On 13th May, Elon Musk, in a tweet titled ‘Tesla & Bitcoin’, announced Tesla’s decision to suspend vehicle purchases using bitcoin owing to the cryptocurrency’s energy usage. This tweet came less than two months after Musk had announced Tesla’s acceptance of bitcoin as a payment for the purchase of its electric vehicles.
Both the tweets unsurprisingly had a huge impact on bitcoin’s price. While the tweet accepting bitcoin as a payment method was not entirely unexpected given Musk’s recent obsession and support for cryptocurrencies, the second tweet was a shocker for the entire bitcoin community.
Tesla’s U-turn brings renewed interest in ESG friendly coins
It’s worth noting that in his series of tweets, Musk acknowledged cryptocurrency as an idea that is good on many levels and has a promising future thus reiterating that his confidence in the underlying concept is intact. His point of concern was the unsustainable use of energy in the bitcoin mining process.
The levels of energy consumption in bitcoin mining have been well-known since its inception, with illegal mining at times blowing up entire power grids of smaller cities.
However, Musk’s tweets and Tesla’s decision have renewed a debate on energy consumption on a much broader level. Investors are paying much more attention to the energy consumption levels of different cryptocurrencies.
Below we explore five cryptocurrencies that are highly energy-efficient and might act as environmentally friendly alternatives to Bitcoin.
Burstcoin (BURST)
Burstcoin differs from traditional cryptocurrencies in how it is mined. Its blockchain operates using a proof-of-capacity (PoC) algorithm. This particular algorithm is a substantially less energy-intensive process than the proof-of-work used in mainstream cryptocurrencies.
Proof of capacity (PoC) is a consensus mechanism algorithm used in blockchains. This allows devices in the network to use their available space to decide on mining and authenticating transactions. This makes the entire process significantly easier, and the underlying tech is subsequently more decentralized than other crypto coins.
It’s worth noting that Burstcoin was the first coin to use the PoC algorithm, and since the inception of Burstcoin, several more coins have come into existence to use this underlying algorithm.
Nano (NANO)
Nano was initially called RaiBlocks and is a newer cryptocurrency that was created in 2015 by Colin LeMahieu. Colin is a software engineer, and he began focusing on Nano in 2017. Nano works on a radically different algorithm, unlike the proof of work or proof of space mentioned earlier.
People can receive Nano tokens simply by solving a captcha on a web page, letting people with low-end computers take part. Hence trading the cryptocurrency uses less energy. Similar to Burstcoin, Nano is a much more inclusive crypto as it doesn’t require expensive high-end rigs and computational power to generate more tokens.
Chia (XCH)
Chia is similar to Burstcoin in using a proof of concept algorithm. The platform was created by Chia Network, a company valued at $500 million in its most recent fundraising. Chia Network plans to launch its IPO towards the end of 2021 indicating the company’s confidence in its cryptocurrency and also the rising popularity of such coins.
Chia, like other less energy-intensive coins, came into the limelight after Musk’s tweet on finding a solution to the energy-intensive mining process of cryptocurrencies but has had a more profound effect on several industries.
Participants looking to mine Chia are hoarding up storage spaces in the form of SSD drives. This demand spike has been so massive that drive manufacturers have warned that the use of their SSDs for high volume processes like mining will void their warranties. The prices of storage space devices are also expected to skyrocket. These warnings, in fact, point towards a rising impact and use of Chia.
Cardano (ADA)
Cardano uses a consensus protocol algorithm known as proof of stake. This algorithm is significantly different from the proof of work and proof of capacity algorithms discussed earlier.
The proof of stake algorithm works by selecting the validators for the blockchain such that these validators’ control is in proportion to the number of their holdings in the underlying cryptocurrency.
The beauty of this algorithm as you must have guessed is that this too, like the proof of capacity protocol, does not require extreme amounts of energy consumption, making Cardano among the more sustainable cryptocurrencies.
Cardano is a relatively new blockchain too. The Ethereum co-founder Charles Hoskinson founded it in 2015, and the entire development project was undertaken by the Cardano foundation which is located in Switzerland.
In addition to being significantly more energy-efficient than the mainstream cryptocurrencies, Cardano’s backers claim that it stands as a viable alternative to both Bitcoin and Ethereum in terms of scalability, flexibility, speed, and safety.
Solarcoin (SLR)
Solarcoin is significantly different from all of the cryptocurrencies discussed above. The cryptocurrency came into existence with the sole purpose of incentivizing the use of green energy, more specifically solar energy, as the name would suggest. Hence it is no surprise that the underlying algorithm for the Solarcoin is different from all of the protocols discussed above.
The creation of 1 Solarcoin is a result of a one-megawatt hour of power generation from solar energy. However, one significant loophole in this process is the fact that the Solarcoin network expects users to upload proof of their solar energy generation. Given this is a cumbersome process, Solarcoin has seen slower uptake from its users.
However, the timing and technology are still on the side of Solarcoin as the internet of things is gaining more and more adoption, which could streamline the process, offering automatic updates on solar power generation at each node. Given the rise in solar power generation across the globe, Solarcoin has great potential to be used as a tool to attribute and assign green credits.
Time for a crypto green revolution?
While we have discussed a few different ESG friendly coins above, in all honesty, comparing the energy efficiencies of different cryptocurrencies is a highly difficult and complex task, given there are so many parameters at play. That said, some cryptocurrencies are inherently more energy-efficient than Bitcoin due to their underlying algorithm or structure.
We’ve already seen many of these coins see a significant jump in their price after Elon Musk voiced his concerns on energy consumption. The rising interest in ESG investments and increasing awareness among investors will continue to attract more and more enthusiasts to the community of the ESG friendly coins.
With many of these cryptocurrencies still relatively undiscovered especially as compared to the well-known cryptocurrencies such as BTC and ETH, there is a reasonable chance that some of these coins can see a meteoric rise in their value similar to the rise witnessed in Bitcoin’s price in the early 2010s. It all comes down to whether people are prepared to bet on the crypto green revolution or not.
