The highest 5 eco-friendly Bitcoin options – MakeUseOf
The debate about climate change caused by cryptocurrencies has intensified. In May 2021, Tesla revised its decision to accept Bitcoin as a payment method, and the automaker and its CEO claimed that the cryptocurrency was not sustainably dependent on fossil fuels.
Bitcoin proponents, meanwhile, argue that the energy used to keep the Bitcoin network up and running is reasonable given the immense amount of value that is being secured in the process.
Are there any more environmentally friendly alternatives to Bitcoin? Are there sustainable cryptocurrencies? They sure do – here are the five greenest Bitcoin alternatives.
In terms of energy efficiency, there may not be a more popular token in the cryptocurrency community than Nano. The cryptocurrency, originally called RaiBlocks when it was launched in 2015, manages to receive transaction confirmations within a single second. As a reference, all other cryptocurrencies today need between a few minutes and several hours for the transaction confirmation.
Even better, this transfer costs the end user absolutely nothing in less than a second – which makes it one of the very few cryptocurrencies that do not have any fees. Nano uses a modified version of the Proof of Stake consensus mechanism called Open Representative Voting (ORV) and a unique data structure to record transactions instead of a traditional blockchain.
In 2018, Nano’s valuation saw a dramatic decline after Bitgrail, an Italian cryptocurrency exchange, was hacked. At the time, Bitgrail was the only trading platform that offered a Bitcoin / Nano trading pair. Around 17 million nano users were lost in the process. Unfortunately, the currency did not recover to its 2017 highs – even during the bull run in early 2021.
Ethereum, the world’s second largest cryptocurrency by market capitalization, is currently in the midst of a major network upgrade that will dramatically improve its overall carbon footprint.
Ethereum 2.0 called Serenity aims to do away with the Bitcoin-inspired Proof of Work consensus mechanism of the cryptocurrency and instead implement Proof of Stake. With the Proof of Stake, users vote on the legitimacy of a transaction instead of validating it through mining.
While the decision to adopt Proof of Stake seems like a no-brainer, some ardent proponents of cryptocurrencies argue that the mechanism achieves scalability and efficiency at the expense of decentralization. They claim that voting rights in PoS-based currencies disproportionately favor those with a large stake, which means that smaller users have less influence.
Criticism aside, Ethereum appears to be well on its way to becoming the world’s most valuable cryptocurrency with a negligible carbon footprint. In fact, a researcher at the Ethereum Foundation estimates that the cryptocurrency will use 99.5% less energy after switching to Proof of Stake.
Compared to most of the others on this list, chia is a young cryptocurrency. It was released in early 2021 and aims to spread the usage of cryptocurrencies while keeping transaction costs down. Chia uses Proof of Space and Time as a consensus mechanism to eliminate the power consumption argument that is often associated with digital currencies.
The consensus mechanism is based on the fact that transaction validators have a certain amount of free space on their computers in which collections of cryptographic numbers are stored in blocks (called plots). Every few minutes a computer is randomly selected for block and transaction checking. Since the process does not involve continuous processing of numbers, as is the case with Bitcoin, power consumption is drastically reduced.
In the weeks leading up to Chia’s release, consumer and corporate-class hard drives were starting to fly off shelves everywhere. This is because transaction validators can improve their chances of being selected by having more free space than others on the network.
Given that the demand for storage devices has been relatively stagnant for nearly a decade, Chia has the potential to drive hard drive prices higher. Because both hard drives and SSDs have a finite lifespan or shelf life, Chia’s boundless appetite for hard drive manufacturing has the potential to cause indirect environmental damage.
Algorand uses a pure proof-of-stake consensus mechanism, which means that it offers several of the same benefits expected with Ethereum 2.0. The cryptocurrency became famous in part because of the extensive references from its development team. The face of the project is Silvio Micali, an Italian computer scientist and professor at MIT.
The developers of Algorand have repeatedly stated that the cryptocurrency has been designed to be as energy efficient as possible. The non-profit Algorand Foundation also partnered with ClimateTrade in April 2021 to ensure that the blockchain is carbon neutral and fully traceable in terms of emissions.
Like Ethereum, Algorand supports the creation of smart contracts and NFTs. In terms of transaction throughput, the cryptocurrency does better than the competition – with over 1,000 transactions per second. In comparison, Bitcoin can only process a fraction of that number.
Originally designed as an open source alternative to Ripple’s digital XRP currency, Stellar Lumens has become one of the lowest-fee currencies on the market. Unlike Ripple, Stellar is backed by a nonprofit development foundation that oversees the development of the network as well as its numerous partnerships, including IBM, in 2017.
Stellar uses a federated Byzantine agreement as the basis of its consensus protocol that allows it to achieve scalability. This system is unique in that it uses a mathematical model to achieve consensus among various pre-approved validation nodes on the network. Since these nodes are considered trustworthy, there is no need for an energy-intensive verification process.
However, the approach exchanges certain properties in order to achieve its high transaction throughput. More specifically, Stellar is neither permissive nor trustworthy. Because not every participant has the same chances of becoming a validator. To do this, they must first gain the trust of an existing validation node. With fewer than 100 active nodes in the Stellar network, it remains to be seen whether the cryptocurrency can prove to be as decentralized as its competitors.
Catching Up Bitcoin: A Hard Road To Go
While there are thousands of cryptocurrencies out there today, only a handful are capable of functioning efficiently. Even among these, many solutions are still relatively new and have yet to prove themselves in comparison to the tried and tested Bitcoin formula.
More precisely, for a cryptocurrency to be successful, scalability, decentralization and security must be achieved in equal measure. We hope that in due course at least one of the above cryptocurrencies will turn out to be a viable alternative to the reigning champions.
Photo credit: Executium / Unsplash
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About the author
(28 published articles)
Rahul Nambiampurath started his career as an accountant but is now a full-time in the technology field. He is a passionate fan of decentralized and open source technologies. When he’s not writing, he’s usually busy making wine, tinkering with his Android device, or climbing some mountains.
More from Rahul Nambiampurath
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