This article was first published on Insights – Ripple
Sustainability is a conversation that many seem to prefer to avoid with regard to currency and commerce, but the environmental ramifications of producing currency are shockingly profound.
In fact, the sustainability of money is a hot topic that’s inspired many heated debates and in-depth research reports. Most currency used today—whether it’s physical fiat currency like paper money and coins or a digital asset like cryptocurrency—is not eco-friendly. The long-term impact from producing these currencies holds startling consequences for our planet.
In theory, cryptocurrency is meant to avoid some of these environmental consequences because these are digital assets by design. However, depending on the specific digital asset, the energy consumption required to produce it varies wildly.
Below we’ll examine two main mechanisms for implementing cryptocurrency—Proof-of-Work mining and Consensus—and assess the environmental impact of each. As adoption increases, industry leaders will need to move quickly to implement best practices and technology that reduce energy consumption to ensure 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 requires mining, an incredibly energy-intensive process. Miners compete against each other to solve complex computational puzzles—a process that consumes large amounts of energy.
On average, one application-specific integrated circuit (ASIC) device designed for the sole purpose of mining digital currency can have an environmental cost of $1,500 a year—a high-performing miner may rack up as much as $6,000.
A 2018 study discovered that the hundreds of thousands of computers that work 24 hours a day to solve cryptographic puzzles and earn Bitcoin consumed 1.5 times the yearly energy consumption of Ireland.
As these puzzles grow more complex, the computational power and energy required to solve them increases. This burdensome ...
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