What is Green Cryptocurrency & is it Actually Eco-Friendly?

  • By Localcoin
  • July 12, 2023
A guide about what green cryptocurrency is

As cryptocurrency grows, so too do the number of questions concerning its energy use. Bitcoin’s energy consumption in particular has become a highly discussed topic as of late. Because it is the world’s largest crypto coin by market cap.

Bitcoin is also the biggest energy consumer compared to other commonly used coins. And while Bitcoin’s energy demands are undeniable, it’s important for those interested in crypto to have more context surrounding the issues at hand, including:

  • Bitcoin’s energy consumption and the reasons behind it
  • The efforts Bitcoin miners are making to find solutions to growing energy concerns
  • More energy-friendly alternatives used by other coins to make sustainable crypto possible

Let’s dig deeper and understand more about what green cryptocurrency is. This article will help you better understand the energy usage behind crypto transactions and the work being done to make green cryptocurrency a viable option in an energy-conscious world.

Browse This Content: 

  1. What is “Green Cryptocurrency” and is it Possible?
  2. Most Eco-Friendly Cryptocurrencies
  3. Why Does Bitcoin Use So Much Energy?
  4. The Answer: Crypto Mining and the Proof of Work System
  5. Why Does Proof-of-Work Lead to High Energy Consumption?
  6. How Much Energy Does Bitcoin Use?
  7. How Bitcoin Miners Are Trying to Find Greener Solutions
  8. 4 Solutions for a Sustainable Crypto Ecosystem
  9. Final Thoughts on Green Cryptocurrency

What is “Green Cryptocurrency” and is it Possible?

Green crypto is still a work in progress, partly due to the uncertainty surrounding the actual carbon footprint of mining. That said, there are already highly popular cryptocurrency platforms that are using a viable alternative to the proof-of-work system called proof-of-stake (PoS).

This new approach to verifying transactions and incentivizing the minting of new coins could potentially address some of the energy usage issues inherent in the proof-of-work system.
The PoS protocol is proving to be a more eco-friendly method of rewarding users for verifying transactions and supporting the network. Notably, the Ethereum network is moving to a proof-of-stake protocol, alongside other coins. 


The process of “staking” involves pledging a portion of your own crypto assets to a coin’s network and locking them up for a period of time, all for the chance to be rewarded with newly minted coins.

This method does not incentivize computational power in the same way that proof-of-work does. Instead, the more crypto holdings you have locked up, the better chance you have of being selected to verify transactions and earn rewards. 

Most Eco-Friendly Cryptocurrencies

Let’s explore a list of cryptocurrencies that prioritize energy efficiency and innovative approaches to contribute to a greener crypto ecosystem.

  • Cardano (ADA): Cardano distinguishes itself with a strong commitment to sustainability. Its proof-of-stake (PoS) consensus mechanism, Ouroboros, requires significantly less power compared to proof-of-work (PoW) systems.
    Cardano aims to enhance scalability and efficiency, boasting over 1,000 transactions per second. With a relatively low power consumption of around 0.547 KWh per transaction, Cardano aligns with eco-conscious goals by minimizing energy use and carbon emissions.
  • IOTA (MIOTA): IOTA sets itself apart by employing the Tangle, a blockless distributed ledger technology that avoids energy-intensive mining. This design eliminates transaction fees and reduces power consumption, making IOTA a greener alternative.
    With its focus on the Internet of Things (IoT), IOTA enables seamless microtransactions, contributing to a more energy-efficient ecosystem.
  • SolarCoin (SLR): True to its name, SolarCoin rewards solar energy producers. It promotes sustainability by incentivizing solar energy generation and reducing reliance on traditional energy sources.
    SolarCoin is designed to verify solar energy production and is awarded for each MWh of solar energy generated. This approach encourages the adoption of renewable energy practices, fostering a more eco-friendly crypto environment.
  • Chia (XCH): Chia stands out as a more eco-conscious option due to its use of proof-of-space and proof-of-time consensus mechanisms.
    These mechanisms utilize available disk space instead of computational power, significantly reducing energy consumption and potential hardware waste. Chia aims to provide a greener alternative for cryptocurrency enthusiasts while maintaining security and decentralization.
  • Nano (NANO): Nano differentiates itself with its lightweight design and efficient consensus mechanism. Utilizing a block-lattice structure, Nano eliminates the need for energy-intensive mining.
    With a focus on instant, feeless transactions, Nano offers an eco-friendly solution that minimizes energy usage and supports a seamless peer-to-peer transaction experience.

Why Does Bitcoin Use So Much Energy?

The conversation around cryptocurrency and its energy consumption has entered the mainstream. It’s gotten to the point where even highly influential crypto enthusiasts are sharing their concerns about how much energy Bitcoin consumes.

If you’re new to crypto and still grappling with how it works, it’s important to understand the reason behind Bitcoin’s energy consumption. The answer has to do with the current way in which Bitcoins are minted and how Bitcoin transactions are verified. 


The Answer: Crypto Mining and the Proof-of-Work System

In order to operate as a decentralized currency, Bitcoin and many other cryptocurrencies use peer-to-peer technology called blockchain. In summary:

  • Blockchains are used as public, digital ledgers that record coin transactions.
  • Blockchains are powered by “nodes”, or individual computers owned by members of the network.
  • These computers collectively oversee the network and safeguard the security of its transactions.
  • This method allows Bitcoin to operate at a peer-to-peer level without intermediaries including banks and governments. 

A key step in keeping the currency decentralized is Bitcoin mining. The process of mining is a necessary part of verifying transactions on the blockchain and minting new coins into circulation. The formal name of this system or protocol is known as Proof-of-work (PoW)

Why Does Proof-of-Work Lead to High Energy Consumption?

