The green future of cryptocurrencies: a transformation underway

Cryptocurrencies have gradually become protagonists in the financial field worldwide. According to the statistics portal Statista, 2024 closed with more than 562 million owners of digital assets. This means an increase of 33% compared to the 420 million recorded at the end of 2023.

This growth has been significant for several reasons. Firstly, we can highlight the robustness and security of blockchain technology. This type of network guarantees fast, encrypted transactions. Furthermore, the decentralized nature of cryptocurrency finance allows for greater freedom. without tariffs or commissions high compared to traditional banks. This is especially true for payments or money transfers in transoceanic transactions.

As far as an asset is concerned, diversify an investment portfolio, offer the possibility of obtaining high returns and, finally, their increasing adoption by companies and businesses. This has positioned cryptocurrencies as a modern alternative, efficient and fast compared to traditional financial systems.

Innovation without environmental damage

As we saw There are key elements that have made the cryptocurrency market grow in the global economic sphere.However, this success also has a downside, and although many users don't see it or aren't aware of it, the reality is that they cause an adverse environmental impact.

Generating and trading cryptocurrencies on the blockchain requires significant energy consumption. That is, each node or computer in which payments and collections are made and recorded needs electricity and much of this comes from non-renewable sources, which increases the carbon footprint which causes pollution, greenhouse effect and global warming.

This process of perform and record transactions It is called mining and involves solving complex mathematical operations to validate transactions on each network. This task requires the continuous use of very powerful computers that consume a lot of electricity. These must be connected 24 hours a day, 365 days a year, without interruption.

Miners compete with each other Yes, to obtain a higher volume of operations because these leave them a percentage that is your income for the work done. To validate each operation, a protocol is required in the blockchain that records it and this is done through two mechanisms: one is the proof of work or PoW and the other is the proof of stake or PoS.

From the technical point of view, The fundamental difference between PoW and PoS lies in how transactions are validated. on each blockchain and how new blocks are added to the network. In the case of PoW, the protocol solves complex mathematical problems that result in each transaction being performed and recorded on its own blockchain.

In the case of PoS, the consensus and validation process depends on the amount of coins that users across the entire network have at stake. Now let's look at this from the environmental point of view: In PoW, the miner who has the node (terminal or computer) that first solves the problem receives the reward or commission.

Therefore, the faster the equipment and processor, the more profitable it is to obtain mining profits. This generates a competitive environment and subsequent high energy consumption. Instead, PoS It's more energy-efficient because validation is done with simpler nodes. This protocol allows for greater inclusion of miners who can perform this work without investing in billions of dollars in specialized processors and software, and therefore, energy consumption is lower.

Cryptocurrency mining and environmental danger

A study of the University of Cambridge in England revealed that the Bitcoin network, the blockchain that generates the native token or cryptocurrency, better known as BTC consumes more electricity annually than entire countries like Argentina or the Netherlands.

This high energy consumption This is due to, as we already said, the equipment required for mining and its main consequence is the emission of large quantities of carbon dioxide (CO₂) and other greenhouse gases (GHG). All of these exacerbate climate change and air pollution.

Another alarming fact that emerges from Bitcoin mining is the one revealed by an investigation by UN scientists that was published at the end of 2023 in Earth's Future magazineAccording to the study, global BTC mining required a total of 2020 terawatt hours between 2021 and 173,42. This energy consumption generates a carbon footprint comparable to burning 38.102 billion kilos of coal or operating 200 natural gas power plants.

The same study points out that to reverse these greenhouse gas emissions It would be necessary to plant about 4000 billion trees worldwide, which is not being done.

Can cryptocurrencies become green digital assets?

The answer to this question is: yes. Sustainable cryptocurrencies have been emerging for about 5 years and They employ new mechanisms designed to reduce their carbon footprint. originating with blockchain technology. These networks have moved toward more environmentally friendly solutions. Such is the case with the Ethereum blockchain and its token. ETH, which has managed to reduce its energy consumption by almost 99,5%. thanks to the implementation of a PoS consensus mechanism.

Now, it is possible that the rest of the cryptocurrencies can maintain the decentralization of finance, while ensuring security and scalability in an ecological way of acting. How? The experts give the answers:

• Use renewable energy: This is a way to reduce carbon emissions and other GHGs. Although PoW is used to validate transactions on the blockchain, if it is used solar or wind energy the impact would be significantly lower.
• Switch from Proof of Work to Proof of Stake: Replacing the PoW consensus mechanism with PoS requires less electricity usage to verify transactions. This contributes to green mining.

Implementation of carbon credits: although they are not a foolproof way of make crypto mining greener, Yes, they help reduce GHG emissions. These are certificates that represent the reduction of up to one ton of CO2 or other GHGs into the atmosphere. In the context of green cryptocurrencies, these credits are used as a form of offset total emissions generated as a result of energy consumption associated with operations on the blockchain.