentine pesos, but they also have their own native token, the lumen. However, every account holder is expected to hold a small number of lumen at all times but it is a very modest amount.
5. Algorand (ALGO)
Another green cryptocurrency that utilises a Proof of Stake model, Algorand has a carbon-negative approach to its cryptosystems. Partnering with ClimateTrade proved this blockchain’s dedication to becoming more sustainable.
Currently carbon neutral, Algorand has begun to partner with environmentally focussed organisations (currently three) to offset their carbon footprint even further and enter into the negatives.
They want to be the greenest blockchain option on the market and they are proving their dedication to this mission.
6. SolarCoin (SLR)
SolarCoin is a decentralised green cryptocurrency. Meaning it is free from government interference and is globally operated. It does work similarly to many non-green crypto business models. However, SolarCoin is run by verifiably produced solar-powered energy.
In fact, it only takes 1 MWh to produce a single SolarCoin.
These green cryptocurrency models keep systems the same as they once were but reduce dependency on fossil fuel energy. It also gives incentives to people for using renewable forms of energy. Both big companies and regular consumers, who own and utilise solar energy, can upload documents that prove this and exchange them for cryptocurrency.
7. BitGreen (BITG)
Launched in 2017, BitGreen was created as a result of the environmentally damaging systems in place at Bitcoin. Created by members of the crypto community who noticed the unsustainable levels of energy consumption in the industry, this green cryptocurrency adopted the new Proof of Stake model to reduce energy usage.
BitGreen is a community-driven enterprise that also runs a sustainability-focused foundation that maintains the BitGreen project and they have a goal to raise $1 Trillion in the next ten years for sustainability projects.
There are also incentives for community members who make more eco-friendly decisions in their day-to-day activities. Such as carpooling, volunteer work, and purchasing sustainable products from approved suppliers.
Are You Ready To Invest In Green Cryptocurrencies?
The term ‘put your money where your mouth is’ has never been more relatable than it is now. With such an important focus pressing on the eco-friendly activities of our businesses and corporations, it’s no surprise that crypto is going green.
Although green cryptocurrencies are a working progress – yes, it is far from perfect – it’s a giant leap in the right direction for an industry that could do irreparable damage to our environment if it stays the same.