Before knowing how green cryptocurrencies differ from traditional cryptos, you need to know what is green cryptocurrency and traditional cryptocurrency.
What is cryptocurrency?
Cryptocurrency needs no introduction since it’s showing an incredible trend nowadays. This digital currency employs encryption to function as a payment method and a virtual accounting system.
Most of them might be familiar with traditional cryptocurrencies, but still, we are giving a brief introduction to them.
Traditional cryptocurrencies are operated by a centralized system while most of the cryptocurrencies are managed by a decentralized system without any intermediaries. Mostly, the traditional one is managed by a recognized government structure, such as the U.S. Federal Reserve. They have characteristics like watermarks, holograms, and anti-counterfeiting elements.
Green cryptocurrency, the name itself reveals what it is. These are eco-friendly digital currencies introduced to reduce their environmental impact. While traditional cryptocurrencies use the Proof of Work (PoW) mechanism, green cryptocurrencies employ sustainable substitutes such as Proof of Stake (PoS) and Proof of History (PoH). Implementing this mechanism will potentially reduce the energy required to validate transactions and maintain the blockchain.
Popular green cryptocurrencies are as follows:
- Cardano (ADA):
- Uses Proof of Stake (PoS) consensus mechanism.
- Lesser energy consumption compared to Proof of Work (PoW).
- Secure and energy-efficient cryptocurrency.
- Solana (SOL):
- Uses Proof of History (PoH) consensus mechanism.
- Combination of PoH and PoS.
- Eco-friendly blockchain networks with high scalability.
- Chia (XCH):
- Employs a novel consensus mechanism known as Proof of Space and Time (PoST). This relies on unused storage space.
- Focus on efficient resource usage.
- Nano (NANO):
- Works on Block Lattice structure and Open Representative Voting (ORV), a lightweight consensus mechanism.
- Most energy-efficient cryptocurrency.
- Algorand (ALGO):
- Works on pure Proof of Stake (PPoS)
- Reduces the need for energy-intensive mining operations.
- Known for its carbon-negative network.
Now that you have acquired the concept of both cryptocurrencies, as a next step, we are going to explore the differences between both cryptocurrencies.
The main difference with energy consumption. As we said earlier, green cryptocurrencies are made to reduce energy consumption more than traditional ones. Traditional cryptocurrencies employ PoW whereas green cryptocurrencies use PoS and PoH.
Secondly, green cryptocurrencies will have only a smaller carbon footprint compared to traditional cryptocurrencies. Crypto mining involves heavy usage of energy, and since the process takes place in countries where water intensities for electricity are higher, so the cryptocurrency will have a large water footprint.
Lastly, green cryptocurrencies align with their global sustainability goals. Now most companies and investors are prioritizing Environmental, Social, and Governance (ESG) factors, and green cryptocurrencies perfectly align with this trend.
Can we check out the benefits of using green cryptocurrencies, read the below section.
1. Reduced energy consumption
By employing PoS and PoH mechanisms, green cryptocurrencies could reduce energy consumption when compared to the traditional one which is using the PoW mechanism.
2. Lower carbon footprint
The mining process which involves high energy consumption is cut down and thereby reduces greenhouse gas emissions.
3. Reduced e-waste
Green cryptocurrencies use a much more efficient validation mechanism which only demands less hardware which will help in reducing electronic waste.
4. Support for renewable energy
The usage of renewable energy sources by several green cryptocurrencies will contribute to the clean energy initiatives.
5. Sustainable investment opportunities
Green cryptocurrencies give eco-friendly investors a way to sync their fund choices along with their care for their nature. This will contribute to the betterment of the planet.
6. Positive public perception
Now most of them are aware of climate change, and this cryptocurrency boosts the outlook of blockchain technology, creating trust among governments, businesses, and the public.
7. Long-term blockchain viability
By prioritizing sustainability, green cryptocurrencies make sure that blockchain technology cares about the environment more.
8. Reduced regulatory scrutiny
Comparatively green cryptocurrencies will not be facing as much regulatory pressure as industries that use high energy consumption.
9. Innovation in consensus mechanisms
With the development of an energy-efficient consensus mechanism, innovations will bloom in blockchain technology and contribute to boosting its capabilities along with proper regulation of environmental damage.
10. Economic and social responsibility
Green cryptocurrencies assist companies and businesses in showing their devotion to Corporate Social Responsibility (CSR), this will captivate the attention of customers and investors who have immense concern about sustainability.