The eco-friendly cryptocurrencies to invest in 2022
Which coins prioritise sustainability and use less energy than the gas-guzzling bitcoin?
The original blockchain technology pioneered by Bitcoin was not designed to be eco-friendly, it was created to offer a decentralised solution to money. What emerged was an industry consuming vast amounts of energy at the rate of medium-sized countries.
There has been a shift in the crypto world away from this model, recognising it is not only environmentally damaging, but also economically unsustainable. By creating alternative consensus protocols, newer cryptocurrencies are avoiding the energy pitfalls and can process transactions at a much faster rate.
There is competition among the cryptocurrencies as to which is the most eco-friendly cryptocurrency. For those looking to make a crypto addition to their ESG portfolio, there are plenty of sustainable cryptocurrencies to choose from.
Powerledger’s native token POWR was one of the first cryptocurrencies to see a surge in 2022, racing from $0.42 on 1 January to $0.82 two days later. This eco-friendly cryptocurrency powers Powerledger, a technology company building decentralised energy software. Its goal is to decentralise the energy market, giving consumers more choice.
POWR, an ERC-20 token, ensures that the businesses that sign up to Powerledger are committed to its sustainability goals. It is essentially a licence used for businesses, including utilities, microgrids and renewable energy operators, to access the platform.
Powerledger launched its token at the end of 2017 and it saw an almost immediate spike, reaching its all-time high of $2.01 on 4 January 2018. POWR has not passed the $1 since, however it did see a bullish trend in 2021. It started off the year around the $0.10 mark and had quadroupled by the end of December. POWR’s recent success and renewable energy commitments could make it a valuable addition to a portfolio focused on environmental, social and governance (ESG) factors.
Cardano was part of the shift away from the energy intensive proof-of-work (PoW) protocol. Instead of using computers to solve complex puzzles, transactions are processed through proof of stake (PoS).
Cardano claims it is the most environmentally-friendly cryptocurrency. According to TRG Datacentres, it only consumes 0.54 kilowatt hour (kWh) of energy per transaction, far less than bitcoin’s gigantic 707kWh.
The blockchain has also demonstrated commitment to wider sustainable goals. At the 2021 Cardano Summit, Veritree revealed a partnership with the Cardano Foundation. Veritree’s initial tree offering had a goal to plant one million trees.
ADA, Cardano’s native cryptocurrency, launched late 2017 at $0.02 and saw an initial surge during the beginning of 2018. It was in 2021 when ADA began a bullish trend and passed $3. Cardano had dropped by January 2022 to around the $1.10 mark. But as the seventh largest cryptocurrency by market cap, the environmentally-friendly cryptocurrency could have a strong year ahead.
There seems to be a fight in the crypto sphere over the title of the most sustainable cryptocurrency. With Algorand’s claim it is the “greenest blockchain”, it is disputing Cardano as the most sustainable.
The blockchain is actually carbon negative, meaning it is actively reducing emissions rather than ploughing CO2 into the atmosphere.
This was made possible through a partnership with the environmental consultant firm called ClimateTrade. The partnership set up a “green treasury” that supports conservation projects taking positive climate action. The firm also regularly notarises the blockchain’s carbon footprint after a set number of blocks, to ensure it is truly carbon negative.
Algorand has used a unique protocol titled pure proof of stake that is less energy intensive, which is helping it achieve its sustainability goal as well. It says the energy needed to operate a node in the network is “negligible” and can be completed on a simple device such as a Raspberry Pi, hardware used to teach basic computer science.
Algorand launched in 2019 at $2.16 and has struggled to get near that price since. However, 2021 proved to be a successful year for the eco-friendly coin. It reached $2.37 in September, but is now currently hovering around $1.30.
Ripple is technically not a blockchain, it’s a distributed ledger database, meaning its data is not organised in blocks but is still spread across a group of computers. Ripple is a payment provider with an aim to become the decentralised alternative to PayPal. Although there are already blockchain-based payment providers, Ripple wanted to provide a faster, cheaper, and scalable solution.
