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What are cryptocurrencies, and how do they contribute to carbon offsetting? Do cryptocurrencies help the environment or offset carbon emissions?
I distinctly remember the first time I noticed cryptocurrency was making its way into society... Wandering around an unusually empty Union Square Market in Manhattan during the thick of the COVID-19 pandemic, a sign for vegan baked goods caught my eye. I took note of a small bakery-cart with a large, double-chocolate chip muffin calling my name.
Many countries such as the United States, especially after the sanitary crisis – are switching to contactless or cashless payment methods. This bakery stand was no exception to this newfound rule, and I struggled to pay with Venmo – as credit cards weren’t even accepted.
So, my eyes instinctively drifted to the large payment method sign with newfound curiosity. It read in large print: “We Take Bitcoin” and “Cryptocurrency Accepted.”
That’s when I realized cryptocurrency was becoming more common than I previously had thought. However, I still couldn’t help but wonder – what is the difference between cryptocurrency and other forms of payment: like cash, credit cards, or Venmo?
Why should I have opted to use cryptocurrency instead of cash (which would’ve helped to stimulate the economy) – especially during the pandemic?
First of all, what are cryptocurrencies? Why have they taken the market by storm, and have become a common method of contactless payment in our society?
Cryptocurrencies are digital currencies that are not impacted by the economy the same way a typical currency is. Cryptocurrencies are a separate entity from currencies that can take a physical form as paper money, and they do not stimulate the economy as locale is irrelevant.
For example the U.S. dollar or the Euro s subject to change its value on a daily basis, whereas the value of a cryptocurrency is made by the users with a decentralized system. This process in cryptocurrency is called mining.
Mining is an automated system which uses artificial intelligence, such as a computer, to create an algorithm to determine the current value of a cryptocurrency.
Cryptocurrencies work as a peer-to-peer system where no centralized third party is necessary to complete the transaction.
Think of when you use Venmo to make a payment to your friend. Venmo still has to go through your U.S. bank account in order to verify the transaction; the payment isn’t being made through a single party. This isn’t necessary with crypto currencies, as no third party is needed to complete a transaction – making crypto currency an easier and more instantaneous method of payment.
Instead of going through a bank, transactions are recorded on a digital leger and kept on an encrypted online database – which allows for secure, cashless payments. The public leger which cryptocurrencies document transactions is called Blockchain.
Blockchain is like a digital checkbook.
Instead of keeping a physical copy of all your transactions, cryptocurrencies generate this automatically. Previous cryptocurrency transactions will be logged not only for the user, but also onto the online database – keeping a continuous, synchronized record of transactions.
This isn’t like waiting for a bill to come through on your credit card or waiting for your bank account to be debited – all transactions with cryptocurrencies are documented the moment they happen, which ultimately allows for greater financial awareness.
The biggest benefits to using cryptocurrency is to partake in its mission to correct the corrupt use of traditional currencies. In other words, cryptocurrency puts the potential and capability of the currency in the user’s hands, whereas the fifty dollar bill I hold in my hands today – may not be worth the same amount tomorrow.
But does that sustainable value override the impact crypto currencies have on the environment?
There are several pros to using cryptocurrencies. For starters, revolutionary technology is one of the biggest advantages of using cryptocurrency. By eradicating the use of a third party, crypto currency allows for a more secure payment system and safer future investment – which appeals to individuals and businesses alike.
As the value of cryptocurrencies aren’t governed by a centralized system, these digital currencies are more resistant to a dramatic change in value. Therefore, investing in cryptocurrencies is a more surefire investment, for instance – in comparison to purchasing a home in the United States that can and willerratically decrease or increase in value. Also, imagine traveling to Europe from the U.S., where you are often catching the currency exchange rate at a bad time – and you’re actually losing money you could spend during your trip. This isn’t a cause for concern with crypto currencies.
Another appeal to the use of cryptocurrencies is the security. The likelihood of getting “robbed” is less when you use digital currency, as they are highly encrypted – hence the name, “crypto” currencies.
Some common examples of cryptocurrencies, besides the original Bitcon, include Ethereum, Litecoin, and Ripple. All of these crypto currencies use the same secure encryption and blockchain technology to govern the currency’s value.
However, cryptocurrency isn’t foolproof. The potential cons of using cryptocurrencies include making a poor investment due to a lack of research, and disregarding the time necessary to properly educate oneself to understand all the security protocols necessary when using cryptocurrency.
Most importantly, crypto currency has proven to not be as environmentally friendly as one might think.
Cryptocurrency isn’t as difficult as navigating the stock market alone, but it also isn’t as simple or user friendly as apps like Venmo or CashApp.
So, how do cryptocurrency and carbon offsetting impact one another? But first, what is carbon offsetting?
Carbon offsetting is a preventative action in attempts to justify a high level of carbon already emitted into the environment by contributing to another project or organization determined to lower carbon emissions and promote a positive impact on the environment.
Still don’t understand carbon offsetting?
Think of it this way: imagine you’re in a cafe, and you order an iced coffee that comes with a plastic straw. You feel guilty that you’ve used a non-reusable utensil, so when you’re at the cash register, and they ask if you’d like to donate to a community project that strives to support the environment – you do.
Would you have donated had the cafe served you with a glass or paper straw?
Perhaps not, because you wouldn’t have had the incentive to donate to the environmental project or organization in question had you not felt the need to make up for your recent plastic consumption.
This is the objective in participating in carbon offsetting projects.
The primary mission of these projects is to reduce carbon emissions and promote environmentally friendly habits.
