The world of cryptocurrency is rapidly evolving, with thousands of cryptocurrencies competing with each other to gain investors and collaborator attestations. There is an increased demand for cryptocurrencies, and so are the concerns about energy consumption. The big giants of the crypto world, Bitcoin and XRP, have unique transaction mechanisms. In this article, you are going to explore both of these crypto methods of validating transactions, transaction cost, and their energy-efficient capabilities. Let’s dive into the concept below!
Bitcoin’s Proof-of-Work (PoW) and Its Energy Consumption
Bitcoin has long been criticized for its Proof-of-Work (PoW) mechanism, which uses a lot of energy. In this process, miners are the entities that solve complex mathematical problems to validate transactions and add new blocks to the blockchain. This mining process consumes a huge amount of energy and generates approximately the same quantity as a small nation. The estimated energy consumption of Bitcoin, according to the Cambridge Center for Alternative Finance, is 155 TWh per year to 172Wh per year. This data makes it clear that Bitcoin is not an eco-friendly and sustainable crypto and uses about 0.3% of global energy consumption.
XRP’s Consensus Mechanism: A Sustainable Alternative
XRP is a digital cryptocurrency that was owned by Ripple Labs and was launched in 2012. XRP runs on the XRP ledger (XRPL); this is a unique consensus protocol that is called federated consensus. Compared to Bitcoin, XRP is more eco-friendly and energy-efficient because of its less reliance on high computation energy. XRP validates transactions by the network’s trusted validators. These validators are institutions, independent operators, and developers who confirm the transaction based on a predefined rule unless a supermajority (over 80%) agrees to change this whole process, which uses no excessive energy. The network remains functional if some validators are offline or acting maliciously; the network can operate as long as most validators function correctly.
Cost Efficiency of Bitcoin and XRP
When considering operation cost and cost efficiency, XRP is the best option. XRP charges $0.0002 per transaction, while Bitcoin charges $0.50 per transaction. XRP finality is just 3-5 seconds compared to that of Bitcoin, which takes 10 minutes to bring finality. Additionally, XRP can access thousands of transactions simultaneously, while Bitcoin can only process 7-10 seconds on the blockchain. These are the reasons that XRP is greatly adopted and collaborated with by financial institutions. The speed advantage makes XRP more suitable for real-world financial transactions, which may make it witness increased utility in the future that will gradually impact its price.
The Decentralization Debate
Despite XRP’s several advances, the XRP space faces some key characteristics, such as its service centralization. Though the XRP Ledger operates as open-source and allows anyone to run a validator, Ripple, the owner of XRP, has control of a massive portion of these validators. As XRP adoption grows, it potentially creates an oligopoly of large validators. However, the XRP ledger continues to diversify its validator node to counter these risks. Unlike Bitcoin, where mining is concentrated among the few large mining pools, the XRP consensus mechanism allows for a more distributed network.
Conclusion: XRP as a More Sustainable Alternative
Bitcoin is a digital gold that has a high price value, is widely adopted, and is the most popular crypto asset. However, the Bitcoin PoW mechanism poses a great limitation to its long-term sustainability. XRP, in many areas, is the head of Bitcoin and offers high-performing space to the users. Its unique consensus mechanism makes it a sustainable and eco-friendly crypto. Its cost-effectiveness, cross-border payment, instant finality, and scalability make it highly adopted by investors and primarily by financial institutions.
