If there has ever been a more polarizing discussion topic in crypto, it would be the subject of electricity. The electrical usage of blockchains has been widely debated for quite some time now. This is completely understandable, as humanity as a whole is striving to do what is right for Mother Nature, and it is clearly a big no-no if certain blockchains use more energy than the entire country of Argentina. But amongst the massive amounts of energy consumption in the crypto sphere, are there any blockchains that are eco-friendly? Or perhaps even have a positive impact on the environment? Well, keep reading, because in this article we are going to put an end to the debate of what is the most energy efficient blockchain!
Not all blockchains are the same and some are designed far differently than others. The way a blockchain has been coded and how it computes the vast sums of data is a big differentiator in how many watts of energy it'll need to run the network. To better understand, let's try and summarize the criticism by separating fact from fiction, shall we?
Why do Blockchains Use a lot of Energy?
Many people believe that blockchains (which are the underlying technology upon which cryptocurrencies, smart contracts, and decentralized applications are built) are extremely harmful to the environment. However, there is a lot more to uncover here than meets the eye. Firstly, not all blockchains share the same coding and engineering underneath the hood, which is what determines the computational resources it needs to run its network.
For example, many older blockchains adopt what is known as Proof-of-Work. This ‘Proof-of-x' is the consensus algorithm that is needed for a decentralized network like a blockchain to function. Consensus between people who choose to help run the blockchain is needed for things like validating and approving transactions, choosing to vote for network-wide changes, and so on. With Proof-of-Work, the way consensus is gathered by the way of “mining” new blocks.
Essentially, all the nodes – who are responsible for collectively managing the blockchain – need to compete with one another to finish these blocks of data by completing mathematical puzzles. Often, this is done with specially designed computers which are needed to run extensively in order to complete new blocks and thus earn rewards, hence why blockchains running a Proof-of-Work consensus model consume a lot of energy, as those computers need to be running full time.
Not All Blockchains Are The Same
As we'll learn a bit later when we dive deeper into what is the most energy efficient blockchain, there are a lot of alternatives to Proof-of-Work. So why are we still using the energy-intensive PoW model? It's quite simple; because a lot of work is needed to mine, and the high costs associated with paying energy bills tied to running those computers all the time, makes PoW more secure. For anyone to execute a malicious control against a PoW chain, they need at least 51% of the mining power.
Doing so is prohibitively expensive, hence why Proof-of-Work is intentionally designed to require a lot of hardware to run it. But over the years, there have been many other types of consensus that have not only been just as secure of an alternative as Proof-of-Work but also far more energy-efficient. The most popular is Proof-of-Stake and the many derivatives that have been designed around it. In this case, a PoS chain requires users to only stake their tokens as proof of ownership.
Imagine stakes as shares in a company, the users that have the most amount of tokens staked in a network will ultimately have the right to process new blocks of data and take part in the network's decentralized governance. You don't need any expensive hardware or having to run your computer at full speed 24/7. All you need is some tokens to build up a sizeable stake. There are others too, such as Proof-of-Importance or Proof-of-Believability that consume very little energy.
What Is The Most Energy Efficient Blockchain?
So then, now that we've understood that not all – in fact, very few – blockchains suck up a lot of electricity, it's time for us to find what is the most energy efficient blockchain. Regardless of where you stand on cryptos, we can all agree that what's good for the environment is good for everyone. For that reason alone, it's no doubt important that we try to put more focus on the greenest of the blockchains…
Starting up in the last place for our search here, we have Bitcoin. Although lauded as the world's prime and foremost cryptocurrency by far in terms of market capitalization and value, not to mention its status as a “digital gold”, the first blockchain ever made has landed in hot water for how much energy it uses. In fact, Bitcoin's image as a massive consumer of electricity has since made everyone think that blockchains as a whole are a very inefficient piece of technology.
According to Digiconomist, the No.1 blockchain consumes more than 119.3 TWh (terra-watt hour), which is equal to the population of the Netherlands – a country of over 17-million people. Despite some external research that has been done to suggest that Bitcoin's overall energy consumption is less than the regular banking and financial system, it's still an all-consuming void for electricity. Hopefully, all those Bitcoin mining farms will at least transition to renewable sources for power.
