Well, the colour of money is Green, Isn’t it?
While some of you are still discussing Bitcoin with your peers or friends in Whatsapp Group Chats or busy understanding it from your financially literate friends, the world has moved a step ahead to a new canard called “GREEN CRYPTO”. The crypto news ecosystem is revolving around a few tweets and comments from our Mars Man. Let’s try and understand more about it ?
What is Green Cryptocurrency?
Cryptocurrencies that do not use Proof of Work (‘PoW’) or Mining as a Consensus Algorithm are known as Green Cryptocurrencies.
Proof of Work (PoW) is a type of consensus algorithm which requires heavy investment in expensive hardware. Considering that it is used to solve complex mathematical puzzles, there is a significant amount of computational power and electricity required to mine the next block.
A Consensus Algorithm in simple words is a procedure or a protocol through which all the peers of the blockchain network come to a common agreement. It ensures reliability and trust in the decentralized system.
Some cryptocurrencies like Ethereum and Chia use Proof of Stake (‘PoS’) as a consensus algorithm, wherein a person can mine block transactions in proportion to the coins owned by the miner. Hence it addresses the electricity issue by dividing mining power by the percentage of coins held by miners.
Hence, instead of utilizing energy to answer unlimited PoW puzzles, a miner is limited to mining a small percentage of the transaction. Hence, such cryptocurrencies are called Green Cryptocurrencies.
The frenzy for cryptocurrencies has been spiking across the globe and interestingly, the desire to invest in the next-gen currency is not just limited to active/savvy investors but has also caught the fancy of passive & passion-led investors. As per a report in News 18 –
“On January 1 last year, the Bitcoin energy consumption index suggests a high of 125.42 TWh, or Terawatt-hour, in power consumption. Simply put, 1 Kilowat (kW) is equal to 1000 Wh, or watt-hour. And 1,000,000,000,000 Wh is equal to 1 TWh. For perspective, Scotland which has a population of around 5 million consumes around 25 TWh of electricity every year. Bitcoin mining and transactions used 5X more”
(Here is the link to the full article https://www.news18.com/news/tech/bitcoin-and-green-cryptocurrency-dream-elon-musk-may-have-smartly-pointed-out-the-energy-problem-3737699.html)
Since Cryptocurrencies are the new mantra now, they are being mined extensively. As a result, the scepticism around mining & massive environmental hazards that will follow the mining, has led to the spike in green cryptos, which use PoS as compared to PoW!
So, next time you are discussing Crypto amongst your peers and friends, don’t forget to “Go Green”.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy of any agency, organization, employer, or any company. Fintuned Co. LLP shall not be held responsible in any manner whatsover, for any decision/action taken by readers on the basis of the content mentioned in the article. Readers are requested to exercise their best judgement before taking any decision/action. Fintuned Co. LLP shall also not be held responsible for any copyright infringement committed by the author in the process of writing and/or publishing this article and in the event any such offence is found, cooperate with necessary authorities to take remedial action
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