Ecology puts pressure on cryptocurrencies

Public awareness, the fight against pollution and general pro-environmental actions are more and more clearly affecting the reality around us. These aspects are also increasingly mentioned by representatives of the establishment, who are moving from a local form of environmental protection, to global solutions, influencing countries or entire continents. This is also what is happening in the European Union, where the vice-president of ESMA, the European Securities and Markets Authority, is himself calling for a change in the current methods of bitcoin mining and has called for greater control of the process. In an interview with the Financial Times, ESMA's current vice chairman, Mr. Erik Thedéen, said that the current form of cryptocurrency mining creates a risk of not meeting the Paris Agreement, which aims to achieve climate neutrality for the European Union by 2050 and reduce emissions by 55% from 1990 levels. 

Thedéen also points to a potential solution to the problem of excessive emissions and the burden on the energy economy. Cryptocurrencies can be categorized into two groups that represent the form in which they are obtained, what tools they require, and whether they are centralized or decentralized oriented. The cryptocurrencies in the Proof of Work group that are cited as the ones that cause the most harm to the environment are primarily: BITCOIN, ETHEREUM, LITECOIN or BITCOINCASH. Mining them involves the consumption of huge amounts of electricity and large investments in crypto-mining equipment. On the other hand, we have projects based on the Proof of Stake system, which benefits from the decentralization of the mining system and rewards those owners who hold more of a given cryptocurrency. This solution is efficient and does not require such a network burden. Their representatives are, for example:  BINANCECOIN, CARDANO, STELLAR, RIPPLE, POLKADOT, ETH 2.0 (ETHEREUM) or DOGECOIN.

The Vice-President urged the European Union to move away from the energy-intensive mining of Proof Of Work projects and ban it at EU level and focus on projects requiring less energy and environmental spending. 

Some projects based on the Proof Of Work system:

BITCOIN

The largest and also the most energy-intensive cryptocurrency in the world. Its annual energy consumption exceeds that of countries such as Switzerland, Greece or Israel. Consumption is estimated at 123.75 TWh per year and the value of energy expenditure is $11.03 billion, which is equal to the GDP of the Bahamas. To meet the energy needs of Bitcoin mining, nearly 300 million trees would need to be cut down. CO2 emissions of 59.9 million tons.

ETHEREUM

The second largest cryptocurrency in the world. Consumption of 39.19 TWh, value: USD 4.15 billion. CO2 emissions of 16.6 million tons. However, things could change as early as June, when the Ethereum 2.0 update will be released, bringing the project into the Proof Of Stake system. 

LITECOIN

The third largest cryptocurrency with the highest electricity consumption (estimated at 4.2 billion kWh per year). This is equivalent to the electricity consumption of countries such as Moldova and Cambodia.

BITCOINCASH

Consumption of 4.6 billion kWh per year (scale similar to Estonia's energy consumption). 

Some projects based on Proof Of Stake system:

CARDANO

Cardano consumes approximately 0.01 TWh of electricity per year with a total value of $1.44 million. CO2 emissions of 0.01 million tons. 

DOGECOIN

Uses only 0.002 TWh of energy on an annual basis, with a value of less than $264,000. 

XRP (RIPPLE)

Uses 0.0005 TWh of electricity on an annual basis. The value of energy expenditure is currently $72,000 and CO2 emissions have reached 0.0004 million tons.