What Are Green Cryptocurrencies
You might have heard about the news that Elon Musk’s Tesla declined to accept Bitcoins as the company was concerned about the amount of energy involved in Bitcoin mining. If you want to know all the details about the ways in which energy is consumed in the cryptocurrency mining and also about the concept of Green Cryptocurrencies, then this article is for you.
What are cryptocurrencies
Cryptocurrencies are virtual or digital currencies that are secured by extremely effecient encryption techniques to prevent them from being double spent or counterfieted. There are more than 10000 cryptocurrencies currently in existence. While some of them are only for name sake, some enjoy a great popularity and huge amounts of investment. The most famous cryptocurrency is Bitcoin. It is so famous that it can be considered as a synonym of cryptocurrency.
Energy Consumed By Cryptocurrency
Cryptocurrencies have become one of the most lucrative yet puzzling area of investment in the world. They are claimed to revolutionise the global financial outlook and this time is considered to be a golden moment. However, most of them have an inherent existential drawback: they consume astonishingly higher amounts of energy and maximum part of it derived from “non renewable sources of energy“.
Most of the cryptocurrencies work on the model called “proof of work“, which in a way, means that a miner has to show the proof that he has actually mined the cryptocurrency possessed by him. This “proof of work” model ensures that the cryptocurrency is not forged or counterfeited.
This “proof of work” model, unfortunately is not energy effecient. The miners/mining computers use a lot of energy to extract cryptocurrencies and in validating them. Further, a lot of energy is also consumed in maintenance of the “digital ledger“, an important component of the most cryptocurrencies.
The energy consumed in case of mining of Bitcoin and Ethereum is as much as would be consumed by medium sized countries each year. For example, the energy required in creating one Bitcoin is larger than the energy consumed by Finland annually. The energy required for a single Bitcoin transaction is estimated to be about 707 KWh.
In addition, some cryptocurrencies like Bitcoin have been designed in such a way, that the more valuable it becomes, the more difficult it becomes to mine them. Consequently, people make use of high end specialised computers and large spaces to mine them. All this leads to the manifold increase in the amount of energy spent in creation of cryptos.
There is an other concern also associated with cryptocurrencies. Every year, crypto mining leads to the production of a lot of e-waste, which is very hazardous for environment. Every year a lot of machinery is utilised, which becomes obsolete next year, and the end result is production of tonnes of electronic waste.
Owing to such ineffecient energy consumption and monstrous generation of e-wastes, and its adverse impacts on the environment, there have been various steps taken towards introduction of energy effecient cryptos. Consequently the concept of “Green Cryptocurrencies” is born.
Green Cryptocurrency Meaning
The cryptocurrencies that use very less amount of energy and that too of renewable kind can be called a Green Cryptocurrencies. These cryptocurrencies will have a lesser Carbon footprint and will produce lesser amounts of electronic waste.
These Green Cryptocurrencies can be designed by:
Using “Proof of Stake” model over “Proof of Work” model
Keeping advantages of “Proof of Work” model employed in maximum number of cryptocurrencies aside, we have to admit that it requires a great deal of Mining, which in turn requires lot of computing power and machinery and therefore huge amounts of energy. Mining a Bitcoin leaves a significant amount of Carbon footprint (27.96 million metric tonnes of CO2) and electronic waste in the nature, and the more costlier it becomes, situation aggravate. If the Cryptocurrencies shift to “proof of stake” model from “proof of work” mode, they will cut their energy consumption by more than 90 %. Ethereum is planning to do so to avoid getting backlash for its environmental hazards.
Using Untapped amounts of energy
If the energy that is going to be wasted, is used for mining cryptocurrencies, then it is not going to raise may eyebrows. Cryptocurrencies have a potential to become demand responsive shock absorbers for excess green power produced. They can buy excess power produced in the power plants and then switch off their functioning when the power is needed elsewhere. A suitable option would be to migrate Crypto mining farms, especially the Bitcoin farms, to such places where renewable energy is overproduced.
Greener Energy Blockchain Mining
The cryptos can become greener, if they completely switch to renewable sources of energy like the wind energy and solar energy. The companies can encourage Greener Energy Blockchain Mining by rewarding the miners using greener energy by awarding them more cryptos than the ones using other sources of energy.
It is an open reality that many cryptocurrencies especially the Bitcoin, are wreaking havoc on our environment. But, the positive point is that the world has taken notice of it and the cryptocompanies are also facing the heat of the movement. With the result, many crypto companies,especially the Ethereum, have started transitioning towards the eco-friendly mode. Even thogh the path is going to be ardous, but with encouragement, it can be a very smooth process.