In the runner-up as the least energy-efficient blockchain, we find Ethereum entering the fray. No doubt, Ethereum is one of the largest and most popular blockchains today. In terms of adoption, we can argue that Ethereum is at the top right now with a plethora of dApps and smart contracts reliant on Ethereum. For example, much of decentralized finance – or ‘DeFi' – runs on Ethereum. Nonetheless, its use of a Proof-of-Work chain means that its huge userbase is a massive consumer of power.
Digiconomist quotes the Ethereum blockchain's overall consumption to be around 50.62 TWh. While that's less than half that of Bitcoin's energy usage on a much more proactive network, it's still not good. Thankfully, Ethereum might not languish this far behind for much longer. A highly anticipated network upgrade is pending with the arrival of ETH 2.0. With this, we should see Ethereum move to a more efficient and speedier Proof-of-Stake chain, which could cut that electrical use by 99%.
The first of the Proof-of-Stake blockchains here is Solana, which has put itself squarely as a young entrant in the long list of Ethereum rivals. As a do-it-all blockchain, high speed and performance is the name of the game with Solana, as it tries to solve one of the biggest problems with Ethereum – network congestion. Bogged down by its comparatively archaic computing processes, Ethereum is plagued not only with highly volatile fees but slow processing and confirmation times.
With Solana, as you'll be paying practically nothing in fees – we're talking about a lot less than pennies – for each transaction, and with a blockchain that can process more than 50,000 of said transactions per second. It doesn't just stop with mind-blowing speeds, however, as Solana's blockchain, thanks in no small part to its focus on scalability and the adoption of highly innovative technologies, is incredibly energy efficient. This is the sort of blockchain that we need more of.
Technically speaking, Cardano hasn't actually properly launched yet. Or at least, by the time you're reading this guide on what is the most energy efficient blockchain, they haven't been actively adopted or integrated with as significant of a scale as the other chains here. However, Cardano's ADA has become one of the most valuable cryptocurrencies for very good reason, and that's based on the promise of what it can do, even though they've yet to roll out basic smart contracts.
As the first widely peer-reviewed blockchain, Cardano's entire ecosystem is pinned with new innovations and novel ideas. Cardano's blockchain is secure, powerful, versatile, immensely scalable, and also very energy efficient. They even advertise environmental sustainability as a key pillar of their growth. But the proof is in the pudding, as Cardano's entire ‘Ouroboros' Proof-of-Stake chain is tested to be at least 4,000,000x – yes, four million – times more energy-efficient than Bitcoin.
Scrolling around Twitter nowadays has shown us a very familiar trend, in that the opinions of artists are very polarised any time the subject of NFTs comes up. Having your artwork be tokenized to give value and a certifiable proof of authenticity onto the blockchain sounds like a fantastic idea, right? Well, not when that blockchain (Ethereum in this case) uses as much energy as entire households do in a year just to “mint” a PNG file. At least, that was the case until WAX came along to claim the NFT crown.
NFTs are more than just artwork, mind you. As the market for collectibles grows, NFTs are a way for once digital-only items to have tangible value, like memorabilia, playing cards, music, and in-game items. While NFTs have gotten off to a rough start, WAX is fixing that image with a clever blockchain that is 320,000 times more energy efficient on average than Bitcoin and is now planning to launch carbon impact NFTs where you can work to offset some of your carbon footprints.
Not only that, WAX is 125,000 times more energy-efficient than Ethereum and is already fully carbon neutral. This is achieved through their delegated proof of stake model, which is maintained by 21 energy-efficient elected guilds.
WAX is the certified winner in our quest to determine what is the most energy efficient blockchain in the world. Actually they are so much more energy-efficient than any other blockchain that's it's not even a close contest.
Not only do they have a computational design that is inherently less energy-hungry but they also pledge to help their users trade special NFTs to decarbonize as much as possible. Their carbon impact NFTs actually result in a net positive impact on the environment through planting trees or transforming e-commerce in a way that reduces our reliance on delivery trucks and the eventual trip to the landfill through the use of vIRLS, or ‘virtual + In Real Life'. With thisvIRLS you can buy a physical item and transfer it digitally to another person through WAX's delegated Proof-of-Stake (dPoS) blockchain.
Not only is WAX carbon-neutral, but they've also already helped to offset more than 4,000,000 tonnes of emissions in its existence through NFTs minted on their chain rather than Ethereum. In other words, all the NFTs that have been minted on WAX in history could've released the same amount of emissions as burning 5.9-billion pounds of coal had it instead gone onto Ethereum. In any case, this is proof that blockchains can be green, and is indeed integral to a more sustainable and safer future.