Cryptocurrencies vs. Fiat Currencies; Which One is Greener?

Money oversees the majority of activities individuals intend to fulfill in their daily lives. By taking coins or paper money, fiat currencies can operate as legal payment tools regulated by a government. Cryptocurrencies began to feature in the market more than a decade ago to replace the traditional financial system with an advanced mode of transacting.

Despite uplifting most users’ lives and living standards, digital and fiat currencies portray specific impacts in the global environment. Generally, the environmental conservation topic surrounds common natural causes. Thus, they include pollution and the solutions we implement when minting and maintaining money in circulation. 

Bearing that in mind, we set out to uncover the most eco-friendly alternative between fiat and cryptocurrencies, with minimal harm to the environment.

General View of Fiat Currencies on the Environment

Environmental sustainability today is highly reliant on the type of monetary system ruling a country. Fiat currencies are most often under government regulation, meaning that any decision made by those in power, whether destructive or beneficial. As such, it will directly impact environmental status. For instance, in recessions, the USA spends enormous resources to revive the amount of wealth lost during that period. 

Among the resources bound to be used include a vast amount of carbon that the Federal Reserve needs to create money. Following the recession situation in 2008, carbon worth 16,500TW/h was destroyed. Moreover, this was without adding to the other 15 previous recessions that the USA has gone through.

Coin Production 

Processing a coin from raw ore to the minting procedure presents certain negative impacts on the environment. Smelting the metal composition of metals such as zinc and copper causes direct harmful emissions and incurs governments more money to process these coins. Some countries, including Canada, Brazil, and Finland, moved to eliminate coins because of their rising manufacturing cost compared to face value. 

A closer look into the environmental footprint suggests that ore extraction also consumes numerous amounts of power. In Alaska, for instance, the Red Dog Mine operates as an open-pit entity that emits hazardous substances to the environment. The action involved the mine in constant battles of toxic waste and water pollution over the years. Furthermore, Zinc metal undergoes complex procedures before it can be lacquered with copper, which gives coins a shiny surface once they dry. 

This process generates byproducts such as sulfur dioxide, which, to some extent, may pose respiratory complications. Thus, while coins may represent financial value or symbolize cultural value to collectors, their actual production process drifts away from adopting greener solutions.

What About Cryptocurrencies?

Cryptocurrencies are classified as digital representations of money which run on blockchains. Depending on the consensus mechanism employed, digital currencies can show different effects on the global ecosystem. 

  • Proof of Work Cryptocurrencies

Under PoW-based cryptos such as Bitcoin, miners in the blockchains network compete in solving complex mathematical algorithms to validate transactions. Therefore, acquiring powerful mining equipment and vast amounts of electricity becomes necessary to compute these algorithms, add transactions to blocks, and earn rewards in return. 

While Bitcoin may be a profitable digital asset to invest in, its carbon emission rates violate the global fight against climate change. For example, the Cambridge Bitcoin Electricity Consumption data suggests that Bitcoin consumes about 148TWh in a year. That energy level surpasses countries such as the Netherlands or Sweden have in terms of consumption. Another study points out that Bitcoin mining in China alone could emit 130 million metric tons of carbon by 2024. 

Therefore, PoW cryptos and processes can release harmful substances that lead to global warming or respiratory illnesses. At the same time, it can be a wake-up call to energy producers, particularly solar energy suppliers, to sell any excess energy they generate. 

That way, miners and other investors can greatly reduce the release of toxic substances and save the environment from pollution.

  • Proof of Stake

Cryptocurrencies under the PoS mechanism operate differently than PoW since they do not deploy any labor-intensive equipment to validate transactions. Instead, participants in the blockchain network stake a certain amount of digital coins to be eligible validators. That aspect makes PoS cryptos a safe alternative towards a greener future. 

On top of that, the mechanism also removes the need for solving complex algorithms, which can cost users hefty electrical bills and massive release of carbon to the atmosphere. For example, Ethereum, the second-largest crypto by market cap, recently began its migration from a PoW to a PoS ecosystem. Upon transition, Ethereum stated that it would reduce carbon emission rates by 99.5%. Algorand Blockchain is another perfect example of a PoS blockchain developed for the future of finance. 

In April 2021, Algorand disclosed that its network runs as the greenest, carbon-neutral blockchain solution in the market. By leveraging PoS-based cryptos and ecosystems, users experience environmentally cautious blockchains, which are much cheaper than PoW digital currencies.

Final Word

Greener alternatives in a financial system can promote an overall improvement in the global environment. By carefully regulating the number of carbon emissions, the financial system will thrive in a conducive environment and promote cost-effective financial services. 

Bitcoin live price
price change

Moreover, the global environment will be free from pollution, illnesses, and global warming, mainly avoiding eco-friendly options. While it is everyone’s duty to protect the environment, adopting a greener path will require a great collaborative effort from citizens, the monetary system, and the government.

