As the popularity of cryptocurrencies grew, so did the amount of energy required to produce them. Especially in the case of the two biggest ones: Bitcoin and Ethereum. This has sparked criticism from environmentalists, who have begun to express concerns about digital assets’ impact on the environment.
Nonetheless, Bitcoin and Ethereum are fairly old blockchains (by the standards of the crypto world) that operate on an energy-intensive proof-of-work consensus method. As part of this process, so-called miners “mine” bitcoins and thus consume energy. All of this leads to massive emissions of carbon dioxide.
And while many maximalists argue that bitcoin can push the world toward renewable energy (and they’re partly right), developers have already come up with a better solution. It is the proof-of-stake (PoS) consensus algorithm. This technology is up to 99% more energy-efficient than PoW and guarantees high blockchain security. The difference between PoW and PoS is that instead of using supercomputers to validate transactions, users “stake” their coins and thus secure the chain.
With Google Earth Day 2022’s doodle showing images of climate destruction over the past several decades, it’s clear that we as a human race need to reduce our carbon footprint in any way possible. Supporting cryptocurrencies with eco-friendly networks is the first step to ensuring future generations can enjoy the planet we all live on.
Galaxy Digital published last year a report titled “On Bitcoin’s Energy Consumption: A Quantitative Approach to a Subjective Question. It compared the Bitcoin network’s energy consumption to the banking system and the gold industry. The statistics turned out to be surprising.
It was estimated that the Bitcoin network (including miner energy consumption, pool energy consumption, and node energy consumption) consumes about 114 TWh of electricity annually. Is that a lot? Well, not really – the traditional banking system draws about 263.72 TWh, and the gold industry uses about 240.61 TWh. So we are talking about more than twice the electricity consumption.
However, it is worth noting that the assessment of energy consumption in the financial system and gold industry is not easy to calculate. This means that the actual demand here might be even higher.
Nevertheless, it is worth considering what this looks like for proof-of-stake cryptocurrencies. A report by Trades of Crypto comes to our aid. This company has detailed the data on eco-friendly coins and finally selected those with the largest market capitalization, using the least energy, and emitting the least CO2. So, which cryptocurrencies are the most environmentally friendly in these categories?
According to Trades of Crypto, the greenest cryptocurrencies at the top of the rankings at the end of 2021 were: Cardano, Polkadot, Ripple, Stellar, and Filecoin.
#1 Fantom (FTM) – Fantom is a smart contracts platform built with a Directed Acycling Graph (DAG). It provides DeFi services to developers using its unique eco-friendly consensus mechanism.
#2 Terra (LUNA) – Terra is one of the most underrated ecosystems featuring a dual-token economy consisting of a stablecoin and a vast ecosystem of DeFi, NFT, and Metaverse dApps.
#2 Stellar (XLM) – Stellar is a public network enabling users to move and store money.
#4 Polkadot (DOT) – Polkadot is a multichain open-source platform connecting the DeFi economy, facilitating cross-chain transfers, and enabling multiple blockchains to communicate with each other.
#5 Tezos (XTZ) – An open smart-contracts platform similar to Ethereum.
Trades of Crypto divided the projects into two categories: those using the least energy per year and during transactions.
Projects use the least amount of energy throughout the year:
For consumption per transaction, the ranking looks as follows:
There are plenty of eco-friendly cryptocurrencies on the market. Supporting any of the coins mentioned above is a great way to promote sustainable projects for those concerned about the impact of crypto’s energy consumption on the Earth.
Moreover, proof-of-stake cryptocurrencies are becoming increasingly popular, which means the crypto market is moving towards sustainable and eco-friendly practices.
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