Cryptocurrency has taken the world by storm, particularly with the rise of Bitcoin in 2008. Cryptocurrency is lauded as being a decentralized currency that is unaffected by the financial markets and is seen as a store of value that cannot be manipulated by the existing banking system. Most Americans (and the global population) have lost trust in their financial systems, including that they are unsustainable. While Crypto may seem extremely noble and attractive, it may have the opposite intended effect as it comes with a currency so popular for being "by the people, for the people".
In this article, we will first take a look at exactly what crypto is and how it works. We will then take a look at any environmental impacts of cryptocurrency, and ultimately, the most environmentally friendly crypto that is sustainable.
Many people may be familiar with the term cryptocurrency, but few understand what it is and how revolutionary it is to our system. The original cryptocurrency was Bitcoin, which everyone knows about today. While Bitcoin was a great invention in and of itself, the underlying blockchain technology was the real breakthrough that made everything possible. To first understand cryptocurrency, we must understand blockchain. To understand the blockchain, we must first understand how money works.
Money is largely a fiat-based currency, with some exceptions:
The majority of the money printed around the world is fiat. Fiat means that it is not backed by any other asset in the world, and works by trading on the financial markets. This is the reason certain currencies are stronger or weaker than others. The USD is considered the "global" currency, as most prices are listed and used as an anchor. This is why the exchange rate often uses USD as the conversion metric. Inflation is a naturally occurring inevitability with fiat currency, as it is free-floating and not backed by anything - causing it to go up every year. Although this may sound detrimental, it is extremely healthy for a slight inflation rate (usually 2%) to occur.
A few countries adopt this monetary policy or a blend of this and fiat currency. For example, some of Kuwait's currency is backed by gold. This means that the currency is always tied to the asset (gold, for example) and cannot fluctuate in value unless the value of gold increases or decreases. Although this seems like a better idea than Fiat currency, it is difficult to have enough rare resources to back all the currency; most people who aren't rich won't have enough money for even the basics under this model.
Blockchain currency (crypto)
The blockchain is a unique novel method that can be used to create a new type of currency (crypto). Blockchain works by "imprinting" all transactions within a ledger, which increases the velocity of money. Money has speed, and digitally creating transactions causes the exchange to happen quickly and with all records available. This increases the speed at which the currency grows. Because of this, only a few cryptocurrencies can be created within the system, or their value will increase exponentially within a matter of weeks. The blockchain is not currently regulated and works by transacting with one another, making it the first decentralized system conducive to digital currency.
Sustainability coins ditch the problem-solving algorithms and reward their members for taking sustainable or eco-friendly actions, such as conscious food choices (veganism) and more energy-saving options.
Now that we have defined crypto and currency in general, it may be difficult to ascertain why it may be unsustainable or bad for the environment. Many people have heard of crypto mining, but few may know that it is extremely detrimental to the environment, and some currencies are also not sustainably created. Cryptocurrency is generated by solving complex algorithms which can only be solved via massive computational power (which is why you can never find any more RAM cards). Heavy miners not only require an extreme amount of power to work their algorithms but also an excessive amount of energy to cool down the processors. Bitcoin, for example, consumes about 150 terawatt-hours of electricity per year. This is enough to power the entire country of Argentina.
Because of this, a certain sustainability coin has been created to offset this impact. Sustainability coins ditch the problem-solving algorithms and reward their members for taking sustainable or eco-friendly actions, such as conscious food choices (veganism) and more energy-saving options.
One of the most environmentally friendly crypto-currencies is eco coin. Eco coin uses the blockchain as normal, recording all transactions receiving the coins and spending them with other members. You can then use the cryptocurrency to exchange it for other products and services within the network, such as booking hotels, l'oreal products, and other organizations. Ecocoin gives out its currency to reward sustainable purchasing choices, or by buying the coin directly and making a commitment. Find out more on their website at ecocoin.com
Is cryptocurrency a good investment?
The cryptocurrency was set to explode in the past few years but has since come down from its high (using Bitcoin as a benchmark). As with all novel products, many competitors and charlatans try to take advantage of the lack of knowledge to sell worthless cryptocurrencies to those who do not understand what they are doing. Cryptocurrency is just like any other investment, it takes support from the financial market to increase it over time. It is important to conduct your due diligence before purchasing any investment.
Can cryptocurrency be taxed?
Cryptocurrency is currently not regulated, which is causing problems. Although most people are law-abiding citizens, not needing to report cryptocurrency has brought about money laundering or tax evasion efforts as it obscures the origin of the funds. You are required by law to report any income (including compensation in cryptocurrency) to your tax authorities.
Can cryptocurrency crash?
Yes. Cryptocurrency trades in a secondary financial market, whose value is associated with trading between its members and the transactions made with the coin daily. This means that at any moment, it can both rise and decrease in value.