Green Cryptocurrencies: West Virginia Sen. Joe Manchin had recently dealt a blow to the Biden Administration regarding its environmental, aka green, plan when he said he would vote against the president’s $1.9 billion Build Back initiative. Better. The legislation included elements that would shift the United States from fossil fuel use to alternative and renewable energy sources in the coming years.
Senator Manchin cited rising inflation as the main reason he could not support spending. However, politics involves negotiation, and though the initiative in its current form may be a dead issue, it is likely to resurface in 2022 in a more low-key form.
Addressing climate change is not just a US issue. Support for a shift to greener energy is widespread on a global scale. Energy products power our lives and businesses every day. The transition from hydrocarbons to cleaner fuels affects all asset classes, and cryptocurrencies are no exception.
As we move into 2022, the burgeoning crypto asset class will be susceptible to environmental concerns. The mining of the leading cryptocurrency, Bitcoin, consumes a lot of energy. In the coming months and years, likely to see this asset class, which includes more than 16,100 different cryptocurrencies, move down a greener path, requiring less traditional energy.
Elon Musk Puts the Focus on Mining and the Environment
Bitcoin price soared after news broke that Elon Musk’s company Tesla (NASDAQ: TSLA ), would accept the leading cryptocurrency as payment for the automaker’s electric vehicles. However, Musk backtracked shortly after, saying Bitcoin mining runs counter to Tesla’s mission to move away from fossil fuel consumption.
Bitcoin mining consumes a lot of energy, as considerable computing power is needed for the computational processes that mine the tokens.
Meanwhile, Bitcoin saw impressive growth in 2021.
On December 28, volatile Bitcoin was sitting at the $48,407.53 level, 67% above its class at the end of 2020, when it closed at $28,986.74. Time of this writing, on December 30, the price is even lower at $46,768, which still puts the token a very respectable 61% above where it closed at the end of last year.
Still, the greenest cryptocurrencies with the lowest carbon footprint fared even better in 2021, and that trend continues in 2022.
PoW vs PoS Means Green Cryptocurrencies Should Attract a lot of Interest
Understanding the carbon footprint of cryptocurrencies involves explaining “proof-of-work” (PoW) vs “proof-of-stake” (PoS), the two main consensus mechanisms that cryptocurrencies use to verify new transactions, add them to the blockchain, and create or discover new tokens.
Proof of Work (PoW) is the oldest mechanism used by Bitcoin, Ethereum 1.0, and many other cryptocurrencies. Proof-of-work and mining are closely related, as the network requires a lot of processing power, making it very power-hungry. Green Cryptocurrencies
Proof-of-work blockchains are secured and verified by virtual miners worldwide competing to solve a mathematical puzzle. The winner updates the blockchain with the latest verified transactions. The reward is the crypto type. Proof-of-work leaves a significant carbon footprint, as electricity comes from fossil fuels.
Proof of Stake (PoS) services a network of “validators” who donate or “stake” their cryptocurrencies in exchange for a chance to get new transactions validated, update the blockchain, and earn tokens. Proof of Stake rewards validators who invested the most and held their stake the longest.
When it comes to the setting, proof of stake leaves a much smaller carbon footprint than proof of work.
Ethereum 2.0: an Ecological Alternative
The Ethereum 2.0 blockchain began to roll out in December 2020 and is expected to be ready in 2022. The new and enhanced Ethereum protocol employs the fastest, most efficient and lowest power consumption proof-of-stake mechanism.
Although Bitcoin was up more than 60% in 2021, Ethereum has fared much better. End of 2020, Ethereum mounted at $738,912. At the $3,846.255 level on December 28, the second leading cryptocurrency more than quintupled so far in 2021. At this writing, Ethereum is down, sitting at $3,693.14, an increase of almost 400%.
One of Ethereum’s rise and outperforming Bitcoin is the release of Ethereum 2.0, which makes it proof-of-stake, a greener cryptocurrency that offers speed and efficiency.
Cardano: is also Environmentally Friendly
On December 28, Cardano (ADA) was the sixth leading cryptocurrency. At $1.47 per token, the ADA market cap stood at $50.139 million. Even after dipping to $1.33 per token on December 30, it remains in the sixth position with a market capitalization $45.52 billion.
moreover Cardano next-generation evolution of the Ethereum procedure. ADA is the native token of the Cardano blockchain, which is a flexible, sustainable, and scalable platform for running smart contracts, enabling many decentralized finance applications. Ethereum co-originator developed Cardano.
Cardano is more energy-efficient than Bitcoin as the proof-of-work mechanism.
The Stellar Development Basis, a non-profit organization, operates the Stellar. The Stellar network allows the exchange of the US dollar, Bitcoin, yen and many traditional currencies and cryptocurrencies. The network’s native token, Stellar Lumen (XLM), facilitates trades on the blockchain-based distributed ledger at a fraction of a cent with excellent efficiency, resulting in an inferior carbon footmark.
The network allows individuals and organizations to create tokens for use on the web. Which has inspired some to use the network for sustainability initiatives such as investing in renewable energy.
The Stellar network does not use proof-of-work or proof-of-stake consensus mechanisms. Instead, it is open source and relies on transaction authentication through trusted nodes. The authentication cycle is shorter and faster, reducing costs and energy requirements.
Remember, though, that all cryptocurrencies, including the greener members of the asset class, are highly volatile assets. Any investment should involve only the capital that the investor is willing to lose. However, the shift towards environmental protection favours green cryptocurrencies as we head into 2022.