Stay up to date with our latest articles

More posts

What Is CBDC In Crypto?

The cryptocurrency trading revolution exploded more than ten years ago and led to an almost unprecedented economic and financial earthquake. As a result, people are learning to change their approach to payment and investment systems, pushing up the price of many cryptocurrencies. Such a rapid change has not gone unnoticed on the boards of the world's major central banks. In fact, in an increasing number of countries, central banks are working on launching centralized digital currencies, known as CBDC. This…

How Social Leaders on Shrimpy help Investors Maximize Profits from Crypto Trading

The emerging trend of social trading allows millions of investors to interact with their peers and learn from accomplished traders in the crypto market. Every market participant wants to become a profitable crypto trader and maximize earnings from the ongoing crypto boom. Unfortunately, navigating the highly volatile space while grasping the complex learning curve that involves fundamental/technical analysis can be rather daunting. Becoming successful in the crypto market requires time to develop a working strategy that empowers investors to execute…

Decentralized Exchanges 2022: Which is the Best Crypto DEX to Trade on?

Market experts believe that the survival and growth of crypto largely depend on decentralization. The good news is that decentralized exchanges or DEXs have become highly popular, and the crypto market sees this as an opportunity to save the essence of traditional blockchain. Each decentralized exchange platform has the potential to revive and thrive crypto market. Moreover, each new DEX platform comes with its own set of features. There are several methods to use DEXs and make money.  Decentralized exchange…

Top Crypto Exchanges for Beginners in 2022

Investing in crypto is not as complex as most people think. So if you’re curious and optimistic about the rise of crypto, there is no reason to hold back and dive into it. Remember, it is normal for beginner investors to get caught in the cobweb of endless crypto exchanges. As a beginner investor, your objective should focus on the best crypto exchanges to make the right investment decisions. Whether it’s Bitcoin or Ethereum, cryptocurrencies continue to be at the…

Top 10 Cryptocurrencies in January 2022

Cryptocurrencies had a great year in 2021. In this period, we have seen the market go from being classified as a billion-dollar economy into a trillion-dollar economy. Aside from that, cryptocurrencies are gaining visibility in the mainstream world with, for example, El Salvador's adoption of Bitcoin as the official digital currency. As a result, investors are looking for the "new Bitcoin" on the market, hoping to find a great alternative in so-called altcoins. Unfortunately, many traders value an altcoin exclusively…

The Story Of Bitcoin And Ethereum’s Reversed Blockchains

Decentralization is the primary selling point of the three worlds of Bitcoin, crypto, and the web. There are several reasons for this. Some are related to the increased transactional efficiency that decentralization can provide. Others are related to creating permissionless, censorship-resistant digital networks. The most important is that decentralization weakens any single-point-of-failure, hence bolstering network security. This not only keeps a network as close to unbiased and ‘neutral’ as possible but almost guarantees its immutability. Yet the crypto world hasn’t…

What Are the Best Crypto Prediction Sites?

There are now several websites that provide, besides crypto live prices, some forecasts on the future of the leading cryptocurrencies. However, considering the market’s high volatility and the few analysis tools available to the public for formulating these forecasts, it must monitor these portals carefully. This article will report some of the primary sources of price forecasts in the crypto industry. However, we remind you that the information contained in the text does not constitute financial advice, and we invite…

Why Do the Cryptocurrency Prices Go Down on the Weekends?

If you have been in the crypto world for a while, you will probably have noticed a typical behaviour of the market during weekends. With some exceptions, we are used to seeing the price of significant cryptocurrencies drop over the weekend. The phenomenon is known to those who operate in this market, but understanding precisely the causes seems to be rather complex. Therefore, this article will discuss a definitive answer by analyzing the various main factors involved in this market…

How to Track and Stay Updated with Cryptocurrency News

Cryptocurrency is a young market and, as such, very fast-moving. If we exclude the phenomenon of stablecoins, the prices of cryptocurrencies change continuously, with sometimes very high volatility. Since a volatile investment is, by definition, a risky operation, traders usually look for ways to reduce the possibility of incurring significant money losses. In this context, it is vital to stay up to date with market events, even if this can be complex. As seen in the past, a single tweet…

Keeping Consensus: Explaining Ethereum’s Difficulty Bomb

Ethereum’s difficulty bomb is a tool for maintaining network consensus between all classes of participants. This is a challenging task for Ethereum compared to Bitcoin, which performs frequent backwards-incompatible hard-forks. The most significant of these – Ethereum 2.0 – is yet to come. When it does, the difficulty bomb will be crucial in ensuring the community’s smooth transition to the new protocol. Review: Ethereum 2.0 and Proof Of Stake To understand the necessity of the bomb, we must review some…