# Cryptocurrency: A viable route to sustainability for financial technology
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2020-10-15
Category: TECHNOLOGY
Category URL: https://financedigest.com/category/technology
Meta Title: Cryptocurrency: A Sustainable Solution for Fintech
Meta Description: Learn how cryptocurrency and blockchain technology can drive a more sustainable future for the global financial industry, reducing carbon footprints and
URL: https://financedigest.com/cryptocurrency-a-viable-route-to-sustainability-for-financial-technologyhtml

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_By **Warren Paul Anderson,** Head of Developer Relations, Ripple_

Since the start of the pandemic, countries under full lockdown have experienced an [average 25% decline](https://www.iea.org/reports/global-energy-review-2020) in energy demand per week. Encouragingly, non-renewable sources of [energy](https://www.financedigest.com/britains-ofgem-to-urge-public-to-reduce-energy-usage-ft.html) like oil and coal declined in usage nearly 20% as curtailment in commercial operations took hold.

However, projections from [McKinsey](https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/the-covid-19-recovery-will-be-digital-a-plan-for-the-first-90-days) suggest these positive developments could be dismantled by an increase in demand for digital technology – especially digital payments, which are expected to grow by 15% this year alone as consumers seek more accessible payment solutions.

For the global financial industry, this represents a fork in time to ensure how we operate moving forward. The tools and infrastructure that we choose to use now can [drive real sustainable outcomes later](https://www.financedigest.com/rapidly-evolving-buy-now-pay-later-finance-drives-retail-growth.html "Rapidly evolving buy now pay later finance drives retail growth"). At the heart of this is [financial technology](https://www.financedigest.com/financial-firms-can-use-technology-combat-todays-cybercriminals.html "How financial firms can use technology to combat today’s cybercriminals") (fintech), which presents an untapped opportunity to drive change and allow us all to commit to operating under a smaller, planet-conscious carbon footprint.

**The Case for Cryptocurrency**

There’s no doubt that a fundamentally [digital future](https://www.financedigest.com/back-in-barcelona-telecoms-bosses-stake-claim-to-digital-future.html "Back in Barcelona, telecoms bosses stake claim to digital future") is on the horizon for global finance. But it’s fintech, namely cryptocurrency and [blockchain technology](https://www.financedigest.com/how-blockchain-technology-can-help-the-fashion-industry-make-verifiable-green-claims.html "How Blockchain Technology Can Help the Fashion Industry Make Verifiable Green Claims"), that can ensure this future is a more sustainable one.

Like cash, cryptocurrency is counterparty-free, and yet it’s more efficient, [accessible and sustainable than fiat](https://www.financedigest.com/alloy-partners-with-fiat-republic-to-democratize-fraud-free-crypto-trading-and-simplify-fiat-access.html "Alloy Partners with Fiat Republic to Democratize Fraud-Free Crypto Trading and Simplify Fiat Access") currencies. For instance, the global banking industry consumes an [estimated 100 terawatt-hours](https://hackernoon.com/the-bitcoin-vs-visa-electricity-consumption-fallacy-8cf194987a50) annually. The bitcoin blockchain, on the other hand, is expected to consume just [60 terawatt-hours in 2020](https://digiconomist.net/bitcoin-energy-consumption). Furthermore, the wider [eco-credentials](https://www.ledger.com/energy-consumption-crypto-vs-fiat) of cryptocurrencies considerably surpass those of fiat. It is suggested that 70% of [bitcoin](https://www.financedigest.com/crypto-survey-shows-less-consumer-scepticism-but-a-third-expect-bitcoin-price-fall.html) runs on renewable energy, such as hydro-electric, while cryptocurrency as a whole has a reduced impact on deforestation, eutrophication or natural resources (water, metals, ink or pulp).

However, a [sustainable future for fintech depends on the industry](https://www.financedigest.com/applying-a-sustainable-lens-to-the-financial-industrys-future.html "Applying a sustainable lens to the financial industry’s future") choosing the right assets. For all its eco-superiority over cash, cryptocurrency can be mined and created through a consensus process called proof-of-work, which [consumes increasingly large amounts of energy](https://www.financedigest.com/german-gas-storage-levy-adds-to-energy-consumers-woes.html "German gas storage levy adds to energy consumers’ woes") by design. What’s more, this consumption is growing at such rapid rates that access to cheap renewable resources may not scale [fast enough](https://www.financedigest.com/why-banks-cant-adopt-digital-identities-fast-enough.html "Why Banks Can’t Adopt Digital Identities Fast Enough") to support this new demand.

The world simply cannot afford more carbon-based [energy](https://www.financedigest.com/britains-ofgem-to-urge-public-to-reduce-energy-usage-ft.html) production.

