Elon Musk recently shone the spotlight on the environmental impact of Bitcoin mining with his U-turn on Tesla purchases with the crypto.
The Billionaire tech entrepreneur’s U-turn wiped billions off the value of the crypto market but also stimulated an important debate on how digital currencies are mined and the impact they have on the environment.
As the Bitcoin mining community scrambles to find clean energy to power the vast computing power needed to maintain the network and mint new coins, we examine some of the greener options in the altcoin sector.
So, if you’re looking for a list of low energy and green cryptocurrencies that might allay climate change concerns voiced by people like Mr Musk, then read on.
The 10 greenest mainstream cryptocurrencies in 2021 are:
- Ripple (XRP)
- IOTA (IOTA)
- Dogecoin (DOGE)
- Cardano (ADA)
- EOS (EOS)
- Stellar (XLM
- Litecoin (LTC)
- Ethereum (ETH)
- Tezos (XTZ)
- Solana (SOL)
This list has been drawn from various online sources in 2021 but is likely to change as new tokens emerge and more energy efficient processes are developed.
Also, it’s very difficult to include all the parameters involved in generating a cryptocurrency and there are many conflicting opinions as to how the green credentials of a coin are measured.
Bear in mind as well that some of the tokens on this list aren’t used anywhere near as much as Bitcoin, hence the environmental impact is automatically lower.
Bitcoin has suffered because of its popularity and soaring value – everyone wants a piece of the digital gold making it a magnet for miners and investors.
Why does Bitcoin use so much ‘dirty’ energy?
Mining Bitcoin is incredible energy-intensive because of the hugely complicated mathematical calculations needed to power the algorithms that process blockchain information and keep the network secure.
Various figures are quoted about the amount of energy involved in the process, but it is often said that it could power a small country.
Bitcoin now uses more electricity than Sweden or Malaysia.– The Cambridge Bitcoin Electricity Consumption Index
Another concern is that the energy used is often ‘dirty’, ie produced by burning fossil fuel, mainly coal.
This particularly applies to countries such as China, which up until recently was one of the leading Bitcoin mining countries in the world.
However, a new crackdown on crypto by the Chinese Government is seeing a rapid exodus of miners to new parts of the world.
How much dirty energy is actually produced specifically for mining Bitcoin is sometimes a nuanced debate with argument and counter argument muddying the water.
Miners are constantly working with environment experts to limit the ecological impact of cryptocurrencies and incredible progress is already being made in harnessing greener energy sources.
Proof of Work v Proof of Stake
Bitcoin is what’s known as a ‘Proof of Work’ crypto which means it involves a massive number of calculations to produce coins, mostly carried out by specially design ASIC computers.
The Bitcoin blockchain is a decentralised ledger which is shared across the global network.
Proof of Work establishes a consensus of the ledger’s contents and ensures the stability of the crypto.
‘Proof of Stake’ on the other hand enables a coin to be mined depending on how much of the cryptocurrency a person holds.
The more coins you hold the more ‘mining’ power you have, and transactions are verified by nodes selected by an algorithm.
As such, you don’t need an energy-intensive mining process to instil trust in the network. In fact, you can often participate in Proof of Stake mining with a decent laptop.
A good example of a successful Proof of Stake coin is Cardano (ADA) which has risen to prominence in recent months and is considered a challenger to Ethereum.
There’s also something called ‘Proof of Space and Time’, which applies to cryptos such as the Chia coin.
Here, Chia blockchain users designate space on their hard drive to ‘farm the coin’ using specialist software. The person doing the farming receives rewards for helping to secure the Chia blockchain.
Another U-turn for Tesla?
June update: Mr Musk has now said that he will once again allow people to buy Tesla cars using Bitcoin if at least 50% of the energy used for Bitcoin Mining is deemed to be ‘clean’.
Here’s his tweet:
“When there’s confirmation of reasonable (~50%) clean energy usage by miners with positive future trend, Tesla will resume allowing bitcoin transactions.”
Bitcoin and many other cryptocurrencies posted double-digit gains within hours of the tweet.
Adam is the founder of The Crypto Adviser which offers experts guides and reviews on all things related to Bitcoin and cryptocurrency.
Adam is Diploma for Financial Advisers (DipFA) Level 4 qualified, a Member of the London Institute of Banking and Finance (MLIBF), and has worked for many years as a journalist and PR consultant, having studied with the National Council for the Training of Journalists (NCTJ).