Four common examples of carbon offsetting projects include forestry protection and conservation, sourcing renewable energies, offering community support, and utilizing common waste.
Individuals and companies often invest into carbon offsetting projects as an “easy way out” to contribute to beneficial environmental action, while still running business as usual. In other words, carbon offsetting is a form of compensation for poor environmental action.
Are cryptocurrencies an effective way to contribute to carbon offsetting projects?
Some companies are attempting to revolutionize the way their digital currencies can positively contribute to the environment.
For instance, a crypto currency called Toucan, has become one of the biggest investors in carbon credits – as they launched their crypto company with the mission to use blockchain to benefit the carbon market.
Due to the accessible and sustainable value of crypto currencies, companies would be able to make a stronger investment in their carbon offset project of choice.
But carbon credits or carbon offsets aren’t the most effective way to reduce carbon emissions, as they don’t halt the actions producing the largest amount of carbon footprint in the first place.
Here are five examples of carbon offsetting projects that could be impacted by the use of cryptocurrency:
This carbon offset project strives for long-term, environmentally friendly travel through carbon offset projects aligned with the UN’s Sustainable Development Goals. They provide assistance with calculating carbon emissions from air travel.
The use of cryptocurrency would ultimately derail the mission of Sustainable Travel International, because in order to achieve sustainable travel – the economies of these tourist destinations need to be stimulated.
If crypto currencies were used as opposed to local currencies, this goal couldnt be achieved.
Terrapass helps carbon offsetting easier for individuals and businesses, as it provides a monthly subscription to assist those who drive to work or school lower the carbon footprint made from their commute.
If a company were to invest in crypto currencies instead of a carbon offsetting project like Terrapass, they wouldn’t be lowering their carbon footprint as much as they are able to.
Subscribing to Terrapass is the smarter investment, as it directly lowers carbon emissions as it helps people become aware of their polluting habits – whereas crypto currencies are merely an investment to offset carbon emissions and don’t fix the root of the problem.
3Degrees is a carbon offset project that aims to help businesses make their production line more environmentally friendly.
Companies could use crypto currencies to invest in carbon offsetting projects, but it’s more beneficial to invest in carbon-emission-friendly equipment for optimal results in lowering carbon footprint.
Love to shop online?
Carbon Checkout is a carbon offset project that easily incorporates carbon offsetting into the e-consumer’s daily life. At checkout when shopping online, customers are given the choice to select a carbon offset project to donate to balance the carbon footprint of their online purchase.
Crypto currency may make it possible for you to buy more with its stronger value, but a single transaction of cryptocurrency is equivalent to 330,000 credit card transactions. Therefore, it is ultimately more environmentally friendly to integrate something like Carbon Checkout into your carbon footprint routine instead of attempting to master the benefits of blockchain in crypto currencies.
The Purus Project is a forest restoration project that strives to reduce carbon emissions, prevent climate change, and preserve the living environments of endangered species. They also source high quality water and seek to create employment opportunities.
The use of cryptocurrency could hold the potential to further fund a complex carbon offset project like this, but the sustainable value of crypto currency doesn’t equate to the multitude of beneficial environmental actions The Purus Project strives to achieve.
Despite the potential monetary benefits of using cryptocurrency, – it isn’t all green all of the time.
The most detrimental effect of crypto currency is the fact that a single transaction of bitcoin is equivalent to hundreds of thousands of credit card transactions.
And those online databases that constantly keep records of the transactions?
Bitcon alone uses the same amount of electricity that Google could use to run their operations globally.
This means cryptocurrency, while promoting sustainability by adding financial value to carbon offsetting projects – ultimately produces a larger carbon footprint.
So, although crypto currencies can sustain value more easily than traditional currencies, they still harm the environment.
Cryptocurrency can improve upon already existing carbon offsetting projects by allowing a company to contribute more with its stronger value, but what are things your company can do to offset carbon emissions withoutinvesting in crypto currency?
Here are 3 things you and your company can do to offset carbon emissions without investing into a carbon offset project:
If your company makes it a priority to create a concrete plan on the preventive measures that could be taken to reduce carbon footprint, investing in carbon offsets wouldn’t be necessary.
Also, establishing an EMS paves the way to apply for an ISO 14001 certification – which only makes your company more sustainable and qualified.
Plastic utensils aren’t necessary anymore when you can provide your employees with reusable water bottles and glass dishware in the office.
It will also be cheaper to purchase durable dishware once than to constantly replenish plastic forks or paper plates.
The turtles will thank you!
If your organization takes place in a major metropolitan area, it is a stronger investment and ultimately more beneficial for the environment if your company offers to pay for their employee’s monthly transportation pass.
Just like investing in higher-quality dishware once, it is smarter to contribute to an employee’s method of transportation – as it is a cheaper and more effective way to reduce carbon footprint on a daily basis.
In conclusion, small actions like these are less time consuming and require less effort to understand and invest in crypto currency.
Crypto currency can be beneficial to carbon offsetting projects, but only if the research and time is dedicated to make a proper crypto currency investment. It is overall easier to directly reduce carbon emissions than to invest in a carbon offsetting project.
If you want to do what’s best and easiest for the environment – it looks like you’re better off sticking with your ATM for cash or your current credit card.
If reading this article about cryptocurrencies and carbon offsetting has made you interested in reducing your carbon emission to further fight against climate change – Greenly can help you!
At Greenly we can help you to assess your company’s carbon footprint, and then give you the tools you need to cut down on emissions. Why not request a free demo with one of our experts - no obligation or commitment required.
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