Bitcoin has seen significant growth in the past few years. And with that, its energy consumption has also expanded. Bitcoin’s energy inefficient form has set off a backlash amongst those who fear that increase in the cryptocurrency’s adoption also means an increase in its already large carbon footprint.
Environmentalists have also expressed concern arguing that we should be working to find less energy-consuming processes to manage the financial world. While instead, we are investing more in high energy-consumption tools such as Bitcoin.
Amid this significant environmental concern, other cryptocurrencies have been developed in the hope of offsetting this problem. Over the past year, environmentally efficient altcoins have been gaining ground among investors who are aware of the environmental impact of Bitcoin.
The new trend offers a way to a more sustainable economy.
How Bitcoin works
The very appeal of Bitcoin lies in its decentralized nature which makes it impossible for a single person to influence its network.
The blockchain records every transaction in order to maintain this level of security. The blockchain is maintained and checked by bitcoin miners who compete to analyse it and are potentially rewarded with Bitcoin. In order to receive that reward, the miners must complete proof of work which is solving a complicated and energy-intensive mathematical problem.
As the network expands, the time for analysing it also grow and with it, its energy consumption. According to the Cambridge Centre for Alternative Finance, Bitcoin currently consumes approximately 121.36 terawatt-hours (TWh) a year. This number is higher than the energy consumption of Argentina (121 TWh), the Netherlands (108.8 TWh), and the United Arab Emirates (113.20 TWh).
The high level of energy consumption is an enormous problem and may stand in the way of Bitcoin becoming widely adopted.
As the environmental backlash against Bitcoin grows, several altcoins have come up to offer a solution to the environmental issues.
ECOcoin is one such alternative. It rewards users who live an eco-conscious lifestyle. The founders say that one tree backs every coin. Their goal is to build a sustainable marketplace and change the behaviour of people.
SolarCoin is another such option. It provides users with SolarCoin tokens for every megawatt of electricity generated using solar solutions. It aims to inspire solar power generators and change the way people use, create and sell energy.
These altcoins have a direct positive influence on environmental issues. Other cryptocurrencies have a reduced environmental impact which they achieve with increased scalability.
One of these is Avalanche. It can process 100 times more transactions per second than Ethereum, Bitcoin’s rival.
Cardano is designed to provide better service at a lower cost than Bitcoin and aims to provide access to financial services in developing countries.
Speaking about Ethereum, this cryptocurrency has an advantage against its rival Bitcoin. It can process a large number of transactions at a lower cost than its competitor. The latest, Ethereum 2.0 update lowers its cost even further and it sets out the cryptocurrency to become more efficient and take market share.
Bitcoin has alternatives
What Bitcoin has over the alternative cryptocurrencies is recognition and popularity. That gives Bitcoin an edge in the race to become widely adopted around the world.
But Bitcoin miners also have options to become more energy-efficient and less damaging to the environment. They can use renewable energy to power their operations.
Genesis Mining did exactly that several years ago. Its entire business was moved to Iceland, where they have abundant hydraulic and geothermal power supplies. Now 100% of the company’s electricity is from renewable energy sources, reducing its carbon footprint.
As Bitcoin grows and with it, its energy consumption, its supporters and users are going to have to find alternatives. There is no one solution to this problem and a combination of all abovementioned can significantly improve the situation.
One thing is clear, Bitcoin cannot go on with its current model of operations. In this shape and form, it can never be a true rival of fiat money.
Experienced writer and journalist, working in the global online trading sector, Steffy is the Editor of LeapRate. She has previous experience as a copywriter and has been with the company since January 2020. Steffy has a British and American Studies degree from St. Kliment Ochridski University in Sofia.