June 5th is World Environment Day, celebrated every year to encourage awareness and protection for the planet. So why not consider how cryptocurrency and going completely cashless could be beneficial for the environment?
Cryptocurrencies often have a bad reputation when it comes to the environment. This is due to the large amount of energy required to power the algorithms necessary to mine certain cryptocurrencies. However, with over 7000 cryptocurrencies currently in existence, there are plenty of environmentally friendly options available. What’s more, even the less eco-friendly cryptos can still be better for the environment than traditional currency.
What are the Eco-Friendly Cryptocurrencies?
There are multiple cryptocurrencies which require virtually no energy to produce. Research has found that the top three cryptocurrencies with the lowest use of Kilowatt hour (KWh) are:
- Ripple (XRP) (0.0079)
- Dogecoin (DOGE) (0.12)
- Cardano (ADA) (0.5479).
Not only that, but there are new eco-friendly cryptocurrencies on the way. Because of environmental concerns, developers are now looking into ways of offering the same benefits of cryptocurrencies whilst leaving a smaller carbon footprint.
A prime example of this is Nano, which aims to use more eco-friendly practices without relying on mining, printing or minting. For instance, it uses an Open Representative Voting (ORV) protocol for the best efficiency, all while using minimum energy consumption. Moreover, Nano aims to address the current inabilities in today’s existing financial systems and limits transaction fees while providing quick transaction speeds.
Similarly, the Ethereum network is also making moves to become more environmentally friendly. Currently operating on the ‘Proof-of-Work’ (PoW) protocol, an upcoming upgrade to the Ethereum network early next year will move this to a ‘Proof-of-Stake’ mechanism. Vitalik Buterin, a co-founder of the PoW-based Ethereum blockchain, projects would use only 1% of the energy consumed by the current mechanism. Cardano, is a good example of a coin that is currently using the PoS protocol.
In fact, it’s already possible to transact with Bitcoins on Ethereum: the tokens called Wrapped Bitcoins (WBTC) are backed one-to-one by Bitcoins. Transacting with WBTCs on the new Ethereum blockchain could reduce the activity on the Bitcoin blockchain and turn out to be far more environmentally-friendly.
How Harmful is Bitcoin mining?
Despite Elon Musk’s initial enthusiasm when it came to Bitcoin, he recently declared that Tesla would no longer be accepting Bitcoin due to the negative environmental impact of mining. However, many crypto-enthusiasts have challenged this idea, commenting that the majority of energy used to mine Bitcoin is clean and renewable. Several studies have found that around 70% of Bitcoin’s energy consumption is carbon-neutral. They also note that, due to the fact that Bitcoin can be mined just about anywhere, there’s a larger range of renewable energy sources that can be used, such as hydropower in China and geothermal power in Iceland. So just because Bitcoin mining requires a lot of energy doesn’t mean that it needs to contribute towards harmful environmental practices.
The Fear of Going Cashless
On another note, you’ve probably heard other downsides of becoming a cashless society. Most notably, the complete reliance on technology and the greater risk of cybercrime and overspending.
These are just a handful of the many concerns people feel about digital money. It all comes down to fear of technology. It isn’t new, and cryptocurrency is no exception. While new technology in general often intrigues us, it’s also natural for it to be faced with suspicion – even more so with cryptocurrency when you consider its extreme volatility.
Often, fear of technology comes from not fully understanding how it works, which also applies to cryptocurrency. For instance, the lack of predictability when exchanging with crypto, as it is always subject to change, and so there’s always a risk of losing out. However, there are many digital payments providers out there such as Wirex that are attempting to make crypto accessible to everyone. By creating easy-to-use platforms that simplify the often-complex world of crypto, these companies are breaking down these stereotypes and reassuring customers to trust their services.
The Bigger Picture – How can we Benefit from Digital Currency?
It’s important to look at the big picture here, because there are so many good things about digital currency. You’ve got less chance of money laundering as there’s always a digital trail, less time consumption for transactions and easier currency exchange when travelling internationally.
On top of that, there’s also the fact that digital currencies offer lower transaction fees, unlike the steep charges you get from a regular credit card. For instance, in the United States, the inflation rate is much higher on goods than the Consumer Price Index indicates. You won’t get that with cryptocurrency.
Finally, think of the environmental factor – just like Nano aims to achieve, and think of the carbon footprint producing coins leaves behind and the manufacturing behind bank notes. This is something else cryptocurrency will say goodbye to – it’s just the question of whether more eco-friendly cryptocurrencies like Nano will be developed, or if current crypto platforms will be willing to change their practices.
The Environmental Impact of Cash
Pennies are particularly damaging to the environment. According to the American Council on Science and Health, the mining and transportation of pennies has caused 48,000 tonnes of carbon dioxide emission. For reference, one gallon of diesel fuel produces 23.8 pounds of carbon dioxide fuel when burned.
A California-based bike store chain, Mike Bikes, stated that it no longer accepted pennies as a form of payment in their stores. The company explained that the reason for this was because pennies waste natural resources and are toxic to the environment. Specifically, they are 3% copper and 97% zinc and are largely made from virgin ore. This was backed up by an article on Treehugger, which noted that it didn’t make sense to move 50,000 tons of rock to get a thousand tonnes of zinc – all for something that people hardly use.
Not only that, but there is the energy intensive process of mining, smelting, minting and trucking the pennies which, again, we hardly use in our day-to-day lives. While cryptocurrencies are also energy intensive, it has more purpose in its usage. Most notably, cryptocurrencies are seeing a rise in popularity, whereas pennies are merely pushed aside, kept in jars or just thrown away into water fountains.
Moreover, let’s look at ATM machines, as they are also considered to be harmful to the environment. This is because they use tonnes of generated electricity to give out cash at any moment. Additionally, they are encased in 100kg of steel, which totals to 150 million tons of steel worldwide.
A Cashless Future is a Green Future
We are becoming increasingly conscious of our planet’s environment, which is why we celebrate World Environment Day in the first place. While crypto isn’t perfect, when you consider the introduction of less energy-intensive coins and a move towards renewable energy for mining it could well become a more eco-friendly payment system in future.
Thanks to developments in technology, we’re becoming more aware of cashless options. Not only does digital money offer many great advantages, but it’s a step towards a greener future overall.
Pavel Matveev, CEO of Wirex