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(IANS)

With changing times, the world is slowly shifting its investment strategies from gold to stock trading to cryptocurrency. The first decade of the cryptocurrency experiment has boomed far beyond anybody’s wildest expectations. And while leading economists believe that it is a game-changing strategy and have coined it as the future of finance, environmentalists have raised their eyebrows in the recent past due to its impacts on the environment.

On Earth Day 2022, here’s a quick explainer of how cryptocurrency impacts our environment and how the crypto community is transitioning into a sustainable future.

The crypto impact

The first generation cryptocurrencies used something called the ‘proof of work’, in which separate parties verify the records and transactions stored in a blockchain. Although crypto trading is entirely paperless, this ‘mining’ process to verify each transaction, involved a high amount of electricity and machinery to process complex algorithms.

Bitcoin, one of the most popular cryptocurrencies, uses around 70,000 computers to run its software and requires roughly 1997.16 kWh for a single transaction, consuming nearly as much electricity as an average family in the U.S. would use for a month.

For this reason, many companies, including Elon Musk’s Tesla, stopped accepting payments in Bitcoin at the end of 2021.

Transitioning towards greener crypto

Subsequently, sustainable or ‘green’ cryptocurrencies have exploded in the market in recent years in an attempt to march towards a cleaner, greener future. Such cryptocurrencies mark a minimal carbon footprint, as they do not require vast amounts of energy to process their transactions.

These cryptos employ something called the ‘proof of stake’ that ensures trust in a more old-fashioned currency: money. This consensus mechanism minimises the computational power required to verify the transactions.

Unlike Bitcoin, Ethereum, which has recently transitioned to proof of stake, is hoping to reduce total energy use by 99.95% since proof-of-stake remains around 2,000 times more energy-efficient than proof-of-work. With the transition, the energy expenditure of Ethereum is expected to be roughly equal to the cost of running a home computer for each node on the network. Till recently, Ethereum used 2,000 computers to run its software and consumed roughly 178 kWh per transaction, which equals six days of electricity consumed by an average family in the U.S.

Several other cryptos have even begun opting for renewable sources for mining their currencies. Research from the University of Cambridge shows that the renewable share of these energy mining reservoirs is already as high as 78%.

Environmentalists have also suggested shifting operations next to oil fields, where they can tap waste methane gas or near wind farms to use excess wind energy.

While there certainly are umpteen challenges ahead, crypto definitely has the potential to lead us toward a greener planet.

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Source: https://weather.com/en-IN/india/climate-change/news/2022-04-21-heres-how-cryptocurrency-is-striving-to-contribute-towards

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