CFDs are complex instruments. 74% of retail client accounts lose money when trading CFDs, with this investment provider. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money. CFDs are complex instruments. 74% of retail client accounts lose money when trading CFDs, with this investment provider. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money.

Are these the best green cryptocurrencies to watch?

As climate change awareness and sustainable investing gains popularity, there’s been an increased interest in trading eco-friendly cryptocurrencies. Are these some of the best green cryptos?

What makes a crypto green?

A crypto is made green by its reduction in energy use and emission in carbon dioxide gases emitted per transaction made on blockchain technologies. This energy reduction ultimately contributes to a sustainable environment for future generations.1

Investing in environmental, social, and governance (ESG) has become a popular route for investors looking to inject capital in portfolios that closely align to their values and belief systems. This previously applied to traditional investments, but cryptocurrencies have since followed suit by going green and reducing the energy consumption of blockchain technologies.

Green cryptos achieve this by switching from high energy intensive ‘Proof of work’ (PoW) algorithms to the more energy efficient ‘Proof of stake’ (PoS).1

PoW is when cryptocurrency miners compete to solve a difficult maths puzzle and the winner is rewarded by enabling him or her to verify the latest group of transactions on the blockchain. PoS is when an individual who takes part in cryptocurrency mining is selected within the network to add the latest batch of transactions in exchange for cryptos.1

Are these the 5 best green cryptocurrencies to watch?

  1. Cardano (ADA)
  2. Stellar (XLM)
  3. Polkadot (DOT)
  4. SolarCoin (SRL)
  5. BitGreen (BITG)

The following cryptocurrencies haven’t been chosen as the five largest or best green cryptos in the world alone, but rather based on various factors including energy consumption and future growth prospects.2

Cardano (ADA)

Cardano incorporates ESG investing by using ‘Proof-of-stake’ (PoS) energy system to ensure that it’s environmentally sustainable. The crypto is a green alternative to Ethereum, created by Charles Hoskinson, one of the ether platform’s co-founders. Cardano achieves its ‘green’ feature by combining pioneering technologies that provide high security and sustainability to the decentralised ecosystem.3

The crypto offers a significant upgrade to Ethereum’s PoW design by implementing PoS for improvements in energy use when validating and recording transactions. Cardano uses the lowest energy per node per annum. For instance, its blockchain can process 1000 transactions per second compared to Bitcoin's seven per second.3, 4

With us, you can trade Cardano using the Crypto 10 Index on CFDs. This index enables you to take a position on ten major cryptocurrencies in a single order.

Stellar (XLM)

Released in 2014, Stellar is a blockchain network that has a faster consensus protocol that relies on trustworthy nodes to authenticate transactions instead of using PoS or PoW. The authentication system is relatively shorter and faster compared to other cryptos.5

This is because of its algorithm – the federated byzantine agreement – which is an alternative that’s more energy efficient than Bitcoin’s mining network. For instance, for each transaction Bitcoin uses 1 575 kilowatt-hours, while Stellar uses 0.00022 kilowatt-hours, making it more energy efficient and more eco-friendly.4

Users can generate tokens, called Lumens, that can be used to create sustainability initiatives within the network.5

With us, you can trade Stellar as a crypto on CFDs and increase your market exposure to the underlying asset.

Polkadot (DOT)

Hailed for having its own consensus mechanism, the nominated PoS, Polkadot has some of the lowest electricity consumption.6 It also has the lowest total carbon emissions per annum compared to several PoS blockchains.7 Crypto researchers found that Polkadot had a total yearly electricity consumption at 70 MWh, which is 28 times less than Solana at 1967 MWh.6

Polkadot enables individuals that hold its token – the DOT – to use it for staking with validators to ‘lock up’ cryptocurrencies and earn rewards or interest in the blockchain. This can be done either through earning additional tokens or more voting rights.8, 9

With us, you can trade Polkadot using CFDs.

SolarCoin (SRL)

This is a cryptocurrency platform that encourages and incentivises the transition to the generation of solar-powered energy across the globe. The crypto protocol does this by rewarding solar producers with SolarCoins.10

The power users can claim a coin per megawatt hour that’s generated by the solar technology. Users are required to submit documents confirming the amount of solar energy they’ve generated. This lowers the cost of solar installations as it’s offset from the SolarCoin. And when the SolarCoin value is higher than the energy production cost then it becomes free.6

This cryptocurrency is not offered on our platform.

