We travel across the crypto market searching for the different sustainable practices in the industry.
As the global market for crypto continues to increase tremendously, so does the quest for becoming more environmentally sustainable become stronger. According to a forecast by experts, the crypto market is expected to hit $4.94 billion by 2030. Well, this means that more digital currencies are going to be mined in the next few years. This also means that more energy sources are going to be drained as miners work to get more crypto.
But you might be wondering, why is that the case? You see, mining crypto like Bitcoin requires a lot of computational power. Miners use heavy hardware to make complex computations in a bid to solve complex mathematical puzzles.
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Actually, more people are getting into the business of mining because of Bitcoin price today. You see, this price of Bitcoin has been increasing over their years ever since it was introduced. So, once you mine you are rewarded with a block reward of 3.125BTC. According to a report by Galaxy Digital, miners raised an unprecedented amount of capital in 2024 Q1, being driven by the anticipation of Spot Bitcoin ETS approval.
Now, the problem is that this computing power uses a lot of energy, just as more powerful cars use up more petrol. So, this means that miners have to use more electricity to run these super-powered computers every single minute.
The rise of and switch to green crypto
Well, cryptocurrencies have been moving to the energy-intensive ‘proof of work’ (PoW) process followed by crypto miners and embracing other mining processes. One good example is ‘proof of stake’ (PoS). For this one, miners do not use as much energy as PoW, but they need to have some kind of deposit in relevant crypto in order to do their operation.
A good thing about this is, if you try cheat or mess around with the system, you might lose some of your crypto. Who would want that? This contingency measure keeps the validators and transaction verifiers secure and honest.
Now, you might be wondering when this PoS became a pivotal process in the green movement. Well, in September 2022, Ethereum switched to PoS in an update, better referred to as “The Merge”. This migration resulted to a 99.9% energy drop in Ethereum’s energy use.
Let’s paint a picture here for you to see how much of an energy drop that was. Before the merge, the energy consumption of Ethereum was similar to the energy consumption of the whole of Switzerland. Now check this out. After the shift, the power usage dropped to almost the power usage of a small town. Isn’t that magical?
According to the University of Cambridge’s Center for Alternative Finance (CCAF), Ethereum used approximately 16.4 TWh in 2021. However, the move by Ethereum dropped the annual energy consumption of Ethereum to 6.56 GWh. In comparison, the Eiffel Tower consumes 6.70 GWh per year.
Challenges with PoS
Well, Ethereum is not the only cryptocurrency in the green energy bandwagon using PoS. Other tokens like Solana and Cardano are making great strides and might even surpass Ethereum. An article by International Business Times submits that these two tokens use significantly less energy, claim to be more secure and can handle large transactions without having a downtime. This provides a massive competition to Ethereum.
Back to PoS; despite its green advantages, some users worry that it might be less secure that PoW. Also, since it requires a deposit so that you can mine, those with more coins might have higher chances of validating transaction. This might lead to a situation where a few people control the network, removing the whole essence of blockchain which is democracy. Here, the wealthier people might get more power.
The evolution of green currencies moves on
You might think that PoS is the only green energy solution in the crypto world, but you haven’t been any more wrong. There is another process known as Sharding. Well, sharding works by dividing the network into ‘shards,’ where each section deals with its own transactions. Because of this, individual computers in the network do not have to deal with big transactions at once.
The great thing about Sharding is that it provides something more than just efficiency. The parallel processing approach reduces energy needs, which as we all know, leads to eco-friendlier cryptocurrencies. Actually, this system will be incorporated in the upcoming upgrade by ETH, Ethereum 2.0 and is aimed at solving the current problems of speed and transaction costs.
However, you should know that Sharding does not come without its hurdles. The system requires the implementation of lots of planning and rigorous tests in order to maintain integrity. Otherwise, you will be having a system that brings more problems than solutions.
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In Conclusion
Green cryptocurrencies are a clear depiction of how technology and finance can directly support sustainability. Even as more investors get into the business of crypto, the green move will allow them to have systems that not only address the issues of security and accessibility but also ecological sustainability.
