Cryptocurrency has become a global phenomenon, with many praising it for it’s entirely digital footprint that does not involve the use of any natural resources like metal or paper, and the associated impacts of using those for currency around the world.
However, the way cryptocurrency is created does use massive amounts of electricity, which largely comes from burning fossil fuels and has a significant impact on the environment, and contributes to climate change.
Thankfully, there are some great eco-friendly crypto companies that are actively working to reduce their carbon footprint and make cryptocurrency better for the environment!
Today, we’re going to cover what cryptocurrency is and how blockchain works, why crypto mining is so bad for the environment and three eco-friendly crypto companies that are actively making a difference.
Let’s dive in!
What is Cryptocurrency and How Does Blockchain Work?
If you’ve ever heard the term “Cryptocurrency,” you may have thought to yourself, “What an odd combination of words.” Or perhaps, “Why would anyone call it that? Why not just call it a ‘digital coin’ or ‘online currency?'”
The word cryptocurrency is quite literal—it’s a digital currency, which means it only exists in digital form and does not have any physical notes or coins. Unlike the physical money we use every day, cryptocurrency isn’t controlled by a bank or government—instead, it relies on something called a blockchain.
The Blockchain is essentially a way for people to store and send this digital money. It’s worked very well so far! Since cryptocurrencies launched about ten years ago, hundreds of millions of transactions have been made using cryptocurrencies.
Check out this video by IBM Technology for a quick primer on what blockchain is and how it works:
Cryptocurrencies are created through something called “mining”. Miners verify the crypto transactions that are happening on the network by solving complex mathematical problems. In exchange for validating those transactions, they collect new tokens as rewards. These new tokens can be used as payments or traded for other currencies like dollars and euros.
This video by Binance Academy illustrates the mining process:
As you can see, cryptocurrency offers many advantages and many consider it to be an ideal solution, and a truly global currency. However, there is one major drawback to cryptocurrency – it’s impact on the environment and contribution to climate change.
So, what is the problem with cryptocurrency and why is it bad for the environment?
Cryptocurrency Mining Consumes Huge Amounts of Energy
The most immediate and obvious effect of climate change is the melting of ice caps, which in turn affects sea levels. As these poles melt, they release large amounts of CO2 into the atmosphere. Some researchers are predicting that the CO2 emissions resulting from this effect could be enough to tip the climate into an ice age. Considering recent events (the hottest years on record globally), that’s not a joke.
The second environmental impact of climate change comes from the increased level of water in our oceans combined with rising temperatures; this causes rising sea levels, a result that threatens low-lying areas around the world. This phenomenon is known as “the ocean acidification problem”, where excess carbon dioxide dissolves in seawater and forms carbonic acid at a faster rate than it was before levels started increasing.
Blockchain is an energy hog, and it’s causing major headaches for developers looking to keep up with rising demand. In the race to secure new coins, miners can consume as much electricity as a small country.
As more coins come online and mining becomes more profitable, the demand for bitcoin miners is projected to grow 20 times.
Thankfully, this issue has a workable solution: pooling resources into blockchain mining pools. In a mining pool, groups of miners combine their computing power and share the rewards equally among members. With blockchain being distributed worldwide, it’s nearly impossible for any individual miner to reach 51% usage on a network—but when miners join forces in pools, they’re able to reach consensus quickly while consuming less electricity per transaction than they would on their own.
This trend has attracted some of the biggest names in tech: IBM has joined forces with the world’s largest mining operation Bitfury Group Limited (BITCF). They aim to use excess capacity from data centers to power blockchain development projects around the world.
Their goal isn’t just saving money through efficiency; it’s also about developing blockchain networks that are greener than ever before; Bitfury will even make its hardware available for purchase by other companies interested in making their own green blockchain projects using renewable energy sources like hydropower or wind farms!
So, mining Blocks on the Blockchain are extremely energy-intensive, and the amount of natural resources expended is extremely high. This contributes to the global warming problem.
However, Blockchain companies are actively pursuing solutions, so next time you decide to purchase cryptocurrency, you can consider these more eco-friendly options:
3 Eco-Friendly Companies Actively Making a Difference
Eco-Friendly Crypto Company #1: Chia
Chia is a cryptocurrency aimed at fixing some of the environmental issues inherent to the competing digital currency, Bitcoin. It was founded by Bram Cohen, the inventor of the BitTorrent file-sharing protocol.
