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Motley Fool Issues Rare “All In” Buy Alert
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The current global heat wave has prompted all kinds of talk about a climate emergency. This is potentially big news not just for industries that have been directly linked to climate change — such as the oil and gas industry — but also for industries only tangentially related, such as crypto. After all, crypto has been coming under increasing scrutiny by regulators for its energy consumption habits. As a result, it’s time to think about climate-proofing your crypto portfolio.
The best place to start is with a green, eco-friendly cryptocurrency like Cardano (ADA -1.22%), which also happens to be one of the top 10 cryptocurrencies in the world by market capitalization. Even before the latest debate about climate ever started, it prided itself on its eco-friendly blockchain and commitment to sustainability. As a result, Cardano is uniquely positioned to withstand a climate emergency.
The crypto industry has always functioned under a high degree of regulatory risk. But now it’s facing a new one. What happens, for example, if regulatory agencies and other government authorities start enacting climate-related executive orders to regulate, restrict, or limit certain industries? In mid-July, for example, the European Central Bank (ECB) warned that it might place a ban on Bitcoin (BTC 0.18%) mining as part of a broader crackdown on fossil fuels. It might also introduce carbon taxes on crypto transactions. The ECB compared Bitcoin to a “fossil fuel car,” primarily based on Bitcoin’s well-known energy consumption problem.
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As a result, the race is now on to prove one’s green credentials and avoid the wrath of the government bureaucracy. Bitcoin miners, for example, are now struggling to prove that they don’t rely on fossil fuels for their energy. They certainly don’t want regulators thinking that Bitcoin mining has anything to do with traditional coal mining! And some cryptocurrencies are now making “green blockchain” a core part of their marketing outreach efforts. Algorand, for example, now claims to have a carbon-negative blockchain.
By nearly any yardstick, Cardano is one of the most eco-friendly, environmentally sustainable cryptocurrencies in existence. In contrast to Bitcoin, which uses proof of work to solve complex math problems and receive new coins, Cardano is proof of stake, in which users pledge their coins for the right to validate transactions and earn more coins. And that makes all the difference. Because Cardano does not rely on energy-intensive mining that uses thousands of powerful computers, that immediately reduces its carbon footprint. In fact, some Cardano backers say that it is now 37,500 times more energy efficient than Bitcoin.
As the ECB acknowledged when it was talking about banning Bitcoin, pure proof-of-stake blockchains like Cardano are the “electric vehicles” of the crypto world. The same governments that want to encourage you to buy electric cars will also want you to buy eco-friendly cryptocurrencies. That argument is going to go a long way for cryptocurrencies like Cardano that can prove their green credentials.
Finally, one of the co-founders of Cardano, Charles Hoskinson, is one of the best-known voices advocating for the crypto industry in Washington, D.C., right now. He knows exactly how the regulatory game is played, which is something that could prove vital if the climate emergency narrative intensifies and the Biden White House starts passing a number of executive orders. This summer, media outlets praised Hoskinson after his testimony in front of Congress, in which he eloquently argued for a more rational approach to crypto regulation. This is the type of person you want making the case against regulatory overreach.
All in all, Cardano is one of the best plays out there if you are looking to climate-proof your crypto portfolio. Its blockchain is pure proof of stake and very energy efficient, and thus, very green. Other smaller cryptos may play up their green credentials, but Cardano is one of the biggest Layer 1 blockchains out there, with a total market capitalization of over $16 billion, making it a key building block of the green crypto future.
Dominic Basulto has positions in Bitcoin and Cardano. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
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