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As we move into 2023, there is a growing need for eco-friendly cryptocurrency projects. It’s due to the negative impact that traditional crypto mining and transactions have had on the environment. To put this into perspective, the energy consumption of Bitcoin as of January 2023 is estimated to be 123.12 terawatt-hours (TWh) per year. This is a little less than the annual consumption of a country like Argentina.
Most cryptocurrencies rely on proof-of-work mining, which consumes a substantial amount of electricity and thus contributes to greenhouse emissions. This is exactly what a new class of cryptos is trying to solve – eco-friendly crypto projects.
Why is cryptocurrency mining a hotly debated topic at the moment?
Cryptocurrency mining has become a hotly debated topic, both politically and internally, because of the significant amount of energy used for mining them. As the popularity and value of cryptocurrencies have increased, so has the amount of energy required for mining. Many studies have shown that cryptocurrency mining can consume as much electricity as entire nations. This has led to concerns about the environmental impact of crypto mining given the carbon footprint associated with fossil-fuel based energy sources.
The concerns have even affected the business world, as evidenced by Elon Musk’s decision to discontinue Bitcoin payments. Musk announced on his Twitter account in May 2021, that Tesla would no longer be accepting BTC as payment for EVs due to concerns over the environmental impact of Bitcoin mining. He also added that Tesla would resume accepting BTC once the mining process became more energy-efficient.
In response to the increasing awareness regarding cryptocurrencies and their effect on the planet, a new class of cryptocurrencies has emerged. These eco-friendly projects have started exploring everything from migrating to less energy-intensive validation systems to even exploring renewable energy-based mining in remote locations of the world.
Why is it important to invest in eco-friendly cryptocurrency projects?
There are various reasons to invest in eco-friendly cryptocurrencies, especially in this age of increasing environmental consciousness. For starters, eco-friendly cryptocurrencies avoid energy-intensive mining operations by using more energy-efficient consensus algorithms. Investing in them is also seen as a socially responsible investment choice. It will also help cryptocurrency projects get the nod from government institutions looking to make a change.
Top 10 eco-friendly cryptocurrencies to invest in 2023
Here are 12 of the most eco-friendly cryptocurrencies to invest in in 2023.
- Solana
- Polkadot
- Algorand
- Stellar
- Cardano
- Ethereum 2.0
- Avalanche
- Hedera hashgraph
- Tron
- Tezos
- Near Protocol
- IOTA
Let’s dive into each of these green cryptocurrencies to get familiar with their eco-friendly aspects.
Solana is a high-speed, low-cost blockchain platform that implements a unique consensus algorithm called Proof-of-History to achieve fast transaction speeds. It lowers the carbon footprint and makes transactions fast, which explains its energy efficiency. The native token of the project is SOL, which is used to incentivize the network. Solana consumes about 200W of power, which is approximately 1752 kWh of electricity per year. Solana has made partnerships with Eqo Networks, the industry group Global Blockchain Business Council (GBBC), and the blockchain-climate collective BxCi.
Polkadot was founded in 2016 as a multi-chain platform that enables interoperability between different blockchain networks. It implements a unique consensus algorithm called Nominated Proof-of-Stake. The Polkadot platform’s native token is DOT. Each validator node at Polkadot consumes around 125W of power, which translates to 1,095 kWh of electricity consumption per year. (2021 estimates)
Algorand was founded in 2017 as a high-performance blockchain platform. It uses a pure proof-of-stake consensus algorithm to achieve security and scalability. Its native token is ALGO. Each Algorand node consumes about 87 kWh to 876 kWh annually. The project has partnered with ClimateTrade, a leader in CO2 emissions transparency and traceability.
Stellar was founded in 2014 as a decentralized payment network that enables fast, low-cost border transactions. It implements a unique algorithm called the “Stellar Consensus Protocol”. The native token of the project is XLM. It is very difficult to gauge the electricity consumption of each node on Stellar. Stellar has formed a partnership with Poseidon to reduce its carbon footprint.
Founded in 2015, Cardano is a smart contract platform that aims to provide a more secure and sustainable blockchain infrastructure. This project uses a proof-of-stake consensus algorithm known as Ouroboros. ADA is the native token of the project. Each node consumes around 70W of power which is approximately 613 kWh of electricity consumption per year.
Ethereum 2.0 is an upgraded version of the Ethereum blockchain with the native token ETH. Ethereum 2.0 is known for its green qualities, as it uses ETH instead of energy to secure the network. It only uses ~0.0026 TWh/yr across the entire global network, according to estimates.
Avalanche was founded in 2018 as a high-performance blockchain platform that applies a unique consensus algorithm called Avalanche to achieve its speed and high throughput. It’s native token is AVAX. While the exact electricity consumption of each Avalanche node is difficult to calculate, it is still lower than that of traditional PoW blockchains. AVA Labs, the parent company behind the project, has formed numerous climate-based partnerships, including one with the Lemonade Foundation.
Hedera Hashgraph was created in 2018 as a decentralized public network. It uses a consensus algorithm known as Hashgraph to achieve its low latency, high throughput, and fairness. The native token of the project is HBAR. While the total annual consumption is difficult to gauge, the average energy consumed per transaction is calculated as 0.00017 kWh. Hedera Hashgraph has formed a partnership with the Inter Work Alliance for sustainability initiatives.
Tron was founded in 2017 as a decentralized platform that provides a more efficient and cost-effective way to distribute content digitally. It employs a delegated proof-of-stake algorithm and uses TRON as the native token. According to reports, Tron used only 162,868 kWh of power last year, which is 99.9 percent less than that of Bitcoin.
Tezos was founded in 2014 as a smart contract platform with the native token XTZ. It uses a unique consensus algorithm called Liquid Proof-of-Stake to achieve its security and scalability. The Tezos network annually consumes 0.001 TWh, which is veryenergy efficient. Tezos has formed a partnership with the carbon footprint app Kora quite recently.
Near Protocol is a high performance blockchain that implements a consensus algorithm called Nightshade, which combines PoS and sharding. Its native token is NEAR. Near Protocol produces 174 tons of CO2 annually, which makes it 200,000 more energy efficient than BTC. Near Protocol formed a partnership with South Pole, a leading project developer and global climate.
With the native token IOTA, the project uses a consensus algorithm called the Tangle, which is a directed acyclic graph (DAG). It is difficult to estimate the annual electricity consumption of IOTA, but it is still less than traditional blockchain platforms due to the efficiency of the DAG algorithm. IOTA is already in a partnership with ClimateCHECK, with both working on a state of the art biodigester project.
The use of eco-friendly cryptocurrency projects can benefit the industry by increasing its appeal to socially conscious investors. This can result in greater adoption and investment in the crypto domain, which will ultimately drive growth and innovation.
What makes cryptos environmentally friendly?
Eco-friendly cryptocurrencies use the proof-of-stake model instead of the proof-of-work model as it consumes a lot less energy. In addition, cryptocurrencies that can process transactions quickly and efficiently can also help reduce their environmental impact.
Which cryptocurrencies can cause environmental damage?
Cryptocurrencies such as Bitcoin, which use the proof-of-work model, have very high energy consumption levels. Various organizations have identified this as troubling from a sustainability perspective. For instance, carbon emissions for mining 1 BTC increased to 113 tons in 2021 from just 0.9 tons in 2016.
Why are green cryptocurrencies so popular?
Green cryptocurrencies such as those in the above list have become popular as they give us an alternative to the energy-intensive mining processes of existing cryptocurrencies.
