Elon Musk's Tweet Radically Changed the Crypto Game. Here's What You Need to Know.
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On May 12, 2021, Elon Musk announced that Tesla would no longer accept Bitcoin as a form of payment because of its environmental impact. While there had been previous grumblings about the energy needed to mine Bitcoin, Musk's tweet brought national attention to the issue. As a result, Bitcoin's value came crumbling down — and the expectations for cryptocurrencies changed instantly. With some popular coins' environmental footprints being as large as those of major cities, green coins are a much-needed solution.
What makes Bitcoin so damaging?
Estimates show that Bitcoin’s network uses the same amount of energy in one year as the entire country of Argentina. While some argue that the majority of energy used for Bitcoin is tied to renewable sources, the exact amount has been disputed. One major caveat to the renewable-energy source argument is that 65 percent of people mining Bitcoin are living in China, where the majority of energy is generated from coal. Apart from the energy use, Bitcoin also generates massive amounts of e-waste: 11.5 kilotons to be exact.
Mining Bitcoin requires so much energy because of proof-of-work blockchains. Miners are rewarded for being the first to solve complex cryptographic puzzles using specialized computers, which require tons of power to work as hard and fast as they do. The system is believed to be better than centralized currency as it relies on no single trusted person or entity. One report found that 39.95 million tons of carbon-dioxide emissions can be attributed to Bitcoin mining each year.
Are all cryptocurrencies bad for the environment?
Some cryptocurrencies avoid the environmental issue altogether, as they do not use mining. These cryptocurrencies don’t have the same energy drag, making them much better for the environment in comparison to Bitcoin. These coins are referred to as green coins.
Proof-of-stake blockchains are especially low-energy. Options like Cardano and EOS require no mining, so transactions can be processed with the same amount of energy that a regular computer network requires. To put that in perspective, Bitcoin uses 121 Terawatt-hours of electricity each year. Ethereum uses enough energy to power the nation of Qatar. Meanwhile, EOS has achieved carbon-neutral status.
Though it’s possible to move to a new consensus mechanism, it can be very difficult. Ethereum, for example, will likely transition to a proof-of-stake blockchain, but faces disputes from its miners. This means that large coins like Bitcoin and Ether will take time to solve their environmental issues — that means more energy is used while they figure it out. By investing in green cryptocurrency instead, you skip the wait.
Four green cryptocurrencies to invest in instead
While Bitcoin runs on proof-of-work, altcoins use proof-of-stake. In essence, a person can validate transactions based solely on how many coins they own — this is also referred to as their stake. Since this is done independently, these miners waste no energy. With that said, many of the green coins are altcoins, using proof-of-stake blockchain platforms.
1. Cardano is one of the most well-known, most successful green coins using the proof-of-stake blockchain. ADA coin has actually outperformed ETH and BTC since Musk’s tweet as people rush to buy sustainable cryptocurrency.
2. EOS uses a proof-of-stake platform and is the first major carbon-neutral blockchain. Carbon neutrality is EOS’s calling card, and it’s how it sets itself apart from the competition. Carbon emissions and carbon offset are listed clearly on the EOS website. In May of 2021, EOS contributed 281 tons of CO2 to the atmosphere over the last year — and also reached its goal of offsetting 281 tons.
3. BitGreen, founded in direct response to Bitcoin’s environmental impacts, uses an energy-efficient alternative to Bitcoin’s proof-of-work platform. BitGreen also encourages people to make more eco-friendly choices, like carpooling in apps like Uber and Lyft. They also provide incentives for volunteering and purchasing sustainable coffee.
4. Stellar is seen as a viable alternative to PayPal, and its network can be used to exchange Bitcoin, U.S. dollars, pesos and most other traditional money and cryptocurrencies. Rather than a proof-of-stake or proof-of-work platform, Stellar operates on a consensus protocol. This method authenticates transactions through a set of secure nodes. This cycle is shorter and faster than the alternative, which is what allows the Stellar network (and its tokens, Lumens) to be considered green.
Although it’s estimated that Bitcoin mining uses 55 percent to 65 percent renewable energy, there’s still a long way to go for the leading cryptocurrency. Musk’s tweet made us all ask important questions: Are all cryptocurrencies bad for the environment? Will we have to give up these revolutionary finance options? Luckily, there are much better options on the market, and with sustainable cryptocurrencies and green coins, crypto is here to stay.