Cryptocurrencies use massive amounts of power, but eco-friendly alternatives come with their own risks

As
the
urgency
of
climate
change
ramps
up,
focus
is
increasing
on
digital
currencies
to
address
their
environmental
impact.

According
to
industry
forecasts,
the
global
cryptocurrency
market
is
expected
to
surge
to
US$4.94
billion
by
2030.
But
the
process
of
mining
digital
currencies
such
as
Bitcoin
requires
immense
computational
power—causing
a
significant
drain
on
energy
resources.

“Miners”
use
sophisticated
hardware
to
solve
complex
mathematical
puzzles,
securing
transactions
and
minting
new
coins.
But
this
process,
known
as
“proof
of
work”
(PoW),
is
energy
intensive.

Imagine
a
giant
lock
with
a
million
combinations.
Miners
are
all
competing
to
find
the
right
combination
to
unlock
the
block
(a
group
of
transactions)
and
earn
rewards.
The
more
computing
power
you
have,
the
faster
you
can
try
different
combinations.

But
this
computing
power
requires
a
lot
of
energy,
similar
to
how
a
powerful
car
uses
more
petrol.
So,
miners
are
using
a
massive
amount
of
electricity
to
run
super-powered
computers
24/7.

In
2021,
police
in
the
United
Kingdom
raided
an
industrial
unit
under
suspicion
it
was
housing
an
indoor
marijuana
growing
operation.
They
were
surprised
to
discover
instead
an
extensive
Bitcoin
mining
setup
which
was
illegally
siphoning
electricity
from
a
mains
supply.

In
2021,
Bitcoin
mining
consumed
enough
energy
to
rank
27th
among
nations,
ahead
of
Pakistan
with
a
population
of
over
230
million
people.
Just
a
year
later,
Bitcoin’s
energy
usage
surpassed
Finland’s
national
power
consumption.

Alternatives
have
emerged
to
address
the
rampant
energy
consumption
of
cryptocurrency
mining.
But
the
question
is,
are
these
green
currencies
a
viable
alternative
to
the
traditional
options?

The
emergence
of
green
cryptocurrencies

Green
cryptocurrencies
use
a
less
energy-intensive
process
known
as
“proof
of
stake”
(PoS).
Instead
of
needing
a
powerful
computer,
miners
need
to
have
a
certain
amount
of
the
relevant
cryptocurrency—kind
of
like
a
deposit.

If
someone
tries
to
cheat
or
mess
with
the
system,
they
could
lose
some
of
their
own
cryptocurrency.
This
“skin
in
the
game”
keeps
validators—those
validating
and
verifying
transactions—honest
and
secure.

A
pivotal
moment
for
those
interested
in
green
alternatives
was
cryptocurrency
Ethereum’s
migration
to
PoS
in
September
2022,
through
an
update
dubbed
“The
Merge”.

This
shift
led
to
a
99.9%
drop
in
Ethereum’s
energy
use.
Before
the
transition,
Ethereum’s
energy
consumption
was
on
par
with
Switzerland.
Post-merge,
its
power
usage
was
closer
to
that
of
a
small
town.

Challenges
and
the
road
ahead

In
addition
to
Ethereum,
several
other
cryptocurrencies
are
making
significant
strides
in
the
realm
of
green
finance.
Notably,
Cardano
and
Solana
are
gaining
ground
in
the
crypto
market.
They
use
significantly
less
energy,
can
handle
larger
numbers
of
transactions
without
slowing
down,
and
claim
to
be
secure.

Despite
the
benefits,
the
shift
to
green
cryptocurrencies
is
fraught
with
challenges.
Some
users
worry
PoS
might
be
less
secure
than
PoW.
And
those
with
more
coins
have
a
higher
chance
of
validating
transactions.
This
could
lead
to
a
situation
where
a
few
people
control
the
network.

Moreover,
the
initial
distribution
of
coins
in
cryptocurrencies
using
PoS
can
be
less
democratic,
often
benefiting
early
adopters.

As
a
result,
early
adopters
who
accumulate
a
large
number
of
coins
can
have
a
disproportionate
influence
on
the
network.
This
can
be
seen
as
less
democratic
because
it
gives
more
power
to
the
wealthy,
which
goes
against
the
decentralized
ethos
of
cryptocurrencies.

Evolution
of
green
currencies
continues

PoS
is
not
the
only
change
attempting
to
address
cryptocurrencies’
energy
consumption.
Sharding
is
another.

Sharding
divides
the
network
into
smaller
sections
called
“shards”,
each
handling
its
own
set
of
transactions.
This
frees
up
individual
computers
on
the
network
(called
nodes)
from
processing
everything
at
once,
leading
to
significantly
faster
transaction
speeds
and
lower
costs.

This
innovation
goes
beyond
just
efficiency.
Sharding’s
parallel
processing
approach
minimizes
energy
needs,
potentially
making
cryptocurrencies
more
eco-friendly.

Ethereum’s
upcoming
upgrade,
Ethereum
2.0,
incorporates
sharding
to
address
the
network’s
current
limitations
on
speed
and
transaction
fees.
By
implementing
sharding
in
phases,
developers
hope
to
ensure
a
smooth
transition
while
maintaining
the
network’s
security
and
decentralization.

While
sharding
seems
like
a
game-changer,
it’s
not
without
its
own
hurdles.
Implementing
it
effectively
requires
careful
planning
and
rigorous
testing
to
safeguard
the
network’s
integrity.

Overall,
sharding
offers
a
glimpse
into
a
future
where
cryptocurrencies
can
process
transactions
faster,
become
more
cost-effective
and
even
reduce
their
environmental
impact.

Green
cryptocurrencies
show
how
technology
and
finance
can
support
ecological
sustainability,
providing
a
model
for
others
to
follow.
But
there
is
always
a
risk.
And
as
they
develop,
green
cryptocurrencies
need
to
address
concerns
over
security,
network
integrity
and
accessibility.

This
article
is
republished
from
The
Conversation
under
a
Creative
Commons
license.
Read
the
original
article.