Ethereum vs. Bitcoin, Which Among the Two is Environmentally Friendly?

With the rise of global warming and climate change, every emerging technology has to be in accordance with the United Nations Sustainable Development Goals (SDGD). Otherwise the chances are pretty less that government or regulatory authorities will approve of their adoption and promotion. Same is the case with this new decentralized, secure and non-regulated form of digital currency known as cryptocurrency.

Based on blockchain technology, cryptocurrencies disrupted the digital financial space in the mid 20s decade. And the two names that emerged in crypto space like Pepsi and Coke of the industry are Bitcoin and Ethereum.

Ethereum Vs BitCoin

Though based on the same blockchain technology, Bitcoin has the honor of being called as the first cryptocurrency. And for that reason Bitcoin also got some early bird benefits in the market. But due to the fact that the founder of Bitcoin is still anonymous. Questions were also raised on its legitimacy and accountability.

Ethereum on the other hand was created a few years after Bitcoin. Both currencies were built over the same blockchain technology but Ethereum has shown significant changes over all these years. One major change Ethereum adapted was based directly on the environmental impact of cryptocurrency. And that change is related to its consensus mechanism.

Before Bitcoin, digital currencies were used to be mere strings of computer codes which can be easily copied. So the same digital currency can be replicated and spent countless times. To solve this issue consensus mechanisms were evolved. These mechanisms are algorithms designed to prevent “double spend” of the same currency.

Earlier the consensus mechanism developed to solve this issue was proof of work validation. Bitcoin still uses this validation method but Ethereum shifted to a different mechanism called as proof of stakes. And this created all the difference between these two crypto currencies.

Proof of Work (POW)

In this mechanism the validator who ensures that each cryptocurrency can be spent only once and records the transaction in an open distributed ledger has to solve a complex math problem. In return for validating a transaction, the validator was rewarded with an amount of cryptocurrency. This turned into a rat-race between validators to get a chance to validate a new batch of transactions.

This in turn increases the complexity of math problems and computational power to solve them. As a result huge amounts of energy was required to be consumed in each transaction. According to the Cambridge Center for Alternative Finance, Bitcoin’s electricity consumption has surpassed Norway’s annual electricity consumption at the annual rate of 127 Terawatt Hours(TWH).

Proof of Stake (POS)

In proof of stake mechanism validators have to stake their cryptocurrencies to get the chance of validating a set of transactions and earn cryptocurrencies. This means the person who has more crypto holdings is more likely to validate a transaction. This reduces the need of raising the complexity of math problems and as a result reducing the need of computational power.

Considering the environmental disadvantages of POW mechanism Ethereum shifted to proof of stake mechanism. Which gives an edge to Ethereum on getting faster transactions while much less energy than BitCoin. According to reports, a Bitcoin transaction consumes over 5 billion joules of energy. Whereas an Ethereum transaction needs just 144,000 joules.

Considering the above stated environmental impact Ethereum can be a better choice over Bitcoin.

Disclaimer

The views and opinions stated by the author, or any people named in this article, are for informational purposes only, and they do not establish financial, investment, or other advice. Investing in or trading crypto assets comes with a risk of financial loss.

Andrew is a blockchain developer who developed his interest in cryptocurrencies while his post-graduation. He is a keen observer of details and shares his passion for writing along with being a developer. His backend knowledge about blockchain helps him give a unique perspective to his writing