One of the primary concerns regarding major cryptocurrencies such as bitcoin and ethereum is the damage that they do to the environment. But not all coins are equally harmful.

Bitcoin’s operation and mining consumes over 140 terawatt hours a year, according to the Cambridge Bitcoin Electricity Consumption Index. This is more energy than Norway consumes in a year, and around half the energy used by the UK.

It could also boil enough water for all cups of tea consumed in the UK for 30 years, according to the Cambridge Bitcoin Electricity Consumption Index.

Bitcoin’s power-hungry reputation has caused many investors to seek greener options. Here, we look into several coins that are popular due to their environmentally friendly credentials.

In this article, we cover:

Want to know more about bitcoin? Read our Should you invest in bitcoin? article.

Why is cryptocurrency bad for the environment?

The level of computer processing power required to mine cryptocurrency has worried environmentalists.

The mining process uses:

• High-powered computers which compete to verify transactions in return for coins
• Vast amounts of electricity to power complex algorithms
• Non-renewable energy sources such as coal, the dirtiest fossil fuel

Why are NFTs bad for the environment?

NFTs are virtual tokens that use blockchain technology to claim proof of ownership of valuables such as digital artwork and virtual property.

NFTs, or non-fungible tokens, run mainly on the ethereum blockchain system, and their generation consumes a large amount of power.

Selling just one piece of artwork on ethereum has a carbon footprint equivalent to a one-hour flight, according to research.

If you want to find out more about how NFTs work then check out our article here.

Are there any eco-friendly NFTs?

There are more sustainable systems in the works. The Ethereum Foundation estimates that a new version of Ethereum (called Ethereum 2.0) will use 99.95% less energy when it is complete. Its arrival is estimated for some time in 2024.

Why is bitcoin so bad for the environment?

Bitcoin mining has more of an energy consumption each year than Malaysia or Sweden, according to the Bitcoin Electricity Consumption Index, run by Cambridge University’s Centre for Alternative Finance.

Campaigners claim that the impact is exacerbated by the fact that most of the mining takes place in China, which is heavily reliant on coal power.

Bitcoin’s price crashed during the latter half of 2022, but 2023 has been much kinder to crypto investors. The price has rallied from around $15,500 in January all the way to over $40,000, where it sits now.

The price action has caused many to wonder if the crypto market is gearing up for a fresh bull run. If bitcoin’s price soars again, so too will the amount of fossil fuel involved in the process.

How bad is dogecoin for the environment?

TRG Datacenters in Texas has analysed a range of cryptocurrencies and ranked them according to the amount of energy required to power each transaction.

Dogecoin used 0.12 kilowatts of energy per hour (kWh) per transaction, well ahead of bitcoin, which was at the bottom of the table, using 707kWh. 

However, critics claim its true environmental impact is difficult to assess because of the complexity of its mining system.

Five green cryptocurrencies

Environmentalists agree that the “mining” of bitcoin uses a worrying amount of fossil fuels.

However, there are alternative, eco-friendly cryptocurrencies that inflict less damage on the planet. These could potentially allay concerns surrounding cryptocurrency and the environment.

Smaller currencies may often appear to have a lower carbon footprint, but that may simply be because there are fewer transactions. However, there are digital assets that are more energy efficient – which means their environmental impact is reduced.

These cryptocurrencies seem to be the most efficient in terms of their energy requirements, according to research by Varun Kohli:

• Hedera
• IOTA
• Ethereum 2.0
• Ripple

Below we outline five cryptocurrencies that are more environmentally friendly than bitcoin.

1. Hedera Hashgraph

Hedera is a “decentralized, open-source, proof-of-stake public ledger”, according to its website. It allows users to transact quickly and efficiently, making it a fairly popular cryptocurrency. Many finance and blockchain companies are built on its technology.

According to a paper analysing the carbon footprints of various cryptocurrencies by Varun Kohli and others, “Hedera is an eco-friendly cryptocurrency with a highly efficient consensus mechanism”.

This means that Hedera’s transaction verification method uses a low amount of power, and consumes far less energy than the mining, proof-of-work approach used by bitcoin, which relies on computer processors.

2. IOTA

IOTA’s technology does not require miners. Instead, its transactions are carried out using something called a Fast Probability Consensus. It is maintained by smaller devices and, as such, has lower energy requirements.

By mostly abandoning the need for proof-of-work, IOTA ends up using far less energy than its competitors and is an eco-friendly cryptocurrency. It’s worth noting that IOTA uses more energy than Hedera.

3. Cardano 

Unlike cryptocurrencies such as bitcoin, cardano uses a proof-of-stake system called Ouroboros. This requires users to purchase tokens in order to join the network, saving significant amounts of energy.

It’s estimated that Cardano is about 60,000 times more energy efficient than bitcoin. The whole of Cardano’s network only uses 0.5479 kilowatts per hour.

It was developed by Charles Hoskinson, the co-founder of ethereum, the second-largest cryptocurrency after bitcoin. It can achieve 1,000 transactions a second compared to up to seven with bitcoin.

Ouroboros is the first peer-reviewed blockchain based protocol, which means that it can be scaled to global requirements without sacrificing sustainability or security.

Cardano is arguably the most well known of the green cryptos and at the time of writing was the fifth-largest cryptocurrency.

4. Nano

Nano is a straightforward cryptocurrency, designed to be used for transactions and as a medium of exchange. While bitcoin has a heavy environmental toll and charges fees, Nano is completely fee-less, making it a popular way for sending crypto quickly. Transactions are also instant.

Nano doesn’t work on proof-of-work or mining. Instead, transactions are broadcast by users out to the blockchain. It uses an Open Representative Voting protocol to reduce energy use and increase efficiency.

5. Solarcoin

Solarcoin is a global and independent sustainable cryptocurrency designed to promote the creation of solar energy by rewarding generators with solar coins.

Generators can claim one coin for every megawatt hour created by solar technology.

I’m a vegan. How can I invest ethically? We explain what you need to know about ethical investments here.

New eco-friendly cryptocurrencies on the horizon

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. 

TRG Datacenters says it expects to see the creation of new, more sustainable, eco-friendly cryptocurrencies, as well as big changes in the practices of existing currencies.

The company identifies Nano and IOTAas pioneers in eco-friendly cryptocurrency, with a commitment to reducing the environmental impact of transactions. 

More than 45 companies and individuals in the crypto, finance, energy and technology sectors have also signed up to the Crypto Climate Accord, which seeks to decarbonise the industry and achieve net-zero emissions from the electricity consumption associated with cryptocurrencies by 2030.