2022 saw the continued advancement of green crypto projects as more companies in the industry focused on sustainability to reduce carbon emissions. A number of elemental forces drove the paradigm shift, including user demands for faster and more energy-efficient blockchains, growing awareness of climate change among investors, and growing concern from governments about energy consumption in the cryptocurrency sector.
Among the most notable green crypto developments in 2022 is the transition of the Ethereum blockchain from a proof-of-work (PoW) to proof-of-stake (PoS) consensus layer. The merger, completed in September, brought together Ethereum's original execution layer with its new PoS consensus layer, the Beacon Chain. Eliminated the need for energy-intensive mining by allowing the network to be secured using staked Ether (ETH). The conversion reduced the power consumption of the Ethereum network by 99.9% immediately. Ethereum's position as a leading programmable blockchain marked the progression of the entire industry towards low carbon solutions.
Mohammed AlKaff AlHashmi, co-founder of cryptocurrency Islamic Coin, spoke to Cointelegraph about how the sector was evolving to meet emerging demands.
โIn 2022, green projects follow three main vectors. The first is to reduce its energy consumption and emissions, such as Ethereum reducing consumption by 99.9% and Polygon presenting itself as carbon neutral. The second is ReFi, a new trend in regenerative finance that is experimenting with financial incentives to reduce carbon emissions.โ
AlHashmi mentioned that his network had adopted a new emission reduction model to achieve its green goals: โIn the case of Haqq [the blockchain that issues Islamic Coin]the protocol automatically deposits 10% of the issued amount into a special Evergreen DAO, a nonprofit virtual foundation focused on long-term sustainability and community impact.โ
Dimitry Mihaylov, chief scientific officer of the Farcana blockchain gaming metaverse, told Cointelegraph that reducing on-chain emissions and transaction costs was good for the industry in the long run, as it would attract users, investors, and governments.
โToday, a regular bank transaction consumes an order of magnitude less electricity than a blockchain-based transaction, but we are betting on the development of more energy-efficient mining equipment and faster blockchain protocols. If successful, 'green' crypto projects are likely to receive strong support from both governments and potential users."
With that being said, 2022 saw the rise of some unique, innovative and eco-friendly cryptocurrency projects that contribute to a greener world.
Chia Network
Chia Network takes a unique approach to reducing carbon emissions by using a space-time proof protocol that differs a lot from earlier power-hungry crypto mining mechanisms that required powerful GPUs and processors. The network performs efficient transaction validations, also known as farming, and allocates users' empty computer storage space into parcels.
The process works through a decentralized network of nodes that act as clients and servers that connect to their peers. The low processing power requirements allow anyone with a decently specced computer to farm Chia (XCH) tokens.
Related: How To Farm Chia: A Guide To Farming XCH Tokens Using A Hard Drive
The network relies on farmers to provide storage space and then assigns mining privileges to each miner based on randomly generated numbers assigned to each space. The storage space whose stored numbers closely match those generated by the network wins mining privileges.
This algorithmic formula rewards farmers with more storage space for more random number assignments, creating more chances to win.
XCH can be farmed using a variety of infrastructures, including cloud computing and data storage platforms like Amazon Web Services. Chia Network use cases include support for decentralized finance projects, asset tokenization platforms, and decentralized exchanges.
On the energy front, Chia Network claims wear about 0.12% of the annualized energy used by the Bitcoin network. While the concept is inventive, it does have drawbacks. Additional demand for hard drives and solid state drives has arisen in countries like China because XCH mining wears out units in just 40 days.
Despite this handicap, the network has presented money-making opportunities for data storage providers with unused space and companies with worn-out but working data storage hardware that is no longer in active use.
Algorand
The Algorand blockchain network is built with an environmental focus and has made great strides in becoming carbon negative in the last two years.
In 2021, Algorand partnered with ClimateTradea company that uses blockchain technology to help companies offset their carbon footprint, allowing them to track their emissions in pursuit of broad sustainability goals.
Related: What is the Algorand blockchain and how does it work?
The partnership allowed a portion of Algorand's transaction fees to be set aside to purchase the carbon credits needed to offset the network's carbon footprint. Algorand is a proof-of-stake blockchain, making it more energy efficient than Bitcoin (BTC) proof-of-work consensus mechanism.
For perspective, a Bitcoin transaction consumes approximately 1,206.52 kilowatt-hours of electricity, while Algorand claims a single transaction. consume about 0.000008 kWh of energy.
Solarium
Solana is a blockchain platform designed to host decentralized applications. It uses the PoS consensus mechanism to validate transactions and embodies the principles of green token generation. In theory, the platform can process more than 60,000 transactions per second. This dwarfs the Bitcoin network, which processes seven transactions per second.
On-chain transactions are settled using SOL (SUN) โ the platform's native cryptocurrency. The network, since its inception, has been working towards achieving carbon neutrality, first reaching the milestone in 2021 by joining a carbon offset program.
Earlier this year, Solana received a favorable carbon rating from the Crypto Carbon Ratings Institute (CCRI) for consuming the lowest energy at a rate of 0.166 watt-hours per transaction.
While many blockchain networks use the power-efficient PoS consensus mechanism, Solana's efficiency is boosted by another novel mechanism called Proof of History (PoH). With PoH, a timestamp creates a historical record to prove that an event occurred at a specific time. The pioneering ingenious solution allows the network to focus on validating current transactions without having to reference past temporary claims by nodes.
This allows consistency, since the nodes must comply with the established order of transactions. The process allows the protocol to be fast and energy efficient.
avalanche
Avalanche is a blockchain platform that aims to address the blockchain trilemma of scalability, efficiency, and security by using its unique proof-of-stake consensus mechanism. The platform uses its native AVAX (AVAX) token to facilitate transactions and distribute system rewards.
Related: What is Avalanche Network (AVAX) and how does it work?
Avalanche has been praised as one of the most energy efficient chains in 2022. According to a research study conducted by CCRI, Avalanche's public blockchain accomplished around 0.0005% of the amount of power used by the Bitcoin network, which is pretty impressive.
These and other high efficiency properties have made Avalanche the platform of choice for projects with environmental considerations.
The future of green crypto projects
Green cryptocurrency projects are here to stay. They are designed to be more environmentally sustainable and are becoming increasingly popular with users due to their scalability capabilities and lower gas fees.
The benefits they provide are likely to lead to the development of more environmentally friendly blockchains, while encouraging the improvement of existing ones. That being said, 2022 stands on the cusp of a new era in which green crypto projects become more prevalent.
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