The Ultimate Guide to Selecting Eco-Friendly Cryptocurrencies and NFTs

In an era where environmental concerns hold ever-increasing significance, the realm of cryptocurrencies and NFTs (Non-Fungible Tokens) has come under scrutiny due to its potential ecological impact. As the popularity of digital assets continues to soar, so does the demand for sustainable and environmentally friendly options within this space.

So, we’ll delve ahead into the intricate landscape of eco-conscious cryptocurrency and NFT selection. We will navigate the complexities, exploring factors to consider, technological innovations, and practical steps that empower individuals to make informed choices that align with both their digital pursuits and the well-being of our planet. But first…

Why could cryptocurrencies and NFTs be polluting?

In case you didn’t know, the intensive use of electricity can also be polluting. That’s because the production of that energy doesn’t always come from clean sources. Indeed, according to the National Geographic Society, “human society is—for the time being [2022]—dependent on nonrenewable resources as its primary source of energy. Approximately 80 percent of the total amount of energy used globally each year comes from fossil fuels.”

Following that fact, the more energy we use, the more we tend to pollute. Cryptocurrencies and NFTs may use a lot of energy to produce themselves, especially Proof of Work-based coins like Bitcoin (BTC).

The process of "mining" cryptocurrencies demands substantial computational power, leading to a colossal energy footprint. For instance, according to the Cambridge Centre for Alternative Finance (CCAF), Bitcoin's annual energy consumption surpasses that of entire countries, with an estimate of over 131 TWh annually —as of 2023. This energy expenditure stems from the energy-intensive process of solving complex mathematical puzzles to create blocks and secure the network (mining).

Similarly, NFTs, which have surged in popularity as digital art collectibles, also carry environmental consequences. Most NFTs have been built on blockchain platforms that often employ energy-intensive consensus mechanisms. This has prompted debates about the environmental trade-offs of purchasing and trading NFTs, particularly due to the energy consumed during their creation and transactions.

Other crypto mechanisms

Those concerns have led to calls for greener alternatives within the cryptocurrency and NFT space. Some crypto projects are transitioning to more eco-friendly consensus mechanisms, such as Proof of Stake (PoS) and Directed Acyclic Graph (DAG), which require significantly less energy.

As these digital assets continue to gain prominence, striking a balance between innovation and ecological responsibility remains a paramount challenge. However, you can help by choosing the greenest alternatives available. They can offer all the advantages given by cryptocurrencies and collectibles, without the polluting part. The mechanisms we mentioned above are present in numerous platforms and tokens, including Obyte (a DAG).

PoS vs. DAG

In PoS networks, so-called validators are chosen to create new blocks based on the number of native coins they "stake" or hold as collateral. This eliminates the need for resource-intensive computations, drastically reducing energy consumption. While this mitigates environmental concerns, it could sacrifice decentralization. Validators with larger stakes wield more power in the network, potentially leading to centralization as those with substantial resources can dominate decision-making.

On the other hand, DAG networks could be environmentally friendly as well, but also more decentralized than PoS systems. For instance, Obyte doesn’t have miners or “validators” (in the PoS sense). The graph is constructed only by users with each transaction they add. The new transactions link to the previous ones, and they’re registered forever this way.

To prevent double-spending, the Obyte DAG has "Order Providers” who help establish a full order. They’re well-respected individuals or companies that create transactions like everyone else, but these transactions serve as waypoints for ordering all other transactions. They’re chosen by reputation and community voting, instead of the number of coins they own (although this might also be a factor).

They don’t have a lot of power either, unlike miners or validators. Users remain in full control of their assets throughout the transaction process, without having to rely on a select group of validators. Decentralization is much stronger in this system.

Nevertheless, it’s worth noting that not all DAGs are the same. They could present substantial variances and different levels of decentralization. It’s important, then, to do your own research (DYOR) about other platforms.

How do you know the used mechanism of each coin/NFT?

It’s easy to acquire this knowledge, indeed. The first thing to consider is that you can’t blindly use crypto projects and marketplaces without reading about them beforehand. It’s important to investigate how they work, who’s behind them, what network they’re using, and what consensus mechanism is securing the transactions. All this information (and more) should be in the whitepaper of the project, placed as a link somewhere on their official sites.

A whitepaper is a comprehensive document that outlines the purpose and mechanics of a crypto project. Some of them are longer and more complex than others. However, you don’t need to read the technical parts. Go to the section of the consensus mechanism, and verify if it isn't Proof-of-Work (PoW) or similar. They’d describe if this mechanism requires some kind of energy-intensive system. Then again, the main website could tell you this easily on their landing page or “About Us” section.

Now, that’s only for cryptocurrencies and fungible tokens. NFTs may require a bit more investigation, but not much more. If you’re buying or selling in a marketplace like OpenSea, Rarible, or CryptoThings you should check their “About Us” section or documentation to discover in which ledger(s) they work. In other cases, they specify the network explicitly and individually in each NFT. Starting from this data, you can apply the previous steps (whitepaper/main website) to discover how that network operates.

Some useful clues: if “staking/stakers/validators” are mentioned, the consensus mechanism is likely PoS. If “mining/miners” are mentioned, then it’s likely PoW. Bitcoin Ordinals, very popular NFTs this year [2023], are, of course, built on the Bitcoin network (PoW and energy-intensive). Sometimes, the marketplaces may not show the word “Bitcoin” at first sight, though. You should check their “About Us” section or previous reviews.

Obyte as a green platform

Obyte could be considered a green platform for creating (and using) both fungible and non-fungible tokens due to its unique consensus mechanism and energy-efficient design. In contrast to PoW or even PoS networks, Obyte's DAG architecture eliminates the need for resource-intensive mining or centralized validation processes. Transactions are added to the ledger directly by users, which avoids the energy-intensive calculations of PoW and the potential centralization of PoS.

Regarding energy consumption, Obyte's transactions require only a fraction of the energy used by PoW-based networks like Bitcoin. The exact energy consumption per transaction can vary, but due to its lightweight design, Obyte's energy usage is significantly lower, contributing to a more sustainable and eco-friendly ecosystem.

This energy-efficient design positions Obyte as an environmentally conscious choice, aligning with the growing demand for greener alternatives within the cryptocurrency space. From human-readable smart contracts and conditional payments to user-friendly interfaces for customized token creation, Obyte can offer a wide array of features without causing any environmental concerns.

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