Proof-of-work — the original mining system used by Bitcoin and many others — rewards miners who have the most computational power at their disposal. More specifically, miners compete to verify transactions and add them to the blockchain — a process involves solving very complex mathematical problems as quickly as possible.

Those with the most computational power succeed, receiving newly minted coins as a reward. As Bitcoin halves over time, miners will require even more energy and new, upgraded hardware to mint the same amount of coin rewards. This can be attributed to the following cycle:

  • As new miners join the network, the coin’s “hash rate” increases. The hash rate describes the amount of computing power being used by the network. 
  • When the hash rate increases, so too does the mining difficulty. Bitcoin was designed this way to control the rate at which new coins are minted and entered into circulation.
  • The price of Bitcoin, and the rewards for mining it, often increase with the hash rate. With an increase, the possibility of earning more rewards encourages even more miners to join the network. 
  • When mining difficulty increases, miners need to use more computing power and upgrade their hardware — generating more e-waste. Some of this hardware, including the leading equipment on the market, generates excess heat and requires its own cooling equipment. This further adds to the amount of energy needed to mine Bitcoin. 


How Much Energy Does Bitcoin Use?

Crypto miners aren’t just enthusiasts with small mining rigs at home anymore. Crypto mining has now emerged as its own industry, with digital mining companies (some that are even publicly traded) and giant data centers around the globe.

  • According to an estimate made by the University of Cambridge Centre for Alternative Finance (CCAF), Bitcoin mining's energy consumption, as of September 13th, 2023, is estimated to be around 117.10 terawatt-hours (TWh) per year, which is higher than the annual consumption of many small countries such as Finland and Chile. 
  • It is estimated that one Bitcoin transaction is equivalent to several hundred of thousands of VISA transactions. 
  • In November 2021, Swedish financial and environmental regulators called for a ban on Bitcoin mining in Europe in order to hit goals set in the Paris climate agreement. 

How Bitcoin Miners Are Trying to Find Greener Solutions

Bitcoin miners are well aware of the energy concerns surrounding Bitcoin and are looking to find solutions. Energy consumption is a primary area of interest for the Bitcoin Mining Council — an open forum of miners committed to transparency, best practices and upholding the network’s core values. Their proposed response? Committing to transparency and to using more renewable energy sources. 

According to a report by Cambridge University, it is estimated that more than 75% of all crypto miners today are using renewable energy sources as part of their energy mix. What’s more, efforts are underway to not only use this energy to mine Bitcoin, but to harvest it for other purposes as well — such as to provide heat for housing in various communities. 

Some Bitcoin miners also use carbon credits to offset the impact of their fossil-fuel burning operations. These are then used to fund green initiatives elsewhere. It’s also important to note that Bitcoin’s energy consumption is not equivalent to its carbon emissions.

This is because Bitcoin miners operate all over the world using various types of energy sources. And because miners are not obligated to disclose their energy mix, it’s difficult to estimate the true carbon footprint associated with mining Bitcoin and other cryptocurrencies. It should also be noted that Bitcoin’s energy use makes up less than half of the energy used by traditional banking systems

Still, these realities don’t take away from the fact that there is still work to do to make Bitcoin and other cryptocurrencies more sustainable. As a viable alternative to the world of centralized currencies, the crypto community has a chance to come up with bold solutions that will lead to a future defined by more responsible energy use. 

4 Solutions for a Sustainable Crypto Ecosystem

The pursuit of a sustainable crypto ecosystem has gained traction as concerns about the energy consumption and environmental impact of cryptocurrency operations continue to rise.

To address these issues, here are some effective solutions that can promote a more ecologically balanced and socially responsible crypto space.

1. Switch to Renewable Energy Source

One pivotal step toward sustainability involves transitioning cryptocurrency mining operations to rely on renewable energy sources like solar, wind, hydroelectric, or geothermal power.

By harnessing clean energy, the energy-intensive process of mining can significantly reduce its carbon footprint, easing the strain on the environment caused by traditional energy consumption.

2. Use Proof of Stake Consensus Mechanisms

The energy consumption associated with traditional Proof of Work (PoW) consensus mechanisms has prompted the exploration of alternatives like Proof of Stake (PoS). PoS operates by selecting validators to create blocks based on the number of coins they "stake" as collateral.

Unlike PoW, PoS doesn't involve resource-intensive computations, leading to substantially lower energy consumption and a more sustainable approach to transaction validation.

3. Implement Carbon Credits System

To offset the environmental impact of crypto operations, the concept of a carbon credits system has gained attention. Crypto projects could engage in initiatives that reduce carbon emissions, earning carbon credits that mitigate their ecological footprint.

These credits could be used to fund environmental projects or balance out emissions, aligning the crypto industry with broader sustainability objectives.

4. Introduce Pre-mining

Pre-mining involves creating a portion of a cryptocurrency's total supply before public release. This reserve of pre-mined coins can be directed toward funding sustainable initiatives, supporting charitable causes, or investing in environmental projects.

By allocating resources to these efforts, the crypto space can establish a positive impact from the outset.

Final Thoughts on Green Cryptocurrency

The sustainability of Bitcoin and other crypto coins is a very important issue for the crypto community and one that will continue to spark debates, discussions and systematic change over the coming years. 

While there may not be a clear-cut answer on what green cryptocurrency is just yet, it’s important for crypto enthusiasts and beginners to stay informed about developments with their coin(s) of choice. With the right knowledge, you can make more informed decisions surrounding your crypto strategy and choose the coins that are right for you.

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