Although there are many benefits to Bitcoin, the cryptocurrency has come under scrutiny due to the significant electricity use involved in mining and keeping the blockchain network running. This issue is one of the reasons Bitcoin has not become more widely adopted than it has so far.
Bitcoin miners globally use thousands of computers to solve complex algorithms in order to mine new bitcoins and verify transactions. This computational work keeps Bitcoin decentralized, secure, and available for use 24/7, but it also has a relatively large carbon footprint. However, not all digital currencies use as much electricity as Bitcoin, and there are ways that Bitcoin can be made into a more eco-friendly cryptocurrency as well.
The crypto industry recognizes Bitcoin’s electricity use, and is taking steps to reduce it. Some crypto miners use renewable energy sources in an effort to keep their costs down. The Bitcoin Mining Council claims that more than half of Bitcoin mining uses sustainable electricity, but some scientists have found that the Bitcoin network could consume nearly as much electricity as all global data centers combined.
Still, leaders in the crypto industry signed the “Crypto Climate Accord ,” an agreement to power 100% of global blockchains by renewables by 2025.
Why Does Bitcoin Require So Much Energy?
Bitcoin requires so much electricity because it uses a “proof-of-work” system that requires “work” using computing power in order to keep it running. The proof-of-work system essentially uses the proof of work as a way of validating transactions, mining new bitcoins, and keeping the blockchain working.
In addition to using more renewable energy for Bitcoin mining, there are other ways that Bitcoin can reduce its energy use in the coming years, such as the introduction of the lightning network, cloud mining, and off-chain transactions. But for now, Bitcoin’s electricity use continues to be high.
Recommended: How Much Energy Does Bitcoin Use?
12 Most Sustainable Cryptocurrencies
Are any cryptocurrencies eco-friendly? Yes, there are other types of cryptocurrencies and proof systems that don’t use as much electricity. These include “proof-of-stake (PoS),” “proof-of-storage,” and “proof-of-space.” Rather than relying on energy-intensive work, these proof systems use other types of verification and incentive structures. Even among proof-of-work cryptocurrencies, some are more energy-efficient than others, depending on the type of devices used for mining and the way the algorithm works.
There are alternative cryptocurrencies, or altcoins, that use far less electricity than Bitcoin. Some coins simply have fewer transactions, while others are actually designed in ways that are more energy efficient. Some popular cryptocurrencies that may be more eco-friendly than Bitcoin include:
1. Ethereum (ETH)
Ethereum is in the process of switching over to a PoS model, which will drastically cut its electricity use.
2. Nano
Nano is very energy efficient because it doesn’t even use mining, it uses a different form of proof-of-work system. It offers instant transactions with zero fees.
3. Chia (XCH)
Touted as one of the most eco-friendly cryptocurrencies, Chia uses a unique “proof of space and time” model that utilizes storage space on users’ personal computers to keep its network running. It creates “plots” of numbers, which it “farms” over time. Bram Cohen, the creator of BitTorrent, created Chia. The coin’s only environmental downside is that it requires the use of solid-state drives, burning through them quickly and creating a lot of e-waste.
4. Stellar Lumens (XLM)
A popular cryptocurrency that uses a small amount of electricity, Steller has a unique consensus model that uses nodes instead of a proof algorithm. It is a network created to be a bridge between cryptocurrencies and traditional financial institutions, similar to PayPal. Users like Stellar because it is fast, simple, and cost-effective for sending large transactions all over the world across any currency.
Recommended: What is Stellar and How Do You Buy Stellar Lumens?
5. Polkadot (DOT)
Another Ethereum co-founder, Gavin Wood, created Polkadot, which uses a multi-chain network to go between different blockchains. It uses a nominated proof-of-stake (NPoS) model that requires holding or staking coins in the network instead of a mining process that would use more electricity.
6. Hedera Hashgraph (HBAR)
Like Nano, HBAR doesn’t use mining, and has quick, low-fee transactions. Large corporations such as Google, Boeing, and IBM support this cryptocurrency, which is used for micropayments and transaction fees.
7. Holo (HOT)
Holochain doesn’t use mining or much electricity, and it is scalable and less expensive than many other cryptos. Instead of a proof system, the cryptocurrency enables users to earn “HoloFuel” in exchange for sharing computing power and space on their personal computers to host peer-to-peer (P2P) apps on the network. This creates a very large network that can scale over time without centralization or huge increases in energy use.
8. Ripple (XRP)
Another popular cryptocurrency designed to use less electricity than Bitcoin, Ripple has its own calculator which determines the environmental impact of events and assets on its blockchain network.
Recommended: What Is Ripple (XRP)? How Does It Work?
9. IOTA
Iota doesn’t use mining, but instead uses a network of smaller devices that use less electricity.
10. Solarcoin (SLR)
This unique eco-friendly cryptocurrency promotes the creation and use of solar energy. Users who create solar energy are rewarded with Solar coins.
11. Bitgreen (BITG)
Similar to Solarcoin, Bitgreen rewards users for eco-friendly activities such as volunteering or carpooling.
12. EOSIO (EOS)
Another eco-friendly cryptocurrency. EOS uses proof-of-stake along with pre-mined tokens, rather than energy-intensive mining. Users like this crypto because it is very easy for developers to use, is low cost and highly scalable.
The Takeaway
Crypto evangelists may appreciate the many benefits of investing in digital assets, but worry about the impact on the environment and question whether blockchain is environmentally friendly. However, there are many other cryptocurrencies besides Bitcoin, many of which have a much smaller carbon footprint, and may make sense as one type of investment in a diversified portfolio.
Photo credit: iStock/MicroStockHub
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