During the past decade or so, there has been a lot of talk about how a new form of currency, namely the crypto-assets, is more eco-friendly than traditional currencies. While there are certainly many advantages to owning a crypto-asset, it is important to understand the carbon footprint of these assets as well.
Ethereum is more energy efficient than Bitcoin
Compared to its predecessor, Bitcoin, Ethereum is significantly less energy intensive. The proof of work consensus mechanism required a large amount of processing power to verify blocks. This process consumed energy, and the resulting environmental impact was higher than expected. In addition, the process of mining ether required expensive graphics processing units (GPUs).
The Proof of Stake (PoS) consensus mechanism, which was implemented by Ethereum in January of this year, reduces energy consumption. In the PoS model, wealth plays a role in determining the right number to forge a new block. Instead of mining, validators are rewarded with tokens for verifying transactions.
The staking process also allows for additional transaction fees to be paid to miners. The total energy draw of the Ethereum network now sits at 2,600 megawatt hours per year. The Ethereum Energy Consumption Index was updated to include a new estimate of PoS energy consumption.
The index shows that an average Ethereum transaction is comparable to the carbon footprint of a U.S. household’s power consumption for a week. It also has an equivalent carbon footprint to 140,893 Visa credit card transactions.
The PoS consensus model requires less processing power and reduces the number of computers needed to run the system. However, the validators still need computers to store data and verify transactions. This creates a significant amount of data redundancy. This is an important part of decentralization. However, it also introduces significant environmental risk.
The DEVVIO network was developed to reduce energy consumption and create a “greener” cryptocurrency. The network’s founders made a commitment to creating a sustainable ecosystem. The network uses about one millionth of the energy used by Bitcoin. It also generates less greenhouse gas than the former.
The PoS model also saves energy because it eliminates the need for the mining process. It also reduces the energy required to create blocks. This is important because a large number of blockchains use massive amounts of energy.
The energy consumption of the Ethereum network was also estimated by the Crypto Carbon Ratings Institute (CCRI). The institute measured electricity consumption of various nodes on the network.
Alternative crypto-asset technologies could reduce power usage
Despite the euphoria that has ensnared many a crypto fanatic, it isn’t all huzzahs and baubles. The world has changed, and so have the crypto industry’s priorities. It’s time to take a hard look at crypto’s strengths and weaknesses. The good news is that a few eminently useful companies are on the case, implementing crypto-asset technologies that could lead to a cleaner and greener tomorrow.
The most obvious use for the new crypto assets is to improve energy efficiency, and bolster the security of local and global financial transactions. The best example of this is IOTA, a standardized crypto asset platform that has an estimated transaction cost of only a fraction of what you’d pay for a comparable service on a conventional financial network. This has the side benefit of making the platform a more viable proposition for the average consumer. The proof of concept is underway, and IOTA’s latest energy efficiency report claims a 33 to 95% reduction in the energy footprint of the network’s previous iteration. This is just the tip of the iceberg, as the company is actively engaged in the development of a number of other crypto assets, including a nifty crypto-based decentralized energy storage system.
The most important challenge for a crypto-asset technology to succeed is making sure that the underlying hardware and software components are properly vetted. The company has been testing Cardano, a digital currency that has been vetted by the likes of the Harvard Business School and Oxford University. It’s been lauded as one of the most energy efficient in the crypto community, thanks to its Proof of Stake consensus model. The company also plans to launch a few nifty demos, including a small data centre in Boden, Sweden, and a couple of mines in Texas. The plan is to use a total of $150 million raised in 2021 to set up a small fleet of the aforementioned nifty, albeit solar powered, mines.
Ripple (XRP) is an eco-friendly cryptocurrency
XRP is an eco-friendly cryptocurrency with a carbon footprint. It is a pre-mined token that works with many money exchanges and payment systems. It also works with a consensus protocol, making it secure and reliable. It was created by Ripple and is one of the founding members of Crypto Impact & Sustainability Accelerator (CISA).
XRP’s carbon footprint is less than other cryptocurrencies. It is estimated that it has a carbon footprint of 164 million tCO2 per year. This number is expected to increase as the crypto market continues to grow. Its carbon footprint is estimated to be less than that of bitcoin. It can be purchased on Binance, OKEx, and Coinbase.
Cryptocurrency networks are known for using a lot of energy, so it is important to find ways to limit the energy consumed. This can be done through innovative mechanisms. For example, the DEVVIO system is a blockchain that uses less energy than the average Bitcoin network. It also facilitates the financing of sustainability projects. It uses individual nodes talking to each other to authenticate green certifications. It can help to improve the communication between players in networks of all sizes.
It is also important to consider the carbon footprint of crypto-assets, and whether it is priced in by investors. Crypto-assets may also be susceptible to jurisdictions’ climate policies. When the price of energy rises, jurisdictions may look more closely at the productive use of different energy sources. It is also possible to tax profits from cryptoassets.
There are also questions about whether crypto-assets are appropriate for ESG investment strategies. For example, can crypto-assets help to improve the reputation of the industry? If so, it is likely that more investors will be attracted to them. This will have an impact on their price.
Climate change has serious consequences for the planet. Natural disasters and rising sea levels cause millions of people to be displaced. A slight increase in temperature has led to a rapid rise in sea level. It has also caused deforestation. It is estimated that climate change could cost hundreds of billions of dollars by 2050.