Environmental, social, and governance (ESG) investing is all the rage in the corporate world despite concerns about its implementation. The crypto industry is relatively nascent. It joined the ESG bandwagon a bit later than other industries on account of its energy-intensive processes, aka mining. Truth be told, many existing crypto projects are working on building a sustainable future and transforming the world of finance by cutting the flab. In this blog, we will discuss the five most sustainable crypto assets. But before we list out the energy-efficient cryptos, we will touch upon Bitcoin, the pioneering crypto that is known as much for ushering in a revolution in finance as for its high-energy use.
Bitcoin – Redefining the world of wealth transfer
Bitcoin redefined the world of wealth transactions by introducing the concept of peer-to-peer transfer. By eliminating third-party intermediaries, the pioneering crypto made the process more efficient and faster vis-a-vis banks and financial institutions. Conversely, banks take 2-5 days to credit the funds to the beneficiary bank account in cross-border transactions and charge close to 3-5% of the transaction value as fees.
The Bitcoin network helps one transfer bitcoins to another in 10 minutes for less transaction fee. The transaction fee is the network fee for processing the transaction that incentivizes the nodes. The network fee remains the same irrespective of the value of wealth transferred because every transaction consumes the same amount of energy to process.
Though total energy consumption by the Bitcoin Network raised concerns, it remains the most efficient wealth transfer system compared to the global banking system. In fact, a study showed that the network is over 50 times more energy efficient than the global banking network. Since the Bitcoin network works on the energy-intensive proof-of-work (PoW) consensus mechanism, many crypto projects have adopted the energy-efficient proof-of-stake (PoS) consensus mechanism. Let’s look at the most sustainable cryptos of all time.
What is sustainable crypto?
A sustainable crypto is one that maintains the integrity of the blockchain protocol. It is also energy efficient and has a lower carbon footprint. Sustainable cryptocurrency is also known as green cryptocurrency.
For instance, crypto assets based on the proof-of-stake (PoS) consensus mechanism are green cryptos because they consume 99% less energy than the proof-of-work (PoW) consensus mechanism. Ethereum, the second-largest crypto by market cap, recently migrated from an energy-intensive PoW to a PoS consensus mechanism, which resulted in a 99.95% reduction in the network’s energy consumption.
Though PoW-based crypto projects are energy-intensive, they bring value to the system compared to the amount of energy consumed. The Bitcoin network is a case in point.
Greenest among cryptos
Here are five of them, based on their level of energy consumption.
Before September 2022, Ethereum ranked second in terms of energy consumption by any blockchain network after Bitcoin Network. Ethereum Network used to consume between 46.31 to 93.98 TWh per year. But, after the Merge or migration to the proof-of-stake network, the energy consumption fell by 99.95%, making it one of the most energy-efficient blockchain networks with a large user base.
As the project developers incorporate more features and update the protocol to improve scalability, Ethereum is likely to emerge as the most energy-efficient blockchain protocol.
According to the CCRI report, Polkadot has the lowest carbon footprint and consumes around 70K kWh of electricity a year.
Polkadot, a multi-chain blockchain network, is an Ethereum killer where developers can launch their own blockchain. Though the project was conceived in 2016, it took a couple of years to launch the blockchain. Polkadot shot to fame during the bull run in 2020 when it broke into the ranks of the top 10 cryptos by market capitalization.
The network has an average transaction speed of 1000 tx/s, but the developers are planning to increase the speed by 100 to 1000X times by deploying asynchronous backing technology, where all the para chains and relay chains will create blocks concurrently.
If Polkadot has the lowest carbon footprint, Cardano has the lowest electricity consumption per node among all smart contract platforms. This, in turn, helps to improve the profitability rate of all node operators.
Cardano is a decentralized proof-of-stake blockchain. It is reportedly 37,500 times more energy efficient than the Bitcoin Network. It has a block time of 20 seconds. This means a new block is created every 20 seconds and can handle up to 250 transactions per second.
Tezos considered the pioneer of proof-of-stake blockchains, is among the first few blockchain networks on PoS blockchain. Tezos, launched in 2018, has emerged as one of the most environmentally friendly crypto networks. Its self-upgradable feature keeps the blockchain updated and helps implement upgrades at a lower cost with minimal energy consumption.
The carbon footprint on Tezos Network is about 2.5 g CO2 eq. per transaction. The energy requirement of the Tezos Network is equivalent to the energy footprint of 17 world citizens, according to a PWC report.
Near Protocol bagged the Climate Neutral Product Label 2021 instituted by South Pole, a leading digital climate solutions consultancy firm.
An Ethereum competitor, Near is a high-performance blockchain that competes with Solana, Cardano, and Polkadot. It can process over 100,000 TPS with minimal energy consumption.
Over the last few years, developers have been focusing on making crypto projects more sustainable and eco-friendly. However, the coins discussed above are not the only projects that are environmentally sustainable. Many energy-efficient crypto projects like IMPT, Regen Network, and The Climate Collective are at the forefront of supporting environmental initiatives.
Which crypto is going to boom in 2023?
It’s crucial to conduct thorough research, stay informed about market developments, and consider your risk tolerance before investing in cryptocurrencies. Additionally, consulting with a financial advisor or expert in the field can provide valuable insights.
Which crypto has the most future?
It’s essential to conduct thorough research, stay informed about market developments, and consider your risk tolerance before investing in cryptocurrencies. Consulting with financial experts or advisors can provide valuable insights. Keep in mind that the cryptocurrency market is highly volatile, and there are no guarantees of future success.
Are there any environmentally friendly cryptocurrencies?
It’s important to research and evaluate individual cryptocurrencies and blockchain projects to understand their environmental initiatives and their commitment to sustainability. Keep in mind that while these cryptocurrencies aim to be more eco-friendly, there are still debates about their overall impact. The choice to invest in environmentally friendly cryptocurrencies depends on your values and sustainability goals.
Which crypto will survive in the long run?
It’s crucial to research and assess individual cryptocurrencies based on these factors. Diversifying your investments and not putting all your resources into one cryptocurrency can also help mitigate risk. Investing in cryptocurrencies carries inherent risks, so it’s important to consult with financial advisors and do thorough due diligence before making investment decisions.