Bitgreen (BITG)

A green alternative to bitcoin, Bitgreen is a permissionless blockchain that combines its technology with green innovation. Launched in 2017 to provide an energy efficient alternative to bitcoin, it’s one of the protocols to watch if looking to invest in sustainability initiatives. It provides an easy solution for investors to finance, originate and buy high quality, transparent carbon credits, which are key to nature conservation and the reduction of carbon dioxide gas in the atmosphere.11

Bitgreen has a fixed supply of 21 million tokens, like bitcoin. It’s both fast and energy efficient due to its PoS, which replaced bitcoin’s energy consuming proof-of-work algorithm. Its PoS algorithm is said to have placed its energy consumption at 0.06% (25.7 million kWh) of bitcoin’s current consumption.12

It has a masternode consensus or ‘green protocol’ that enables the protocol to use the InstantSend function that transfers currency at fast rates. It also has a PrivateSend function that sends private transactional currency. These masternodes can also provide an income for passive investors.12

Bitgreen says its goal is to raise $1 trillion for sustainability projects in ten years. These include renewable energy, rainforest conservation and community upliftment. Its impact investment platform offers the first blockchain marketplace for buying digital green bonds.11

This cryptocurrency is not offered on our platform.

Blockchain: ‘Proof of Work’ vs ‘Proof of Stake’

PoW is a high energy consuming process. It’s the original consensus mechanism used by cryptos like bitcoin and ether 1.0. As the blockchain technology evolved and scalability demand increased, using PoW was labour intensive, resulting in fee hikes. The solution was to replace it with PoS among newer protocols like ether 2.0 and Cardano, which significantly reduced transaction fees.1

The Ethereum case

Following years of research and development, Ethereum (ETH), one of the early pioneers of PoW recently announced that it’s started its migration towards PoS with ETH 2.0. The reasons for the migration were due to PoS being more secure, less energy intensive as compared to PoW computations. Due to its low energy requirement, less ETH issuance is required to incentivise participation.13

PoS is also best suited for scalability of the platform as cryptos grow in popularity. Ethereum says it uses this more complex PoS mechanism to achieve distributed consensus. With PoW, crypto miners had to prove they’ve got capital at risk by expending energy. But with PoS, validators explicitly stake capital in the form of ether into an Ethereum smart contract.13

The staked ether is used as collateral and can be destroyed if validators are found to be dishonest or complacent. To participate as a validator, individual users must deposit 32 ETH into the deposit contract and run three separate software that include an execution and consensus client as well as a validator.13

This gives validators the responsibility to check that new transaction batches on the network are valid.

With us, you can trade cryptos like ether using contracts for difference (CFDs), which’ll enable you to speculate on the price movement of the crypto without taking outright ownership of the underlying cryptocurrency. CFDs are leveraged products, you’ll take a position on ether by paying a fraction of the total value of the underlying assets – called margin.

When trading with leverage, your profits can be magnified if the markets move in your favour and the loses can be amplified if they turn against you. Use caution and consider using some of our risk management tools when trading leveraged derivatives. With us, you can trade over 17,000 markets on leverage through our web, mobile, and MetaTrader 4 platforms.

Overconsumption: how to sustainably trade bitcoin

Bitcoin, the largest crypto in the world, uses 707 kilowatt-hours of power per transaction – 11 times higher than ether. Its energy consumption is estimated at an annualised rate of 127 terawatt-hours per annum, which is above Norway’s annual electricity usage.14

Since its inception, bitcoin’s trust-minimising consensus has been enabled by its PoW algorithm, which consumes a lot of energy that’s mainly sourced from fossil fuels. The Bitcoin Energy Consumption Index was created to provide insight into the electricity spend of the blockchain technology. The index’s aim was also to raise awareness on the unsustainability of the PoW algorithm.

Bitcoin was founded by mysterious figure with a pseudonym ‘Satoshi Nakamoto’ that represented the group of coders believed to have published a white paper on bitcoin on 31 October 2008.15

No-impact Bitcoin trading

With us, you can trade on bitcoin using CFDs, which’ll enable you speculate on the price movements of bitcoin without taking ownership of the underlying coins. This means when trading on bitcoin you won’t be partaking in activity that has a negative impact on the environment as would be the case if you were mining the cryptocurrency.

Some of the best green cryptocurrencies to watch summed up

  • Over the years, traditional investments have found a way to be more eco-friendly, cryptocurrencies have since followed suit by going green by reducing their energy consumption
  • The aim of green cryptos is to reduce the amount of carbon dioxide gases emitted per transaction made on blockchain technologies
  • Green cryptos are a way to incentivise investors for injecting their capital in eco-friendly crypto trading portfolios
  • Green cryptos are those that have transitioned from using high energy intensive ‘Proof of work’ (PoW) algorithms to the more energy efficient ‘Proof of stake’ (PoS)
  • With us, you can trade green cryptos using the Crypto 10 index and gain market exposure to ten popular cryptocurrencies via CFDs

Footnote

1 Coinbase, 2022
2 This list was last updated on 24 August 2022.
3 Cardano, 2022
4 Nasdaq, 2021
5 Saur Energy International, 2022
6 Crypto Carbon Ratings Institute (CCRI), 2022
7 Bloomberg, 2022
8 CryptoVantage, 2022
9 Business Insider, 2022
10 SolarCoin, 2022
11 Bitgreen, 2022
12 Business2Community, 2022
13 Ethereum, 2022
14 Forbes Advisor, 2022
15 Satoshi Nakamoto Institute, 2008


This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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