A blockchain is making waves as an eco-friendly alternative to traditional cryptocurrency mining methods.
Celo is a cryptocurrency that allows people to send money anywhere in the world instantly and for free, making it a popular choice for people sending funds back to their home countries because Yahoo Finance reported. It also promises to cause less carbon pollution than its crypto peers.
Cryptocurrencies use a process called mining to produce new coins and verify transactions. Most cryptocurrencies, including Bitcoin, mine coins through “proof of work,” in which huge computers solve complex mathematical equations to generate transaction codes.
These processes consume a lot of electricity. Since most power grids rely on dirty energy sources, they also contribute to pollution that warms the planet. A study has warned that cryptocurrency mining has caused a “substantial carbon footprint and wide-ranging environmental impacts”.
However, Celo mines crypto differently. It relies on “proof of stake,” in which miners validate transactions based on the amount of crypto they have. Because it does not involve the same complex calculations as proof of work, it is much less energy intensive.
Celo presents itself as a “carbon negative blockchain” which offsets more carbon than it produces. Carbon offsets are controversial because they do not limit the amount of pollution caused by a company – rather they involve companies funding activities that reduce the amount of carbon in the atmosphere, such as reforestation initiatives.
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However, there are other ways that cryptocurrencies can reduce their pollution. For example, mining operations are increasingly dependent on clean electricity sources. Other projects have directly linked crypto transactions to climate action.
“Very simply, the Celo network’s Proof-of-Stake (POS) consensus algorithm naturally requires a tiny fraction of the power consumption of the Proof-of-Work (POW) algorithms used by Bitcoin and Ethereum,” Celo wrote on his blog. “And at full capacity, the Celo network could process up to 7 million transactions per ton of CO2 emitted by its infrastructure.”
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