New White House Climate Change Report May Be Bullish on These 2 Cryptos – The Motley Fool | Jewelry Dukan

If you thought the national debate on climate change and green energy was skipping the crypto industry, you are dead wrong. The White House just released a 30-page report (“Climate and Energy Implications of Crypto-Assets in the United States”) in which it highlights electricity and energy consumption trends in the crypto industry. As the report made clear, the crypto industry must do its part to meet the White House goal of reducing greenhouse gas emissions by 50% by 2030.

The conclusion of the report is that some cryptos are consuming 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 -0.72%) ranked as the top culprit due to the energy-intensive nature of bitcoin mining. In contrast, proof-of-stake blockchains are like Cardano (ADA -1.64%) and Solana (SOL 0.68%) has been lauded 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 and proof-of-stake blockchains. This included charts and graphs detailing how and why energy consumption can vary so widely between blockchains. The computing power required to mine Bitcoin is now so intense that it affects local power grids.

Image source: Getty Images.

In fact, global bitcoin mining consumes more electricity than entire nations in a year, while proof-of-stake blockchains consume a tiny fraction of that. Currently, bitcoin mining consumes about as much electricity per year as Argentina and Australia. Of even greater concern, the US is now home to 38% of the world’s 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 bullish for Cardano and Solana, both of which use Proof of Stake. The case is for mixed ether (ETH -0.86%)which is just transitioning from Proof of Work to Proof of Stake.

Green cryptos and institutional investors

If you look at the appendix of the 30-page White House report, a total of six proof-of-stake cryptos caught the attention of the White House Science and Technology Policy Office: Cardano, Solana, Speckle (POINT -1.84%), avalanche (AVAX -0.56%), Algorand (Algo -1.46%) and Tezos (XTZ -0.70%). Based on publicly available data, it is possible to see how all of these blockchains compare to each other in terms of metrics like “total carbon emissions” and “electricity per transaction.” These could become metrics to measure how green a given crypto is. Overall, Cardano and Solana were rated as two of the best considering these metrics.

This clear demarcation between proof-of-work cryptos and proof-of-stake cryptos could impact institutional investors’ investment decisions, especially amid renewed attention to climate change. Given a choice between two cryptocurrencies, institutional investors might start to favor the cryptocurrency with greener credentials. Just as endowments and pension funds need to be careful when investing in certain types of companies, they may also need to be careful when investing in certain cryptos or certain companies that serve the cryptocurrency industry, including crypto miners.

Blockchain innovations for the climate policy agenda

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

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

So, if you are looking to invest in a green crypto, focus primarily on whether it uses a proof-of-stake consensus mechanism. From there, focus on cryptos known in the industry for having energy-efficient, sustainable blockchains, like the six cryptos listed in the White House report’s appendix.

Because of this, I am bullish on both Cardano and Solana, as well as the new and improved Ethereum (once it completes its Proof of Stake transition). Overall, the White House report seems to give a positive signal for these cryptos. Sustainability seems to be an increasingly important framework for measuring the desirability 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.

Leave a Comment