Revealed: 6 cryptocurrency projects with small carbon footprints

You may already be aware that most cryptocurrency projects are extremely energy-intensive, but did you know that some consume way more resources than others?

A recent study looked at the carbon footprints of some of the biggest cryptos around and compared them. I’m going to explain a few things you need to understand about how these digital assets use energy and reveal the ones that are the greenest.

How do cryptocurrency assets use energy?

How much energy is required will largely depend on how the crypto works. The two major ways that networks operate to authenticate transactions is by using proof of work (PoW) or proof of stake (PoS).

Proof of work (PoW)

PoW (not to be confused with a prisoner of war), was the original method used by blockchains. It’s the system that Bitcoin mining uses and it’s very heavy on energy consumption.

This is because every time there’s activity, the whole history of the network has to be verified. Imagine every time you went to buy a packet of crisps, you had to look through your bank statements at every transaction you’ve ever made before knowing whether you have enough money to buy said packet of crisps. Nightmare!

Cryptocurrencies use state-of-the-art tech and computers to compete with each other to carry out this task, so it happens relatively quickly. But it takes a lot of energy to keep doing this over and over again.

Proof of stake (PoS)

PoS was introduced in an attempt to tackle some of the glaring issues that original blockchains had. Instead of checking the whole network and verifying everything, PoS randomly selects network validators who have ‘staked’ some crypto as collateral.

This system uses far less energy and is something that popular projects such as Cardano (ADA) use. It’s also one of the reasons that the world’s second-largest cryptocurrency, Ethereum (ETH), is in the process of migrating from PoW to PoS.

Which crypto projects have the smallest carbon footprints?

New research from the Crypto Carbon Ratings Institute (CCRI) looks at different cryptos and compares them based on energy use.

For this study, only projects using PoS (or similar) mechanisms were considered because they are all much more efficient that PoW assets like Bitcoin (BTC). Here are the results, according to Bloomberg:

When looking at this data, it’s important to note that it’s hard to compare everything on an apples to apples basis.

This is because some of these networks have considerably more transactions, for example, Solana (SOL). So it’s useful to compare the electricity per transaction instead of just total emissions. 

Does this mean cryptocurrency is environmentally friendly?

Not necessarily. By looking at research like this, you can see that some projects are more efficient than others.

So, there definitively are cryptos like Polkadot (DOT) that are better for the environment than others. Nevertheless, it’s still a lot of energy being consumed when you add up the carbon footprint of every single digital asset on the market.

If there were only a handful of projects, all striving to use clean energy and have a reduced footprint, the usage could be better justified. But when you have thousands of projects all jockeying for position and using piles of energy, it’s slightly worrying.

I think eventually, the cryptocurrency assets that survive in the long run will be efficient. But until that day comes, energy consumption is going to be an ongoing concern surrounding the tech.

Investing in Cryptocurrency is extremely high risk and complex. The Motley Fool has provided this article for the sole purpose of education and not to help you decide whether or not to invest in Cryptocurrency. Should you decide to invest in Cryptocurrency or in any other investment, you should always obtain appropriate financial advice and only invest what you can afford to lose.

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