By Thomas Kostigen
Bitcoin uses more electricity than many countries. That was a recent headline in The New York Times, which appeared even before the news broke that several countries had adopted Bitcoin as legal tender. El Salvador went as far as to make it its official currency.
Increased use of cryptocurrencies such as Bitcoin create much more of an electricity drain and, in turn, have an adverse effect on the global climate. Most electricity is powered by fossil fuels. The increased carbon emissions for this have a negative effect on global temperatures, sending them higher.
Elon Musk last spring was forced to halt Bitcoin purchase of Tesla vehicles because of these eco concerns. Still, he says Tesla will most likely again accept crypto purchases once the electricity is derived from cleaner sources such as solar, wind, etc.
Cryptocurrencies are manufactured, or “mined,” by computer coding. The electricity used to power the coding process is what’s so concerning to many people, including environmental, social, and governance (ESG) investors.
But not all cryptocurrencies are power burners. A new breed of “green” crypto is popping up.
The blockchain Tezos, for example, recently launched a green token on its platform, OneOf. OneOf is a ‘green’ NFT platform designed specifically for music artists and fans. The Planet Doja token is a limited collection for the pop star Doja Cat.
Tezos says it has developed a unique coding process that uses two million times less energy (and has lower transaction costs) than Etherium, a Bitcoin competitor. Etherium itself is attempting to be more energy efficient, by adopting less energy intensive mining procedures.
Soon-to-be-launched PulseChain is yet another eco friendly crypto currency. It also bills itself as faster, cheaper and more energy efficient than Etherium. As it stands, the most eco friendly cryptocurrencies are IOTA, XRP, Chia, Dogecoin, Cardano, Litecoin, Bitcoin cash, Etherium, and Bitcoin (in order of least to most energy used to create a token). That research was compiled by TRG Datacenters whose report concludes that as “awareness of the power-hungry nature of many of the world’s best-known cryptocurrencies continues to grow, we can expect to see some big changes in both the practices of existing currency providers and the development and creation of new blockchain-based currencies. Keep an eye out for more eco-friendly digital currencies on the horizon – ones created with sustainability in mind.”
Individual investors and money managers may want to do their own digging for more eco friendly crypto alternatives. Cryptocurrencies are exploding in popularity and more and more financial services executives and companies are embracing them.
With the Securities and Exchange Commission poised to regulate the crypto industry (allowing them to be possibly traded in such vehicles as exchange traded funds, for example) it may be wise to learn which crypto currency could serve you best, especially if you are an ESG investor.
A good financial advisor can walk you through the admittedly complex world of crypto currencies. Along with the many questions that you’re likely to have should be whether the cryptocurrencies in which you invest are eco friendly. You can bet that the fast-growing ESG community itself will be asking that question, too.
Thomas Kostigen is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Thomas is a best-selling author and longtime journalist who writes about environmental, social, and governance issues.
