One of Bitcoin’s (CCC:BTC-USD) biggest and most vocal supporters — Tesla (NASDAQ:TSLA) CEO Elon Musk — threw some cold water on the not-so-green coin when, last night, he tweeted that his company would no longer accept Bitcoin payments for Tesla cars. The reason? Bitcoin is bad for the environment.
Specifically, Musk — a green energy enthusiast whose Tesla empire is built entirely on the purpose of improving the environment — said that Bitcoin mining uses a ton of electricity, and a lot of that electricity is powered by fossil fuels, specifically coal, meaning it is a huge contributor to climate change.
Lots of folks disagree with Musk. Lots agree, too.
So, let’s try and unpack this. Is Bitcoin actually bad for the environment? And, if so, what should you do about it? Are there altcoins out there that are good for the environment?
Let’s take a deeper look.
Bitcoin: Is It Bad for the Environment?
I don’t want to come out and say boldly that Bitcoin is bad for the environment. But there is some credibility to Musk’s point: Bitcoin mining does contribute to climate change.
First, the science. Then, the numbers.
The science? The process by which new bitcoins are entered into circulation is called bitcoin mining. It is a competition to solve a cryptographic hashing function that any node in the distributed bitcoin network can participate in. Once a solution is found, a new block is added to the bitcoin ledger, which propagates to the entire network.
Solving these hashing functions requires a lot of computer power. The higher the compute power, the more electricity required. Meanwhile, only one miner or pool will be rewarded for each block, so all of the computational work performed by the losing parties is, in effect, wasted.
Thus, the science here does support the notion that bitcoin mining is at least somewhat bad for the environment.
But how bad?
Here are the numbers. According to the University of Cambridge, bitcoin miners are expected to consume ~130 Terawatt-hours of energy, which is roughly 0.6% of global electricity consumption. That’s on par with a small, developing nation like Sri Lanka or Jordan. So, in effect, bitcoin mining’s impact on the environment is like adding an entirely new country to the world.
Net net, Bitcoin isn’t directly bad for the environment. But the process that validates bitcoin — the mining — does contribute to climate change in a somewhat meaningful way.
Altcoins or ‘Green Coins’: What’s the Solution?
All cryptocurrencies are built on a proof-of-consensus algorithm that validates the network.
Bitcoin’s proof-of-consensus method is a proof-of-work method, which is one of the more environmentally “unfriendly” proof-of-consensus methods since it results in all the energy and electricity used by the losing parties to solve the hashing function being wasted.
The solution here is what is known as a proof-of-stake method.
Proof-of-stake turns the competitive game of proof-of-work methods into a collaborative game, wherein a person can mine or validate block transactions based on their “stake,” or how many coins they hold. Each person does this, independently, so that there are no losing parties and no energy or electricity wasted in the validation process. Proof-of-stake cryptocurrencies are far more computationally efficient and environmentally friendly than proof-of-work cryptocurrencies.
So, if you’re looking to invest in altcoins that are more environmentally-conscious that Bitcoin — or “Green Coins,” as they’ve come to be known — you need to look for altcoins built on proof-of-stake blockchain platforms.
The most noteworthy proof-of-stake altcoin? Cardano (CCC:ADA-USD).
Cardano is a proof-of-stake blockchain platform, and notably is the first to be founded on peer-reviewed research and developed through evidence-based methods. I’m a firm believer that the long-term future of Cardano is fairly bright.
Bottom Line on Bitcoin
Proof-of-work cryptos — like Bitcoin — aren’t terribly environmentally friendly at the current moment. Proof-of-stake cryptos — like Cardano — are much more environmentally friendly. And that could be a big difference the broader cryptocurrency market starts to bifurcate over the next few months, and separate between winners and losers.
But Cardano is far from the only the proof-of-stake crypto worth investing in today. In fact, it may be the least exciting and least explosive proof-of-stake altcoin on my buy radar right now.
Which ones am I more excited about?
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On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
By uncovering early investments in hypergrowth industries, Luke Lango puts you on the ground-floor of world-changing megatrends. It’s how his Daily 10X Report has averaged up to a ridiculous 100% return across all recommendations since launching last May. Click here to see how he does it.