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Is crypto ecofriendly and sustainable?

Cryptocurrencies like Bitcoin have taken the world by storm in recent years, with traditional investors struggling to understand them while their values soar and dip in an ever-changing market.

While some people see cryptocurrency trading as a risky investment and a mere trend that will pass, others view it as the future of money and a force that could upend the traditional financial system.

But there’s another aspect of cryptocurrencies that is becoming increasingly important: their environmental impact.

Although there is some energy-saving from the lack of physical infrastructures to manage cryptocurrency, the massive downside is that crypto mining requires vast amounts of energy.

But is crypto really that damaging to the environment, or is this narrative simply a bad case of FUD (Fear, Uncertainty, and Doubt)?

Why is crypto’s energy consumption so high?

The debates around the sustainability of crypto assets have been one of the key talking points in the industry for some time now. The well-publicized carbon footprint of Bitcoin has led companies, including Tesla, to refuse them as payment based on their carbon footprint.

The driver behind this high energy consumption is that it takes a lot of electricity to run the decentralized networks that power cryptocurrencies.

Crypto transactions are not verified by a centralized bank. Instead, they are verified and tracked by the blockchain, a digital record of transactions that is distributed across a decentralized network of computers all over the world.

Transaction validation takes place in the blockchain, traditionally by mining, which is a process that requires computers to solve complex mathematical problems to add new blocks of data to the blockchain. The more popular a cryptocurrency becomes, the more people are mining it, and the more complex the mathematical problems become, which in turn requires even more energy.

Not all blockchain networks are created equal.

Proof of Work (POW) blockchain

The Proof of Work (POW) consensus mechanism has been widely used since the early stages of cryptocurrency. It is still in use by some of the most popular cryptocurrencies, such as Bitcoin and Ethereum. In POW, transaction validators (miners) compete against each other to validate transactions and add new blocks to the blockchain.

The first miner to solve the complex mathematical problem associated with a block is rewarded with cryptocurrency.

The competition to validate transactions means that miners require huge amounts of computational power, with the corresponding hardware and energy consumption that goes with it. This is why large-scale mining operations have popped up in countries with low energy costs, such as Iran and Kazakhstan.

An alternative to POW that doesn’t require as much energy is the Proof of Stake (POS) consensus.

Proof of Stake (POS) blockchain

Proof of Stake (POS) blockchain networks, on the other hand, do not require as much energy to run as POW networks.

In POS, instead of miners, blockchain validators are chosen based partly on the amount of cryptocurrency they hold. The more cryptocurrency a miner has, the more likely they will be chosen as a validator.

Because miners are not competing against each other in POS, there is no need for large amounts of computational power and hardware requirements that POW has. This means that POS-based blockchains are more energy-efficient than POW-based ones.

However, POS-based blockchains have their own problems. For one, they’re often less secure than POW-based ones because the verification process is not as decentralized. To counteract this, POS-based blockchains often require users to lock up their cryptocurrency to verify transactions, staking their own tokens to validate, which can be a risky proposition.

What is the future of sustainable crypto?

With more and more eco-minded consumers able to access crypto trading through platforms such as Kraken, Coinbase, or the artificial intelligence powered CurPay, it is clear that the industry needs to take steps to address the sustainability challenges it faces.

Customers are demanding more environmentally friendly products and services, and the industry needs to respond.

The move from POW to POS validation is a crucial step in this transition, as it reduces the energy requirements of verification significantly. Ethereum is already making this shift in an effort to drive sustainability.

Another possibility is for the industry to move towards using renewable energy sources to power mining operations. This would help to reduce the carbon footprint of cryptocurrencies not by making them more energy-efficient but by using cleaner energy as fuel.

It is likely that we will see more projects coming up working in both directions; to reduce the energy consumption of blockchains, as well as other initiatives to make the industry more sustainable.

Whatever the solution, it is clear that the cryptocurrency industry needs to find a way to become more sustainable if it is to continue to grow and drive higher adoption levels.

Otherwise, it faces the risk of being left behind as other industries move to cleaner and more sustainable models

With state-of-the-art AI Volatility Protection and everything else you need to customize the perfect trading strategy, CurPay is like having a financial advisor in your corner 24/7. So, If you are ready to start trading crypto, then be sure to check out CurPay today.

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