Can Cryptocurrency Save The Planet?

Many people question whether the use of cryptocurrencies with natural capital is good for the planet or if they are just another facade to generate more money.

Many people question whether the use of cryptocurrencies with natural capital is good for the planet or if they are just another facade to generate more money.

Bitcoin cryptocurrency and behind a forest

Photos: Unsplash

LatinAmerican Post | Christopher Ramirez Hernandez

In recent years, there has been talk about a new type of cryptocurrency known as ‘stablecoin’. According to BBVA’s explanation on its official blog, what these new cryptocurrencies do is that they create their ‘ tokens’ with a value whose base is a fixed capital, with which they avoid the volatility present in some of the main cryptocurrencies such as ‘bitcoin’ or ‘Ethereum’.

In a nutshell, what the organizations in charge of these stablecoins do is generate a digital asset that represents a physical one: fiat currency (such as dollars or euros), tangible assets such as gold or even another cryptocurrency with higher performance and stability in the market.

In this way, in case the cryptocurrency goes bankrupt for one reason or another, they have resources with which to respond to investors. 

Thus, this new way of trading with cryptocurrencies is gaining more and more strength, especially in those prudent investors who, do not want to risk market volatility. They want something safe, and that, of course, is something very acceptable and respectable in the investment world.

However, for some organizations, this new way of trading cryptocurrencies may be the key to not only improving the economy of the individuals who acquire them but also contributing to the care of the environment, which is so affected by this new economy.

It should be remembered that in order to mine a cryptocurrency, an incredible amount of energy is required, which translates into the generation of more and more CO2 that contributes to the carbon footprint in the world.

According to a report by Bank of America, entitled ‘The little secrets of Bitcoin’, in the last 2 years the carbon emission in the mining of this cryptocurrency has increased by more than 40 million tons ; Thus, if the total processes of bitcoin and the energy it spends annually are added up, they could be compared with the emissions of countries such as Argentina, Finland or Switzerland.

Thinking about this, in recent months a series of stablecoins have been brewing that, contrary to “normal” cryptocurrencies and some of their kind, have natural capital as their base value, that is, the value of the tokens lies in the ecosystem spaces of the planet and the way in which these can be made renewable and recoverable. In this way, economic capital is created while the index increases of natural sustainability.

How viable are natural capital-based stablecoins?

Of course, the big question that arises around this new way of creating money through natural capital and sustainability projects is: from what Is it useful to create a cryptocurrency whose base is caring for the environment, knowing that the mining of these virtual currencies will continue to considerably affect the planet?

Also Read: These are the New Environmental Crimes in Colombia

To understand this, Rodolfo Tarraubella, executive director and coordinator of the Secretariat for Sustainability and Climate Finance of CIFAL (International Training Center for Authorities and Leaders) attached to the United Nations Institute for Training and Research (UNITAR), in Argentina, explained, through an opinion article published in El Economista, the importance of this new form to capitalize on cryptocurrencies, in addition to their significance for the reduction of the carbon footprint in their specific mining process.

“These are assets that, instead of being mined through mathematical calculations that consume a lot of energy, are mined through emission reductions or other activities such as the restoration of biodiversity or ecosystems”, indicates Tarraubella.

In other words, this type of stablecoin is managed in a much more traditional market, since it needs to have a business plan behind it. By avoiding mining as much as possible through exercises that consume a lot of energy, it is necessary to have a backup plan that helps generate investors’ money without having to affect the sustainability plan that they want to achieve.

For this,  the sale of carbon bonds with which to generate extra income for the cryptocurrency business will be necessary, in addition to collaborating with the industries that need to justify their environmental impact.

In short, the tokens used by these stablecoins are based, for the most part, on the reforestation of hundreds of hectares of jungle, which in turn promise “natural” mining in which commercial exercises derived from the same sustainable strategies are the ones that generate profits for their investors.

Of course, for it to be a cryptocurrency, the intervention of a blockchain will also be necessary that allows the transcription of the transactions carried out during the sustainability processes of the land, as well as for the purchase of the tokens.

However, it is more likely that those responsible for stablecoins with natural capital will choose Proof of Stake or PoS as a way to control the use of large amounts of energy, by limiting the participation in the mining process between the same participants who have the cryptocurrency, that is, who are direct investors in these projects.

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