**The Environmental Impact of Proof-of-Work vs Consensus**

In proof-of-work blockchain networks, like [bitcoin](https://www.financedigest.com/crypto-survey-shows-less-consumer-scepticism-but-a-third-expect-bitcoin-price-fall.html) and Ethereum, the game is won by whoever has access to the cheapest power and largest, most [advanced mining systems](https://www.financedigest.com/sensor-based-glucose-measuring-systems-market-by-2028-with-technological-advancements-growth-of-industry-overview-and-dynamics-with-affecting-factors-2.html "Sensor Based Glucose Measuring Systems Market by 2028 With Technological Advancements, Growth Of Industry, Overview and Dynamics with Affecting Factors"). Back in 2011, a spare laptop could earn bitcoin rewards, but now, ‘professional’ miners have dedicated ASIC mining rigs stacked side-by-side to form mining farms larger than most [rural towns](https://www.verdict.co.uk/worlds-largest-bitcoin-mining-farm/). As a result, the amount of electricity consumed by the bitcoin network in one year could [power all tea kettles used to boil water in the UK for 15 years](https://www.cbeci.org/cbeci/comparisons), or roughly 1.5 times the annual [energy](https://www.financedigest.com/britains-ofgem-to-urge-public-to-reduce-energy-usage-ft.html) consumption of Ireland.

But not all cryptocurrencies rely on resource-intensive technology. In fact, a [key motivator for my wanting to join Ripple was to contribute to the development](https://www.financedigest.com/automotive-actuator-market-key-manufacturers-development-trends-and-competitive-analysis-2028.html "Automotive Actuator Market Key Manufacturers, Development Trends and Competitive Analysis 2028") of the XRP Ledger which, unlike [bitcoin](https://www.financedigest.com/crypto-survey-shows-less-consumer-scepticism-but-a-third-expect-bitcoin-price-fall.html) or Ethereum, isn’t powered by megalo-mining farms. Instead, a decentralized network of individual servers, no larger than a laptop, algorithmically deliberate on which transactions should be included in the next ledger, and in what sequential order.

One of the key components that makes this consensus mechanism (what powers the XRP Ledger) possible is that a fixed [supply of 100 billion](https://www.financedigest.com/trafigura-enters-3-billion-loan-to-supply-germanys-sefe-with-gas.html "Trafigura enters billion loan to supply Germany’s Sefe with gas") XRP were generated at inception of the network. Because the total supply of XRP already exists, a consensus model doesn’t [require the same energy-intensive process](https://www.financedigest.com/fraud-protection-why-customer-onboarding-requires-digital-identity-processing.html "Fraud Protection: Why Customer Onboarding Requires Digital Identity Processing") as proof-of-work mining. And the results are game-changing.

One bitcoin transaction consumes an average 700 KWh of electricity, whereas one XRP Ledger transaction consumes just 0.0079 KWh. This means that for every 1 million transactions, 4.51 [billion lightbulb hours are used to mine](https://www.financedigest.com/glencore-to-sell-australian-copper-mine-to-spac-for-1-1-billion.html "Glencore to sell Australian copper mine to SPAC for .1 billion") bitcoin compared to 79,000 lightbulb hours used by the XRP Ledger. In all, this makes the energy consumption of XRP 57,000 times [more efficient](https://xrpl.org/carbon-calculator.html) than bitcoin.

Bringing this back to computational costs, running a single XRP Ledger server is comparable to running a small email server and yet still has the means to power [global payment](https://www.financedigest.com/fingerprints-and-tag-systems-collaborate-to-offer-contactless-biometric-payment-cards-globally.html "Fingerprints™ and Tag Systems collaborate to offer contactless biometric payment cards globally") transactions.

**Making cryptocurrencies green by design**

Ultimately, as digital payments increase, so will the adoption of blockchain and cryptocurrency – presenting an opportunity for fintech to lead global [finance toward a sustainable future](https://www.financedigest.com/sustainable-finance-the-wave-of-the-future.html "Sustainable Finance: The Wave of the Future").

However, it’s critical that we don’t immediately recognize all cryptocurrencies as one and the same. While cryptocurrencies are a robust eco-friendly alternative to fiat currencies, bitcoin and XRP [hold very different energy](https://www.financedigest.com/energy-utilities-sector-to-hold-60-share-in-switchgear-monitoring-system-market-by-2031.html "Energy & Utilities Sector To Hold 60% Share In Switchgear Monitoring System Market By 2031") footprints.

XRP is green by design; as of today, the XRP Ledger is carbon net-zero and settles transactions without the high energy costs associated with proof-of-work mining. As shown, XRP has proven eco-credentials and can stand up against a serious sustainability agenda.


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