Sustainability is a conversation many would rather avoid when it comes to currency and trade, but the environmental impact of currency production is terrifyingly profound.
In fact, the sustainability of money is a hot topic that has inspired many heated debates and extensive research reports. Most of the currencies in use today – whether they’re physical fiat currencies like paper money and coins, or digital assets like cryptocurrency – are not environmentally friendly. The long-term effects of the production of these currencies have astounding consequences for our planet.
In theory, the cryptocurrency should avoid some of these environmental impacts as it is a digital asset. However, depending on the specific digital system, the energy consumption for their manufacture varies greatly.
The following examines two main mechanisms for implementing the cryptocurrency – proof-of-work mining and consensus – and assesses the environmental impact of each mechanism. As adoption grows, industry leaders need to act quickly to implement best practices and technologies that reduce energy consumption and secure our future for tomorrow.
The proof-of-work algorithm underlies Bitcoin and is used to validate transactions within its blockchain and to create and distribute new coins. As a mechanism or algorithm, proof-of-work mining requires an incredibly energy-intensive process. Miners compete against each other to solve complex arithmetic puzzles – a process that uses a lot of energy.
On average, an application-specific integrated circuit (ASIC) device designed solely to mine digital currencies can have an environmental cost of $ 1,500 a year – a high-performing miner can cost up to $ 6,000.
A 2018 study found that hundreds of thousands of computers solving cryptographic puzzles 24/7 and making Bitcoin were using 1.5 times the annual energy consumption of Ireland.
The more complex these puzzles become, the more computing power and energy are required to solve them. This stressful load on energy sources underscores the negative impact of proof-of-work mining on the environment and the need for more sustainable practices.
Consensus is a process by which a mutual agreement can be reached that transactions are carried out in the correct order. This is known as a double spend problem and one that proof-of-work mining is constantly working on while using a lot of energy in the process.
The XRP Ledger (XRPL) confirms transactions through a unique consensus mechanism that uses negligible energy. The XRPL uses a distributed agreement protocol that establishes a majority agreement or consensus on a particular transaction. Indeed, the consensus that governs the transactions of the digital asset XRP solves the “double spend” problem without the need for energy-intensive proof-of-work mining.
XRP and ecological sustainability
As a digital asset itself, XRP was developed with sustainability in mind. It is an inherently green currency. All of the XRP are already in place, which means that unlike other digital assets like Bitcoin and Ethereum, it will never require unsustainable mining practices or additional energy to produce more.
The unsustainable mining practices and proof-of-work mechanism behind Bitcoin and Ethereum are massive obstacles to the wider adoption of cryptocurrencies. But not all blockchains are created equal. For example, for every 1 million transactions, XRP could provide 79,000 hours of light bulb power. In contrast, for every 1 million transaction, Bitcoin could power 4.51 billion lightbulb hours. This means that the energy consumption of XRP is 57,000x more efficient.
Energy consumption is a critical side effect of the blockchain. With the adoption and use of this new technology growing across the global financial system, this issue needs to be addressed to ensure a sustainable future for our planet and the global economy.
To learn more about why XRP is one of the greenest currency options today, listen to the latest episode of Ripple’s Block Stars podcast.