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New White House Report on Climate Change Could Be Bullish for These 2 Cryptos

15 September 2022
in Solano
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New White House Report on Climate Change Could Be Bullish for These 2 Cryptos
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If you thought the national debate on climate change and green energy was going to skip the crypto industry, you’re very much mistaken. The White House just released a 30-page report (“Climate and Energy Implications of Crypto-Assets in the United States”), in which it highlighted electricity usage and energy consumption trends within the crypto industry. As the report made clear, the crypto industry needs to be doing its part to realize the White House goal of reducing greenhouse gas emissions by 50% by the year 2030.

The conclusion of the report is that some cryptos consume a significant amount of energy resources, and they are the ones that need to focus on becoming more energy-efficient. No surprises here, and Bitcoin (BTC -0.77%) ranked as the biggest culprit, due to the energy-intensive nature of Bitcoin mining. In contrast, proof-of-stake blockchains like Cardano (ADA 0.68%) and Solana (SOL 0.92%) earned praise for being two of the most energy-efficient blockchains.

Proof of work vs. proof of stake

The White House report included a surprisingly nuanced discussion of the differences between proof-of-work blockchains and proof-of-stake blockchains. This included charts and graphs detailing how and why energy consumption can differ so much across blockchains. The computing power needed to mine Bitcoin is now so intensive that it is impacting local electricity grids.

Image source: Getty Images.

In fact, global Bitcoin mining is consuming more electricity in a year than entire nations, while proof-of-stake blockchains consume only a tiny fraction of that. Right now, Bitcoin mining is consuming about as much electricity per year as Argentina and Australia. Even more worrisome, the U.S. is now home to 38% of global Bitcoin energy consumption.

Based on this report, one thing is overwhelmingly clear: A crypto will have a hard time claiming to be environmentally sustainable if it still uses a proof-of-work consensus mechanism to validate transactions. That’s bearish for Bitcoin, which uses proof of work, and it’s bullish for Cardano and Solana, both of which use proof of stake. The case is mixed for Ethereum (ETH -0.27%), which is in the process of transitioning from proof of work to proof of stake. 

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Green cryptos and institutional investors

If you look at the appendix to the 30-page White House report, a total of six proof-of-stake cryptos attracted the attention of the White House Office of Science & Technology Policy: Cardano, Solana, Polkadot (DOT -1.12%), Avalanche (AVAX -0.58%), Algorand (ALGO -1.20%) and Tezos (XTZ 0.86%). Based on publicly available data, it’s possible to see how all of these blockchains stack up against each other, in terms of metrics like “total carbon emissions” and “electricity per transaction.” These could become metrics for measuring just how green a certain crypto is. Overall, Cardano and Solana graded out as two of the best when taking into account these metrics.

[crypto-donation-box]

This clear delineation between proof-of-work cryptos and proof-of-stake cryptos could start to have an impact on the investment decisions of institutional investors, especially given renewed attention on climate change. Given a choice between two cryptocurrencies, institutional investors might start to favor the crypto with greener credentials. In the same way that endowments and pension funds have to be careful when investing in certain types of companies, they might also have to be careful when investing in certain cryptos or certain companies that service the cryptocurrency industry, including crypto miners.

Blockchain innovations for the climate policy agenda

The final section of the report touched on the various ways that blockchains could be used to support climate change policy. It’s not just how much energy a blockchain is consuming; it’s also what types of apps or services developers are building on top of that blockchain. For example, the report highlighted how the California grid is already using blockchain technology to deal with potential power blackouts.

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The report separated these blockchain innovations into two classes: climate monitoring and climate mitigation. For example, decentralized exchanges built on a blockchain like Cardano or Solana might be an efficient way to trade carbon allowances and carbon credits at the local level, making it a useful innovation for climate mitigation.

So, if you’re looking to invest in a green crypto, focus first and foremost on whether it uses a proof-of-stake consensus mechanism. From there, focus on cryptos that are known within the industry for having energy-efficient, sustainable blockchains, such as the six cryptos featured in the appendix to the White House report.

For that reason, I’m bullish on both Cardano and Solana, as well as the new and improved Ethereum (as soon as it completes its transition to proof of stake). Overall, the White House report appears to give a positive signal for these cryptos. Sustainability looks like it will be an increasingly important framework for measuring the attractiveness of different cryptos, and both Cardano and Solana appear to be leading the way.

Dominic Basulto has positions in Bitcoin, Cardano, and Ethereum. The Motley Fool has positions in and recommends Avalanche, Bitcoin, Ethereum, and Solana. The Motley Fool has a disclosure policy.


Credit: Source link

Tags: BullishChangeclimateCryptosHouseReportWhite
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