Sustainability and Crypto: The two couldn’t be further apart (for now) - Frequently Asked Questions(FAQ)

Sustainability and Crypto: The two couldn’t be further apart (for now)

February 17, 2022
It is believed that Bitcoin mining alone will generate 130 million metric tons of CO2 in less than 2 years, and that's only looking at production from one country...

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Cryptocurrencies have exploded onto the scene of personal finance in the last few years. Available for purchase and exchange on practically all trading platforms, it’s now easier than ever to invest in the various “coins” in the marketplace. While crypto offers a number of benefits, like security and diversification, it is not without fault. Crypto’s environmental impact has become a critical concern for environmentally conscious investors, and with good reason. 

But first…


What are cryptocurrencies?

Cryptocurrencies are a form of currency with no central authority, like a treasury or bank. It’s important to understand how these currencies operate in order to contextualize their impact on the environment.

Currencies rely on the blockchain, a public financial record that holds transaction histories and balances. The blockchain is maintained through mining, the process of solving extremely complex math problems which verify for other crypto owners’ transactions. 

In exchange for hosting transactions on the blockchain, miners are rewarded with newly issued coins. As such, those with the most powerful computers capable of supporting blockchain capacity are more likely to be rewarded. Once all the transactions in one block are verified, a new block is loaded. 

This format describes a proof-of-work verified currency, as opposed to a proof-of-stake verified currency. In proof-of-stake systems, miners are randomly assigned a block to verify, as opposed to many miners – and thus their computers – competing. The difference between them will become important later. 


So what’s the problem?

Crypto has a serious CO2 problem...

To support the rapidly growing blockchain, an enormous amount of computers are needed. And to support those computers, an even more enormous amount of electricity is needed. See the problem yet? 

Despite claims that crypto is largely run on renewable energy, the emissions from its electricity demand are unthinkable. According to one estimate, the carbon dioxide emissions from Bitcoin alone rival those from the entire country of Kuwait. As we know, emissions are not to be taken lightly. 


Let’s take a look at how different coins compare

Bitcoin

Bitcoin, undoubtedly the most popular cryptocurrency, is among the most emissions intensive. It’s expansive proof-of-work blockchain, as described, uses electricity and contributes emissions on the scale of whole countries.

Ethereum

Etherium, second in the line of most popular cryptocurrencies, is not much better. In terms of emissions, a single ethereum transaction – verified through proof-of-work – could power the average American home for nearly nine days! In a year, Ethereum transactions produce approximately the same amount of carbon emissions as all of Singapore.

In better news, Ethereum has launched Eth2, a proof-of-stake model that is considerably less destructive than its predecessor. In time, all Etherium holdings and transactions will be transitioned to this newer system. 

Solana

Solana is a currency dedicated to maximizing energy efficiency through its verification process. A single transaction amounts to a fraction of the energy required to have a lightbulb powered on for an hour. For reference, each individual bitcoin transaction could power an entire American household for 75 days! 

Cardano

Finally, Cardano is one of the most valuable currencies available, and is run on a proof-of-stake verification system. Last year, the founder of Cardano, Charles Hoskinson, claimed that the entire currency uses 6 gWh of electricity per year, less than 0.01% of Bitcoin’s annual consumption. 


Can crypto be more sustainable?

Current emissions figures from cryptocurrencies are complicated and worrying. But they are not inevitable! The simplest way to reduce the emissions from your crypto trading and banking activity is to incorporate currencies’ environmental impacts into your decision making. Prioritize investing in coins like Cardano and Solana that use proof-of-stake verification and stay away from the big polluters: Bitcoin and Ethereum (until they improve their carbon footprints). 

By prioritizing sustainable investments, you’ll still be able to trade in many of the most sought after markets and make a great profit. With this method, however, you won’t need to worry nearly as much about the impact your crypto wallet has on the environment. 

If you use emissions intensive cryptocurrencies for many of your average purchases, consider pressing pause. Instead of, say, Bitcoin, consider applying for a credit card. By reducing your number of crypto transactions, you’ll demand less computational power be directed towards your shopping. 

If you are a miner, consider transitioning your computers out of proof-of-work currencies. They will have to endure far less intense computations as a result. Also be sure to properly dispose of your e-waste, another leading factor in crypto’s environmental footprint. 

Finally, if your retail business accepts crypto, consider working with Neutrl to neutralize your footprint


The bottom line.

Cryptocurrencies are an innovative and exciting facet to the personal finance world. They can also be environmentally devastating through excessive electricity use. Currencies that operate on proof-of-work verification are known to be more emissions intensive than their proof-of-stake counterparts. When investing, consider sticking to more sustainable options. Your crypto balance and the environment will thank you for it!

FAQ

Want to learn more?
Crypto FAQs

What is crypto?

Cryptocurrencies are a form of currency with no central authority, like a treasury or bank. Transactions are stored and verified in a public record called the blockchain.


What is proof-of-stake verification?

Proof-of-stake verification is a method of maintaining the integrity of the blockchain that uses far less computational power – and thus electricity – than its counterparts.


Will investing in sustainable cryptocurrencies make my portfolio less profitable?

No, have you seen the returns Solana and Cardano have given investors? Sustainable currencies are, and will continue to be among the most desirable – and there are plenty of options!


What is Eth2?

Eth2 is the younger sibling to Etherium, and because it is run with a proof-of-stake verification system, it is a less emissions intensive investment than its predecessor. In time, this new version should drastically reduce the carbon footprint of ethereum and provide a more sustainable way to use one of the world's most popular crypto coins.

Sources:

Bitcoin energy consumption

Solana.com 

Forbes, Cardano surge during crypto crash