Most energy efficient cryptocurrencies are those that use proof of stake algorithm. In terms of proof of work, X11 algorithm is power efficient than most other mining algorithms.
Bitcoin is the most popular cryptocurrency that uses a proof of work algorithm. But, it is not the most energy efficient coin. Bitcoin and other proof of work cryptocurrency use so much energy in its mining process. It is said that mining Bitcoin consumes more energy than the country of Serbia. There are big differences between proof of work and proof of stake.
What is Proof of Stake (PoS)?
In proof of stake, creator of a new block is chosen pseudo-randomly depending on user’s wealth; also known as the “stake”. Also, there is no block reward. In PoS, users who validate blocks are called “forgers”. However, they do earn the transaction fee. In PoS, there is no mining involved. This is why PoS is energy efficient.
The purpose of proof of stake and proof of work is the same. It is to validate transactions and achieve a distributed consensus. Only the process of validating and achieving consensus is different.
What is Proof of Work (PoW)?
In proof of work, miners get rewarded for solving mathematical problems. Just like proof of stake, the goal of proof of work is to verify transactions and achieve distributed consensus. Miner earns a reward for successfully solving the mathematical problems. It is this mining process that consumes a lot of energy. It is difficult for the miner to perform this work but easy for the network to check. The first miner to solve the problem, announces the solution to the network and earns the reward.
As more and more computational power is added to the network, it becomes increasingly difficult for miners to solve these mathematical problems. This is because of difficulty increase when miners join the network. When difficulty increases, miners have to consume more energy to mine.
Most Energy Efficient Cryptocurrency
If you want to find the most energy efficient cryptocurrency, it will be those that use proof of stake system to verify transactions. If you want to find the most energy efficient cryptocurrency to mine, cryptocurrencies with X11 algorithm is relatively energy efficient.
X11 algorithm is known for its energy efficiency when mining with a GPU or CPU. This algorithm combines 11 hashing functions into one, hence X11. X11 algorithm requires a lot less processing power than other algorithms. Because it requires less power, it can keep your mining hardware lot cooler. Another great thing about this algorithm is its ASIC resistance. Unfortunately, ASICs have found a way around this algorithm and now able to mine efficiently. However, it is still profitable to mine if have a decent GPU or CPU.
Next versions of this algorithm are X13, X14, X15, and X17. Just like X11; X13, X14, X15, and X17 combines that many hashing functions into one.
The complete list of X11 coins here.
Most Energy Efficient Coins to Mine (X11 Coins)
Dash is one of the most popular cryptocurrencies that uses the X11 algorithm. It is currently ranked 15th in terms of market capitalization. Some of the best features of this coin include:
- Anonymization of transactions
- Instant transactions
- Low transaction fees
Enigma is another cryptocurrency that uses X11 algorithm. Enigma tries to solve the problem of privacy in the blockchain. Enigma platform provides solutions for privacy, storage, and scalability. You can learn more about Enigma here.
Bitcoin diamond is a hard fork of the Bitcoin. It uses X13 algorithm to mine. Just like x11, X13 is power efficient. Instead of combining 11 different hashing functions into one, X13 combines 13; hence X13. Some of the best features of Bitcoin diamond:
- Mining: Unlike Bitcoin, Bitcoin Diamond (BCD) allows miners to mine with less powerful hardware. This allows more miners to participate in the mining process.
- Speed: It is not the fastest cryptocurrency in terms of transaction speed, but BCD processes transactions faster than Bitcoin. This is because of the increased block size. BCD can process larger blocks within the same time as Bitcoin.
- Low-value transactions: BCD can support low-value transactions like micropayments unlike Bitcoin which takes higher transaction fees and longer time to process.
Dangers of Proof of Stake
PoS eliminates the cost of mining completely; however, it is not without its flaws. One major downside to PoS is, it cannot regulate inflation. In Proof of work, when new miners enter or exit the network, difficulty adjusts itself. In proof of work system, when the price of a coin increases, more miners join the network. This results in increasing difficulty of the network and slowing down the supply which helps to maintain the value of the coin. It can have the same effect when the price of a coin drops.
In proof of stake system, there is no such mechanism to maintain supply and demand. The creation of a new block is determined by miner’s stake. Blocks are produced on a schedule. The growth of coins remains the same regardless of the value of the coin.
There is another downside to PoS. Changes to the protocol are done using votes. These votes are weighed according to wealth (Stake) of your wallet. If you own a large number of coins, you can influence the blockchain. This can be problematic as a group of wealthy stakers can get together and vote to change the protocol for their benefit.
Efficiently Mining Proof of Work Coins
If you are concerned about the energy consumption of PoW coins and can’t afford to pay high electricity bills, you can start investing in cloud mining. Cloud mining can save your electricity cost as everything is done for you. Services like Genesis-mining, Hashfllare, Eobot and other cloud mining services usually take a fee for maintaining your rig. But this is a worthwhile investment. These services usually have big mining farms with very low or free electricity which makes it profitable to mine.
You can signup to these services:
So to answer the question “Most Energy Efficient Cryptocurrency”, it is ones that use the PoS system. As for PoW, X11, X13, X14, X15, and X17 algorithms are the best for energy efficiency at the moment. Happy mining!