Can online transactions be unsustainable?

Crypto is a collection of binary data which is primarily used as a medium of exchange. There is no physical form of crypto, It just exists in the computer database. Crypto can also be used as a form of payment online in order to exchange goods and services. Cryptocurrencies work using a technology called blockchain. In recent times, the cryptocurrency which has caught the eye of all the people is Bitcoin. After the introduction of Bitcoin in the cryptocurrency, there are several apps that have emerged to make the investments more simple and easier, allowing users to make purchases for amounts as low as ten rupees. 

Crypto has been the talk of the town ever since the business tycoon Elon Musk admitted to being an ardent supporter of the virtual asset. When he revealed in February 2021 that he himself has invested in Bitcoin, the value of all cryptos skyrocketed and have been on the rise thereafter. Due to this newly garnered support from people, the Indian youth has also already started investing in various cryptocurrencies. A recent survey conducted by Kantar revealed 83% of Indians know about cryptocurrency and 16% of our population has invested in it. This revolution in India proved to be advantageous especially for CoinSwitch Kuber, a crypto trading platform based in India, as it was recently able to raise a humongous funding of $260 million. The company also surpassed India’s largest stock broking platform Zerodha in terms of the user base. Not only India, but the entire world has opened up to the world of crypto. So much so that El Salvador, a country in Central America legalised crypto as a legal tender.

Now the question arises, why is Crypto gaining so much importance? The answer lies in the fact that the currency we have in circulation (known as Fiat Money) has certain drawbacks, two of which crypto can easily overcome. The fiat money printed by the government is based on TRUST. It is acceptable only because it is considered to be a legal medium of exchange. It has no value of its own and its strength is dependent on the stability of the government. Furthermore, central banks have the power to print notes in a country as and when needed. Thus, there is no limit to the money supply. We know that a higher money supply leads to inflation. Whereas, cryptocurrencies are limited in supply (for instance, the supply of Bitcoin is limited to 21 million only) and are decentralized, which means that there is no central body controlling crypto-related transactions. Another benefit of crypto is that it is secured. Since it uses blockchain technology, the details of a transaction cannot be altered. The transaction cost of transfers and remittances is also lesser than that involving financial institutions. Using Bitcoin also opens up an economy to attract foreign investments. Crypto indeed looks promising with so many economic benefits. However, there are certain downsides to it acting as hindrances in its otherwise steadily increasing popularity.

 

The basic requirement for the use of crypto is an internet connection. However, not everyone has access to a steady internet connection. Studies show that only 55% of people in India have an internet connection. This means that for the rest of the population, crypto is not even accessible. Also, the technology associated with crypto is not understandable for laymen and thus people have their apprehensions about using crypto. This would widen the gap between rich and poor. People who have access to cryptocurrency would be able to reap its economic benefits, making the rich richer, while poor people without internet and/or knowledge would continue to remain poor. Since, cryptocurrencies are not regulated by any authority, they become volatile assets and anyone can indulge in an illegal transaction using crypto. The transactions made using crypto are anonymous, making it impossible to track down the lawbreakers.

A major problem associated with crypto is the havoc it causes to the environment. Mining cryptocurrencies is done using complex mathematical problems on supercomputers, which needs a whole lot of electricity generated with fossil fuels. According to Cambridge Center for Alternative Finance (CCAF), Bitcoin currently consumes around 110 Terawatt Hours per year — 0.55% of global electricity production, or roughly equivalent to the annual energy consumption of small countries like Malaysia or Sweden. Also, Bitcoin alone could produce enough carbon dioxide emissions to push global warming above 2 °C within less than three decades and it generates significant quantities of electronic waste.

 

As the bitcoin price rises, so does the energy consumption. The rising price offers even more incentive to miners to mine coins and attracts an umpteen number of people to join the bitcoin network. Since it provides a solid stream of revenue, it has attracted more and more miners to run power-hungry machines to make a small profit out of every Bitcoin transaction they approve. Bitcoin mining is done with specialized hardware that becomes obsolete roughly every 1.5 years. The continuously increasing energy efficiency of newer iterations of mining devices means older machines will inevitably be sooner or later, pressured out of the market.

 

We've looked at the environmental costs of this mechanism: a vast energy consumption, a lot of hardware used, and e-waste created. Thus, environment friendly coins become the need of the hour.

 

Let’s talk about environmentally friendly GreenCoins. These cryptocurrencies are inherently more energy efficient than Bitcoin. Cryptocurrencies that use a ‘Proof of Storage’ or ‘Proof of Stake’ system, instead of ‘Proof of Work’ technology use far less energy, as do currencies using a technology called block lattice, which doesn’t require mining. As concerns mount over the levels of energy used in the mining of cryptocurrencies, new initiatives are constantly emerging to improve the sector’s environmental credentials. These include increased use of renewable energy, more energy-efficient protocols and carbon footprint offsetting. 

Our generation is in need to see the creation of new GreenCoins, more sustainable, eco-friendly cryptocurrencies. We can identify GreenCoins such as NANO, IOTA and CHIA as pioneers in eco-friendly cryptocurrency, with a commitment to reducing the environmental impact of transactions. It uses different protocols to reduce energy use and increase efficiency. There’s been a lot of attention on cryptocurrency’s shocking environmental impact in recent months, and while efforts are being made to minimize the carbon footprint of the cryptocurrencies.

 

Due to the increasing concern and criticism, developers have tried to, and have been successful in developing GreenCoins. As eco-friendly alternatives to Proof-of-Work (PoW) based coins, these deserve to get the industry’s attention for all the right reasons. While solving the issue of energy efficiency related to the PoW consensus mechanism, it has benefits that make it a compelling case for the eco-conscious crypto community.