XRP has its own unique protocol method to process transactions and like PoS it is not energy intensive. According to TRG datacentres, it takes 0.0079 kWh to process each transaction, making XRP one of the most sustainable cryptocurrencies by energy usage.
XRP launched towards the end of 2013 at $0.0056 and reached its all-time high in January 2018. Ripple’s token did make a resurgence in 2021 where it surpassed $1 for the first time since. But the price has dropped and at the time of writing is $0.72. XRP’s price might not be making a dent in the crypto sphere but it is the eighth largest by market cap.
In 2014, a crypto project called Stellar was created out of a fork from Ripple. Its goal is almost identical to Ripple, to create a faster, easier, and cheaper payment processor. Instead of proof of stake or proof of work, the cryptocurrency is based on its own system titled Stellar Consensus Protocol. The verification process is much shorter and faster, which is keeping energy usage to a minimum.
A report by Wilhelm Wanecek found Stellar’s electricity usage is very little and compared it to the energy needed to run a regular website. Wanecek said: “It seems that Stellar has successfully decoupled decentralisation from extreme power consumption and, as such, it is a protocol that other blockchain implementations – in or outside of fintech – could draw from.”
Stellar’s native token, XLM, launched in 2014 and barely moved for the first three years, staying between $0.001 and $0.005. It saw its first bullish trend in 2018, which peaked at $0.89 in January. The price did fall since then, but another upward trend occurred in 2021, peaking at $0.73 in May. At the time of writing, XLM is hovering around the $0.26 mark and is up 0.2% in the past seven days.
Solana has positioned itself as a scalable, fast, and efficient solution to the gas guzzling blockchains like Ethereum and Bitcoin. Through use of its proof of history consensus protocol, it only uses 0.0005 kWh per transaction, more than ten times smaller than Ripple’s energy usage. This makes it a top contender for the most eco-friendly cryptocurrency to invest in.
The blockchain has commissioned an independent energy and climate adviser to look into its carbon footprint last December. It found the annual carbon footprint of the Solana network is 2,500 tonnes of CO2, equivalent to the emissions of 1,178 US households. The report said: “Solana’s total climate footprint is equivalent to a small neighborhood, not a mid-sized country.”
For Solana’s cryptocurrency SOL, 2021 was an extremely bullish year, growing from $1.84 to $170. Although the price has fallen recently in line with the bearish crypto market, Solana still occupies number five in the cryptocurrency market cap rankings.
Is the future green for crypto?
There is a growing consensus in the crypto world that the current set up is not sustainable, both economically and environmentally. Ethereum, the second largest cryptocurrency, has recognised this and plans on shifting from proof of work to proof of stake. It is hoping this will drive down transaction speeds and energy usage – and is an indication of huge change in the crypto industry.
Some investors and blockchains may be prioritising ESG goals when investing, however, there is still a gas guzzling problem at hand: bitcoin. The largest cryptocurrency consumes 91 terra watts every year, using more energy than Finland. For crypto to go fully green, it must come up with an eco-friendly solution to an unsustainable cryptocurrency.
Is cryptocurrency bad for the environment?
It depends. Cryptocurrencies that use proof of work, like bitcoin, consume large amounts of energy to validate transactions, making it an environmentally-damaging process. But not all cryptocurrencies are bad for the environment. There are some sustainable alternatives that use proof of stake or more eco-friendly consensus protocols.
Is bitcoin environmentally friendly?
Not really. For computers to process a bitcoin transaction, they must solve a complex puzzle that consumes large amounts of energy. Bitcoin consumes a staggering 707 kWh per transaction, and its total annual energy consumption is equal to a medium-sized country like Finland.
How to invest in environmentally-friendly cryptocurrency?
There are several cryptocurrencies that consume very little energy and have prioritised sustainability goals. You can invest in these coins on exchanges, including Currency.com’s trading platform.