Unlike Bitcoin, which relies on “proof-of-work” mining to verify transactions, Chia relies on a proof-of-space and proof-of-time process that uses significantly less energy. It also uses space on hard drives as an alternative to high-powered GPUs and ASICs (Application Specific Integrated Circuits), which are used for proof of work mining for some existing cryptocurrencies.
Proof of space mining is more difficult with this technology than it would be with ASICs since it requires a lot more memory, according to Chia tech lead Ryan Wu.
Eco-Friendly Crypto Company #2: Pi
Pi is a new cryptocurrency that you can mine on your phone. Pi is an eco-friendly cryptocurrency, which means that mining it doesn’t use up too much energy. It’s also relatively easy to mine Pi because you can do it on the mobile phone in your pocket—by contrast, bitcoin requires specialized computers.
Finally, the Pi network is led by a team of Stanford PhDs and is backed by investors, including the co-founder of Google. The Pi network has chosen to focus on people who have never been able to access cryptocurrencies before: those who are unbanked and live in developing countries.
Anyone can join the Pi network—although U.S.-based users currently have a waitlist for access, there are no restrictions based on nationality or location. The idea behind this project is that everyone should be able to benefit from cryptocurrencies and blockchain technology, not just those with the resources needed to participate in existing networks like bitcoin.
Eco-Friendly Crypto Company #3: SolarCoin
SolarCoin is an alternative digital currency that rewards solar energy producers for the positive effects of solar energy on the environment.
The SolarCoin Foundation, a 501(c)(3) non-profit organization, issues SolarCoins to solar electricity producers in recognition of their environmental impact. Every megawatt-hour of solar electricity produced earns one SolarCoin.
Check out this short video by Nick Gogerty for more on SolarCoin:
How SolarCoin Works
You can claim your SolarCoins by registering with the foundation and providing proof that you had generated power from a solar photovoltaic (PV) system. There are two steps to claiming your coins: You need to provide the foundation with information such as your location, system capacity, and contact details; then, you must prove that you have generated electricity from a PV system. The foundation accepts meter readings and certificates as proof sources.
The Process of Claiming SolarCoin
While it usually takes 30-40 days for the claim process to complete, once it does, you will receive an email confirming your transaction ID and wallet address where you can view your SolarCoins. You are allowed one claim every 90 days from each source (metric/certificate).
How to Claim SolarCoin
Claiming your free coins takes four easy steps: register on their website, submit a request to claim coins, create a wallet address where they will send the coins, and verify your identity via KYC (know-your-customer) verification procedures.
Final Thoughts on Eco-friendly Crypto Companies and How to Make Crypto More Sustainable
The global carbon footprint of the cryptocurrency industry was recently revealed in a report published by the Cambridge Centre for Alternative Finance. The findings were staggering, with the key takeaway being that the energy consumption of Bitcoin alone is comparable to that of Austria. In other words, we have a big problem on our hands.
This doesn’t mean that you have to stop buying crypto with a credit card or convert cryptocurrency altogether, but rather be aware of your impact as an investor since there are now eco-friendly alternatives out there. Whether you’re just getting started with crypto or whether you’re a seasoned expert, it’s important to be mindful of how your purchases and investments may affect the planet.
Frequently Asked Questions
Is cryptocurrency bad for the environment?
Cryptocurrency itself isn’t harmful to the environment because it is entirely digital, but the process of mining, or creating a cryptocurrency takes a toll on our energy resources and atmosphere. Blockchain firms are currently working towards alternative forms of energy consumption to bypass this. Check out the full guide to learn more about how they do this and which ones are doing it.
Is cryptocurrency safe to use for transactions?
Blockchain technology is currently the most advanced form of encryption known to humanity. Aside from targeted data breaches, very little outside a global power outage can tamper with data and transactions stored on the blockchain. Check out the full guide for more on how blockchain works and why it is so secure.
Can I help with blockchain’s energy problems?
Anyone can, it requires a deep understanding of the technology from end to end, and a creative engineer’s mind to bypass the energy requirements, but with the right skillset and a passion for the environment, anything is possible. As a consumer, you can support crypto companies that are actively reducing their carbon footprint. Check out the full guide for some of the best eco-friendly crypto companies.
Business Insider: Environmental Impacts of Cryptocurrency Explained
Columbia University Climate School: Bitcoin’s Impacts on Climate and the Environment
Euromoney Learning: What is Blockchain?
Freeman Law: How Cryptocurrency Mining Works
University of Cambridge: 2nd Global Alternative Finance Market Benchmarking Report