In recent months, Bitcoin has repeatedly come under criticism in connection with possible environmental damage. Tesla founder Elon Musk, a former Bitcoin fan, criticized the cryptocurrency’s high energy consumption as early as 2021. Bitcoin actually causes extremely high energy costs, primarily due to its mining process, which can be harmful to the environment. In this context, we present 5 Bitcoin alternatives!
Why is Bitcoin not Eco-friendly?
We have already examined the energy consumption of Bitcoins with its Proof of Work (PoW) consensus mechanism in a separate article. There are many alternatives that are much more resource-efficient. However, it must be said that so far nothing has come close to the security of Bitcoins. PoW is based on computing power and computing power cannot be simulated or faked.
Why is Proof of Work bad for the Environment?
The Proof of Work consensus mechanism requires an extremely large amount of computing power, which means that the energy consumption of the process is extremely high. For example, the power consumption of large Bitcoin mining farms is extremely high. Often these farms are powered by energy from coal-fired power plants. This means that the emission of greenhouse gases emitted by the industry around Bitcoin is extremely large.
Is there an Alternative to Proof of Work?
The best-known energy-saving alternative is called Proof of Stake (PoS). The computing effort is replaced by coins. Since this costs money, it is difficult to accumulate many and gain power in the network.
Another advantage is that PoS is not hardware intensive. Good standard hardware is usually sufficient, while PoW uses special hardware, which often fills entire halls and thus poses a security risk. If the largest of these inflexible mining farms are seized by governments or other powerful organizations, they have power over the network.
Top 5 Bitcoin Alternatives
There are many interesting cryptocurrencies that are significantly more eco-friendly compared to Bitcoin. Let’s list our top 5!
Cardano implements full Proof of Stake. That means there is no hashing component like there is with Peercoin (see our article on Proof of Stake ). Cardano should therefore also need little power for the consensus mechanism. Like EOS, Cardano is a smart contract-enabled platform. The nodes also consume more power under load. However, the power consumption is significantly lower than with Bitcoin, especially since the security of the network does not depend on the energy consumption. Cardano is therefore a good example of environmentally friendly cryptocurrencies.
Ripple is often said to be central because the company behind it, Ripple Labs, controls a large part of the cryptocurrency XRP. In terms of energy consumption, however, the network is comparatively economical. All nodes are known in the ripple network. That means not everyone can just join without being notarized. This eliminates the authentication-free consensus mechanism of Bitcoin, which is generated by the computing effort, and significantly less electricity has to flow.
Eco-friendly cryptocurrencies often use new concepts. The cryptocurrency DOT of the Polkadot network uses nominated Proof-of-Stake as a consensus mechanism. The Polkadot blockchain acts as a so-called “relay chain”. The resources flowing into the system are thus “subleased” to new blockchain systems. Polkadot thus promotes a quick and resource-saving start of your own system. The interaction between the participating chains is improved because the play chain simplifies the interactions between the individual systems.
EOS uses the delegated Proof of Stake consensus mechanism. This means that half of the network is authentication-free. The trusted block producers are chosen by the token holders. Only 21 block producers do all the computing required for the network. Other nodes then check all or selective transactions, which also costs electricity, but is nowhere near as good as Bitcoin.EOS is a high-performance platform that consumes power during calculations. Australian block producer GenerEOS published a study last year estimating the power consumption of the EOS main grid at 0.0011 terawatt hours per year. In comparison, Bitcoin consumes around 73 terawatt hours of electricity per year, making EOS an environmentally friendly cryptocurrency.
IOTA is also currently using a consensus mechanism that, if it were to run decentrally, would be based on PoW or in which the security of the network depends on the energy consumption. However, IOTA currently has a coordinator who centrally secures the network. A new consensus mechanism is planned, which partly uses PoW and partly uses other mechanisms for consensus building. The new process is likely to consume significantly less energy than Bitcoin.
Can Bitcoin become eco-friendly?
Recently, the EU Parliament even considered a draft law to ban technologies such as Bitcoin due to its resource consumption. Although this is an insane proposal, it also shows the need to make Bitcoin more environmentally friendly.
In the past, much of Bitcoin mining was done in China because electricity was extremely cheap there. However, it was also electricity from “dirty” coal-fired power plants. With the mining ban in China, mining has shifted significantly. However, this also helps the environmental balance of Bitcoin.
Bitcoin mining has become increasingly environmentally friendly in recent years, especially in Northern Europe. Most of the energy for Bitcoin is already obtained there from renewable energy. Other countries are also working on technologies that will make Bitcoin more environmentally friendly.Forget about Bitcoin and Check out those 5 Bitcoin Alternatives!