Elon Musk announced that Tesla is ditching the Bitcoin payment structure it recently boasted about. The source of the issue lies in Bitcoin's hefty carbon footprint. Alternative cryptos that use less energy are coming into focus.
Options like Chia and Nano are in the spotlight. Traders are looking toward more sustainable digital currencies.
Cryptocurrency mining is heavy on fossil fuels.
Bitcoin's value is down to $50,042.30 (a five-day decrease of more than 15 percent). Bitcoin is expensive in the energy economy too. Each transaction requires 250 kWh of energy. Mining a single token takes as many as 556 days.
The data likens Bitcoin's global annual energy consumption to countries like Argentina and Denmark. The energy that powers crypto mining mainly comes from fossil fuels like coal because it's cheaper than renewable sources. Bitcoin's surge in popularity over the years has led to mining farms taking on overwhelming demand.
The environmental concern is pushing some investors away from Bitcoin toward a more sustainable approach to crypto asset appreciation.
Chia uses less energy
Chia Network (XCH) is in the news for its climate-friendly approach to crypto trading. The coin's value has gone up 4.73 percent in the last 24 hours to $1,052.71.
What makes Chia green? While Bitcoin uses a PoW (Proof of Work) protocol, Chia uses something called PoST (Proofs of Space and Time).
Chia says, "Proof of Space is a cryptographic technique where provers show that they allocate unused hard drive space for storage space. [...] PoT ensures that block times have consistency in the time between them and increases the overall security of the blockchain."
The PoW method is energy-intensive, while PoST can complete smart transactions that are just as powerful, auditable, and secure as market leaders in a much smaller window.
Chia uses crypto "farming" as opposed to mining, which means it can "leverage existing empty hard disk space distributed on nodes around the globe."
Other crypto coins with a slimmer carbon footprint
The Ethereum (ETH) blockchain functions on a PoS (Proof of Stake) protocol, which is also much more efficient than Bitcoin's PoW. ETH consumes 62.56 KWh per transaction. This makes it more sustainable than Bitcoin once all four stages of the Ethereum 2.0 transition fall into place.
Nano might be a target as Tesla searches for environmentally friendly altcoins. Dogecoin, another option, consumes a comparatively minimal 0.12 kWh per transaction.
Energy isn't the only environmental criteria—consider e-waste, too.
Chia is being criticized for its massive electronic hardware requirements. Is it worth creating more e-waste for reduced energy consumption? With more e-waste, that energy will flow to the landfills, which ultimately contributes to greenhouse gas emissions.
Cryptocurrency reform might be upon us—as evidenced by Ninepoint's Bitcoin ETF carbon offset program—but there still isn't a perfect solution for the steadfast environmentalist. The climate crisis requires investors to look at where they're putting their value, and cryptocurrency has yet to adhere to the E in ESG (environmental, social, and governance—three key factors in impact investing).