Bitcoin and Ethereum may be the biggest players on the cryptocurrency market, but they are – admittedly – flawed. And despite them being the perceived pioneers of the industry, we’ve reached the point where some of their shortcomings cannot be ignored.
As cryptocurrencies continue to establish themselves as demonstrable digital assets that can, in fact, affect global financial institutions, the need for more environmentally-friendly options rises. Bitcoin and Ethereum both have high carbon footprints that could, if forcibly sustained, be damaging.
Why Environmentally-Friendly Cryptocurrency Matters
Consider how cryptocurrencies like Bitcoin and Etherum are obtained.
They are reliant on energy-intensive digital mining models that run complex mathematical equations—just to yield one or two tokens every hour. This is exhaustive, inefficient, and incredibly wasteful.
Now consider this process on a global scale.
Thousands – if not tens of thousands – of individuals and institutions simultaneously mining nonstop for days at a time. Then, it comes as no surprise that the amount of power used for transactions with these cryptocurrencies is equivalent to that of a small country.
If this market is to survive, it needs to shrink its carbon footprint by more than half. That means finding and dealing in cryptocurrencies that consume a mere fraction of the energy BitCoin and Ethereum use per transaction. Otherwise, there could be irreversible consequences.
As proof that they exist, we’ve listed five other cryptocurrencies that are far more environmentally friendly than Bitcoin and Ethereum:
1. Cardano (ADA)
Created by “crypto-trailblazer” Charles Hoskinson – the co-founder of Ethereum – Cardano (ADA) is a third-generation cryptocurrency that holds the title of the world’s first peer-reviewed blockchain.
Years of academic research and planning have gone into making Cardano as fast and as energy-efficient as can be. Current numbers tell us that Cardano can achieve 1000 transactions per second. Pretty impressive compared to Bitcoin’s average of 7.
Cardano: PoW versus PoS
Unlike Bitcoin and Ethereum, Cardano doesn’t use the Proof of Work (PoW) mining model. Instead, it is built on the Proof of Stake (PoS) – a mining model that allows for staking.
Staking is a built-in limit that allows people who own some of the currency to validate transactions. This renders the typical economic incentive to continuously mine (and add computing power to the currency) null and void. This, consequently, keeps mining under control.
Controlled mining = controlled energy expenditure.
For reference, the Proof of Work model uses mining to add new blocks to blockchains. As the value of the cryptocurrency increases, it becomes more profitable to add new blocks through mining.
However, the computing power used in the process is inversely proportional to its efficiency. Mining becomes significantly harder to complete as more computing power is added—meaning more energy is consumed just to reach the same endpoint.
2. BitGreen (BITG)
BitGreen was created specifically to address (and provide a solution to) the environmental impact of BItcoin. Founded in late 2017, BitGreen is considered an “energy-efficient alternative to Proof of Work consensus cryptocurrencies.” This means that, like Cardano, BITG uses the lower-energy Proof of Stake mining algorithm.
The BITG Initiative
The company that created BitGreen started out as a non-profit, community-driven initiative aimed to oversee the maintenance of BITG as a sustainable, environmentally-friendly cryptocurrency. This cryptocurrency is intended to incentivize eco-friendly actions in order to encourage more people to participate.
Basically, anyone can earn BITG by, for instance, buying sustainable materials, volunteering for clean-up projects, or participating in carpool or rideshare programs.
People can, of course, still earn BITG through more conventional ways following the PoS model (i.e., via desktop wallet). It can also be traded with BitGreen’s partners or spent on goods and services accepting BITG.
3. Stellar (XLM)
Operated by the Stellar Development Foundation – a non-profit organization – since 2014, Stellar is yet another eco-friendly cryptocurrency considered to be faster, more efficient, and more cost-effective than Bitcoin and Ethereum.
Stellar started with the goal to “bridge the gap between financial institutions and digital currencies.” Its current ability to perform cross-asset and cross-border transactions for virtually no cost has resulted in many considering it a serious alternative to PayPal.
Originally funded by companies like Stripe, BlackRock, and even Google, Stellar has, over time, gained serious traction. It’s caught the attention of – and engagement from – Deloitte and IBM, and numerous banking institutions in Nigeria, India, France, the Philippines, and the South Pacific.
Stellar’s Tokens: Lumens
People can exchange US dollars, Bitcoin, Pesos, Yen, and other traditional currencies through the Stellar network. These trades are facilitated using the network’s token, Lumens. According to analysts, these highly efficient transactions are quick, painless, and cost a fraction of a cent.
This efficiency translates to less energy used per transaction, which consequently, further translates to a lower carbon footprint.
Stellar’s Lumens tokens can also be bought and sold on most exchanges like Binance, Coinbase, Bittrex, and Huobi.
4. Holochain/Holo Token (HOT)
This cryptocurrency may still be in development, but insiders project 2021 to be a big year for the network. Holo operates differently from other cryptocurrencies in the sense that specialized processors are not needed to generate it. It is instead an open-source framework for peer-to-peer applications backed by tangible assets. Its token – HoloTokens, or HOT – requires virtually no mining.
HOT: A Promising Cryptocurrency
As it has yet to be launched, there is no clear data on how much energy Holochain consumes. However, given what we know about it, predictions for its performance include limitless transaction speed and absolute minimal energy expenditure. It enables scalable crypto-accounting without relying on either the PoW or PoS model.
It is also said that it can operate through regular browsers, making it more accessible – and potentially more powerful – than any other cryptocurrency on the market.
5. SolarCoin (SLR)
Global, decentralized, and independent of any government, SolarCoin has started a novel approach to cryptocurrency. People can spend and trade SLR like they would typical cryptocoins.
The only difference is that the network incentivizes it (like BITG). People can earn SolarCoins when they produce verifiable solar energy.
SolarCoins for Solar Power
Here’s how it works: 1 SolarCoin is earned for every verified Megawatt hour generated using solar technology. The network behind SLR relies mostly on users uploading documented proof of their solar energy generation. It’s a little clunky and not very streamlined, but the concept is admirable, and therefore we believe it deserves a spot on this list. Hopefully, they can construct a more efficient and automated system for earning and trading SolarCoins.
Now even some of the bigger platforms are working on their green credentials. Ethereum is moving, this year, to a proof-of-stake system rather than mining, which is a lot less energy intensive. We'll be keeping our eye on new projects and the environmental credentials in the future so stay tuned by following us on social media.