The Greener Future of Cryptocurrency: Is it Possible?

By  //  July 5, 2021

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Here’s a spoiler: YES! Bitcoin, the largest and well-known cryptocurrency in the world, and many other cryptocurrencies have gone mainstream due to the unpredictability brought by the ongoing COVID-19 pandemic, hence encouraging more companies and investors to finally take notice of these and their advantages—most especially in our current global situation.

From the news article of BBC last November 2020, it was reported that Bitcoin has jumped above 7% to $17,891 (£12,800), its highest level since December 2017. According to the records of Statista,

Bitcoin has around 330,000 daily transactions in December 2020, reaching around 400,000 in early January 2021. Meanwhile, its competitor Ethereum would have 1.1 million processes per day. Woah! Just imagine how big those numbers are!

You are reading this article now, probably because you are one of those curious individuals who have also searched about these: “What is Bitcoin?” “What is Cryptocurrency?” “Any safe and secured platform to use in trading?”

…and you may also be curious about what the environmental impacts and concerns of cryptocurrency are.

Q: How can cryptocurrency be a concern to the environment?

A: Many surging cryptocurrencies are leaving a massive carbon footprint.

Lately, many environmentalists have raised their concerns regarding the production of more carbon emissions, which is a significant cause of climate change, from several cryptocurrencies.

“Mining” virtual coins (such as the mentioned above), also defined as solving computational puzzles to serve as verification of the accuracy of a transaction and creation of digital currencies by rewarding ‘miners’, requires a vast amount of electricity to run, which makes this promising technology bring unintended consequences. 

For a simple explanation, in mining, there are millions of computers around the world competing to mine a block (solve a difficult problem) every 10 minutes but only the first computers claim the reward. 

This process is also called Proof of Work (PoW).

Needless to say, initiating a transaction indeed requires a large amount of energy and the environment becomes more at stake if the source of electricity used is from non-renewable energy i.e., fossil fuels (coal, petroleum, natural gas). Carbon is the main element of fossil fuels.

But here’s the good news: Not all cryptocurrencies have weighty environmental impacts. Most of them don’t use mining at all and many would be in the process of addressing this concern!

Q: How did some of the known virtual coin developers respond to these?

As Bitcoin is one of the cryptocurrencies using PoW, and it has acknowledged its impact on the environment, Bitcoin started to try being environmentally friendly. This year, on March 8, Norwegian investment giant ASA Aker made an announcement in a letter to shareholders of setting up a Bitcoin investment unit, called Seetee AS. 

As stated in the letter, “See­tee will es­tab­lish min­ing op­er­a­tions that trans­fer strand­ed or in­ter­mit­tent elec­tric­i­ty with­out sta­ble de­mand lo­cal­ly — wind, so­lar, hy­dro pow­er — to eco­nom­ic as­sets that can be used any­where.

Bit­coin is, in our eyes, a load-bal­anc­ing eco­nom­ic bat­tery, and bat­ter­ies are es­sen­tial to the en­er­gy tran­si­tion re­quired to reach the tar­gets of the Paris Agreement…” That is to say, Bitcoin mining centres are planned to be located in areas where renewable energy farms overproduce electricity during times of low demand and absorb that excess power for mining.

Ethereum is also working on being environmentally friendly—that is by transitioning to Proof of Stake (PoS). In this process, solving those extremely hard puzzles is not involved. A user can only mine or validate block transactions in proportion to the number of coins and the current complexity of the network they have. Compared to PoW, PoS requires less energy.

Another one that is worth to be mentioned is Ripple (XRP), which is an inherently green currency. This cryptocurrency does not require any mining practices or additional energy to produce more. By 2030 or sooner, Ripple has pledged to achieve carbon-net zero.

Q: Is a greener future of cryptocurrency possible?

We want to believe that! As we can see today, cryptocurrency has shown great performance and benefits to its users. The benefits include, but are not limited to discretion, convenient transactions, and elimination of banking fees! If some industries, particularly where carmakers are, have resorted to carbon-neutral solutions, then so can cryptocurrency in the near future.

A problem well-analysed is already a problem half-solved. Long-term plans towards a greener, sustainable financial future in cryptocurrency can be obtained with the unity of dedicated environmentalists and inspiring tech leaders around the world.

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