When it comes to crypto mining, one will automatically associate it with high energy consumption. Considering the debates on climate change and the overall wellness of the environment, it is important to address how payment services contribute to this.
A research paper dubbed, “How Eco friendly is our money and is there an alternative” looked at traditional currencies and cryptocurrencies, which include the USD as per payments provider, Visa and cryptocurrencies including the likes of Bitcoin [BTC], Ethereum [ETH] and Ripple [XRP].
To measure the amount of energy used, the duo behind this research, Sid John Leopol and Niclas Englesson, assessed the currencies in electricity consumption and carbon footprint. In addition, household activities along with social media platforms have also been considered.
As for the conclusions, it turns of that the XRP token was contributing the least to carbon footprint, as it uses very little energy compared to the remaining three. The annual electricity consumption shows that BTC uses 26.05 TWh, ETH uses 9.68 TWh, Visa (USD) uses 0.54 TWh and XRP uses 0.000536112 TWh.
To put this into a clearer perspective, another table looked at the “Number of U.S households that could be powered by each currency”, and the rank remains the same, as XRP can only power 50 houses, whereas BTC can easily power over 2.4 million.
Another interesting statistic showed the cost (in USD) incurred in using energy annually, and it looks like it only costs XRP 64,333USD compared to Visa’s 64.87 million USD and BTC’s 3.124 billion USD.
Leopol and Englesson further discuss the findings and made some interesting conclusions. First, the duo argues that BTC and ETH’s reliance on Proof-of-Work (PoW) means that “these power-hungry systems require huge amounts of electricity which makes the cost per transaction extremely high”.
Furthermore, the duo has associated PoW with not only increased energy consumption, but also CO2 emissions and transfer fees. As for the argument behind CO2 emissions, the duo is basing it on assumptions, as it is a category that has subsets including the location of servers, energy source utilized, and the amount of CO2 emitted.
Finally, the duo has concluded that it is ideal to “run a validator (server) on Ripple’s network [which] does not require any fees and it is comparable in cost in terms of electricity to running an email server.” Interestingly, the argument that with low energy consumption comes low transaction fees, which will then induce investors to trade was made – pointing out that in said case utility will be maximized.
Are you surprised to see that Visa uses much more energy than XRP, especially given the fact that many praise Visa’s current services and feel a crypto-based service is unnecessary? To read more on this research, go to: http://papers.netrogenic.com/sid/eco-friendly-money.pdf