Most Eco-Friendly Cryptocurrencies in 2022

Cryptocurrencies are often criticized for not being eco-friendly enough, Bitcoin was criticized by Elon Musk for this same reason too.

Many people, like Elon, see Bitcoin and other proof-of-work (PoW) cryptocurrencies as energy-intensive projects that are extremely bad for the environment. 

According to a report made by Colombia.edu, Bitcoin alone consumes 150 terawatt-hours every year, which is more than Argentina consumes with 45 million people. Many developers and crypto entrepreneurs try to push changes in the Bitcoin system and codes in order to address this energy consumption issue. 

However, most people remain skeptical. They don't believe Bitcoin can ever become eco-friendly as long as it utilizes proof-of-work as its consensus algorithm.

Despite all the criticisms against Bitcoin's sustainability, it's not fair to put the blame on the entire crypto industry. There are a lot of alternative cryptocurrencies out there with minimal carbon footprints.

So, what are these alternatives? 

We have compiled a list of the most eco-friendly cryptocurrencies with the largest potential in 2022.

From the CCRI report above, you can see which of the top blockchain ecosystems have the least carbon footprint. The research shows that Polkadot has had the lowest electricity consumption in the past year.

Polkadot only consumed 70,237 kWh/year, lower than other eco-friendly cryptocurrencies. This report was hugely welcomed by the Polkadot core team, who then allocated 993,286 DOT tokens to promote Polkadot's environmental sustainability.

Polkadot was founded by Gavin Wood, former Ethereum Foundation's CTO and also the creator of Solidity (the most popular smart contract programming language). Polkadot utilizes NPoS (Nominated Proof-of-Stake) as its consensus algorithm.

The basic idea of NPoS is basically similar to DPoS (Delegated Proof-of-Stake), but they have what they call nominators beside validators. With the combination of validators and nominators, they believe the system can maximize the blockchain's security potential.

PolkaDot facilitates cross-chain interoperability through its network of parachains, which allows different blockchains to exchange security without having to establish independent validators.

Developed by the co-creator of Ethereum, Charles Hoskinson, Cardano is considered one of the best eco-friendly cryptocurrencies in the world. While its total electricity consumption is still below Polkadot, it consumes the least electricity per node (only 199.45 Kwh/year).

Cardano utilizes its own unique proof-of-stake consensus protocol called Ouroboros. This protocol requires Cardano users to purchase Cardano native token (ADA) before they can participate in the network. Cardano claims it can go as high as 1,000 transactions per second (TPS), which is significantly faster than Bitcoin's 7 TPS.

Among all the most popular cryptos, Cardano is arguably the largest crypto (by market cap) with low energy usage. Despite being one of the most popular altcoins in the world, Cardano still struggles to get more on-chain activities on its blockchain. 

It's falling behind Ethereum, Binance Smart Chain (BSC), Polygon (MATIC), Avalanche (AVAX), and many others. It remains to be seen if Cardano can eventually surpass its competitors.

Algorand is another blockchain platform with a very fast transaction confirmation time and super cheap transaction fees. Technically, it is a direct competition with Ethereum, since developers can build dapps (decentralized applications) on top of its blockchain.

Algorand is often considered one of the pioneers when it comes to blockchain projects that try to be as eco-friendly as possible. It became the first smart contract platform to allocate a part of each transaction fee to offset carbon emissions. Algorand's core team has been fully committed to becoming as "green" as possible.

As for its consensus algorithm, Algorand uses Pure Proof-of-Stake (PPOS), where every user's influence must be proportional to its ALGO token stakes. The valid users will then be randomly chosen to vote on block proposals. The system will make sure all users have the same right to be chosen for the proposals.

According to DefiLlama, Algorand is still struggling to gain more DeFi transactions and locked values in its chain. However, it’s still doing slightly better than Cardano. Whether Algorand can eventually make it to the top or not still remains to be seen.

Tezos is another Ethereum competitor that is trying to grab some pieces of the web3 market from Ethereum. As you can see from the above table, Tezos is actually doing pretty well compared to other eco-friendly cryptocurrencies. Its total electricity consumption and total carbon emissions are only second to Polkadot.

Tezos has a unique feature called self-amendment. The idea here is that self-amendment will allow Tezos to upgrade itself without any fork risks. Self-amendment allows Tezos to coordinate and minimize protocol upgrade costs. 

And thanks to its Proof-of-Stake consensus algorithm, Tezos is able to consume very low amounts of energy. 

Compared to all the names above, Tezos is probably the least popular. Algorand, Cardano, Polkadot, and others all have bigger market caps and on-chain activities than Tezos. It's interesting to see whether Tezos will be able to turn this around in the next market cycle.

Another famous Ethereum-killer, Avalanche, has been able to consistently stay on the top 25 market cap rankings, competing directly with other top eco-friendly crypto projects like Cardano, Algorand, and Polkadot.

Avalanche is perhaps one of the biggest success stories in 2021's bull market. It was able to penetrate the DeFi market, and now it remains one of the top blockchains with the most on-chain activities in the world. Many decent DeFi apps are built on Avalanche.

As another smart contract alternative platform, it promises the combination of scaling capabilities and a very fast confirmation time. Avalanche claims to be able to process 4,500 transactions per second (TPS) at this stage.

Avalanche's consensus is unique and different from the standard Proof-of-Stake or Delegated Proof-of-Stake. Avalanche consensus works by randomly polling peers and gathering replies from these randomly-chosen peers. The node in the Avalanche system will develop its own conviction about the consensus.

Despite its difference, Avalanche still borrows the concept of token staking for securing its network integrity and security across its ecosystem.

Ethereum Merge was able to significantly reduce Ethereum energy consumption. However, as long as there is no verified report to analyze, it's impossible to tell whether they will be able to become more eco-friendly compared to all the heavyweight competitors above. 

Once the numbers are in, we will update this article.

You might be wondering by now, why use the blockchain at all, if the top blockchains are not that eco-friendly compared to centralized networks. The truth is, we will get the best of both worlds if we can use decentralized blockchain while still optimize them for the environment. In case you still have doubts about blockchain, read our centralized vs decentralized article.