How to Make Cryptocurrencies More Sustainable?
Finding a way to make cryptocurrencies more sustainable has become a rising concern for mining companies around the world. As more and more people are becoming aware of the energy-intensive mining operations of cryptocurrencies and feeling reluctant because of increasing the carbon footprint, companies are forced to work out greener solutions for mining. On that note, we are discussing some ways to make cryptocurrencies more sustainable.
Current Situation of Crypto Mining
At present, the mining of cryptocurrencies is highly unsustainable. The process involves the consumption of very high amounts of energy and the production of large amounts of electronic waste. The fuel for generating the power required for crypto mining is derived from the burning of fossil fuels. This doesn’t only lead to the exhaustion of fossil fuels which are non-renewable sources of energy but also leads to the production of significant amounts of carbon dioxide. All of these aspects of the mining of cryptocurrencies pose a great threat to the environment in terms of pollution and rising global temperature. Thus, we can say that cryptocurrencies are very unsustainable at this moment. So, there is a dire need for methods to make them green.
Is it Possible to Make Cryptocurrencies More Sustainable?
Yes, it is possible to make cryptocurrencies more sustainable. We can achieve this by replacing the current mechanism with alternatives. Such alternatives employ renewable sources of energy to power the process of crypto mining. In fact, there are crypto projects working at present that either incentivize people for making sustainable life choices by awarding them with their tokens or to mine a coin whenever a certain amount of energy is produced by using inexhaustible sources of energy.
One such example is SolarCoin. In this, the founding company promotes the deployment of solar arrays to generate electricity. So whenever one megawatt of energy is generated by a solar array in a particular region, the company mines a SolarCoin. Cardano is another example in which the investors have to buy Cardano in order to be a part of the network. This is completely opposite to the Proof of Work consensus mechanism where thousands of computers race amongst themselves to win and be a part of the blockchain. This saves a very significant amount of energy as each participating computer can now solve one problem instead of so many computers fighting each other to be the first one to solve the problem.
How to Make Cryptocurrencies More Sustainable?
There are several ways to make cryptocurrencies more sustainable like switching to greener energy resources, changing the consensus mechanism, dedicating carbon credits, and so on. Let’s discuss each of these methods in detail.
Opting for an Alternate Consensus Mechanism
There are a few alternatives to the standard Proof of Work consensus mechanism which is highly energy-intensive and leads to the production of greenhouse gases. The alternatives include Proof of Stake, Proof of Capacity, Proof of Elapsed Time, and Proof of History.
Proof of Stake: How to Make Cryptocurrencies More Sustainable?
The Proof of Stake consensus mechanism is the second most widely used mechanism in crypto mining. This involves the allocation of the responsibility to validate transactions according to the number of tokens owned for that blockchain. Though this mechanism is not as secure as the Proof of Work, it is 99.9% more energy efficient. Blockchains like Polkadot and Cardano are currently using this mechanism to mine cryptocurrencies.
Proof of Capacity
This consensus mechanism involved a two-step process of mining cryptocurrencies. It utilizes the empty spaces on the hard drives to store solutions to the hashing process of cryptocurrencies. The first step is to plot the empty spaces and the second step is to mine cryptocurrencies on them. Green cryptocurrencies like Chia are using this method at present.
Proof of Elapsed Time
In this mechanism, the nodes on the blockchain go to sleep for a short period of time. The node with the least amount of sleeping period activates and broadcasts the transaction to the blockchain network. The fact that the processors go to sleep for some time, makes this mechanism very energy-efficient.
Proof of History: How to Make Cryptocurrencies More Sustainable?
In this method, the consensus is achieved by mapping the passage of time cryptographically. As it doesn’t involve human intervention to validate transactions, it is time-efficient and consumes a negligible amount of energy as compared to Bitcoin.
Including Renewable Sources of Energy
The burning of fossil fuels to generate power for mining operations is a major reason for the energy inefficiency of the crypto industry. However, many mining companies are switching over to greener sources of energy like geothermal energy, wind power, and solar power.
Adopting Favorable Crypto Regulations
Currently, there are some crypto regulations like the Federal Solar Tax credit that gives a 30% reduction in the costs of installments of a solar energy system. This motivates the mining companies to replace their fossil-powered systems with green energy-power electrical setups. Another such regulation allows companies having solar power systems to sell their excess power to power grids. This helps them in generating additional income from it. Such government-backed regulations can help to fight climate change. Also, they will favor crypto-mining companies that can help in the reduction of environmental impact.
Awarding Carbon Credits: How to Make Cryptocurrencies More Sustainable?
Introducing carbon credits for mining cryptocurrencies can lead to a considerable decline in the use of non-renewable energy sources to mine crypto. In this, the mining companies will need carbon credits to continue their mining operations. They will need to buy the carbon credits, leading to a higher cost of production. This, in turn, will lead to the companies switching to greener energy resources to reduce the carbon credits.
Including Pre-mining Operations
Pre-mining operations refer to the identification of demand and the meaning of the cryptocurrency in the world. According to this method, the company mines a predefined number of tokens depending upon the demand. This reduces the emissions and electronic waste related to crypto mining to a great extent. This is unlike the traditional process where the company mines unlimited amounts of cryptocurrencies.
In the upcoming course of time in the world of crypto-mining, there are very high chances of new projects emerging in the crypto market to offer sustainable solutions to investors. We advise you to look out for these projects and invest in them when the right time comes.