While the broader cryptocurrency market plunges after billionaire Elon Musk said Tesla would no longer accept bitcoin because of its hefty environmental cost, the price of Cardano’s ada, the world’s fourth most valuable token, surged, as crypto traders and analysts plow into the token that promises it’s a much less carbon-intensive alternative.
The only top-ten cryptocurrency rising Thursday, Cardano’s ada token hit its latest high of $1.96 around noon EDT, catapulting its market capitalization to roughly $61.5 billion.
Meanwhile, the broader cryptomarket was plunging 9% over the past 24 hours after Musk’s Wednesday tweet announcing Tesla’s bitcoin pivot and blasting its environmental cost—a single development that wiped out more than $300 billion in cryptomarket value in just hours.
In a Thursday morning email, Investing.com senior analyst Jesse Cohen note that Musk said he would look for bitcoin alternatives that consume less than 1% of its energy per transaction and pointed to Cardano’s ada and Ripple’s XRP as two cryptocurrencies with more sustainable environmental costs than bitcoin due to their less-intensive mining and transaction networks.
Cardano founder Charles Hoskinson, also an Ethereum cofounder, responded to Musk Thursday, tweeting: “Are we finally going to have the Cardano conversation? Come to my farm . . . Got sweet tea and minidonkeys.”
Thanks to a more energy-efficient mechanism to verify transactions, Hoskinson has claimed Cardano uses just 6 gigawatt hours of energy annually—not even 0.01% of the 115.85 terawatt hours bitcoin is estimated to use.
Though it’s up nearly 1,000% this year alone, Cardano is also highly susceptible to the broader crypto market’s massive volatility; its token crashed nearly 90% within less than two months in early 2018 as regulatory crypto crackdowns ushered in a years-long bear market for the nascent industry.
Nearly all cryptocurrencies document every single transaction on what’s called a public ledger, which helps ensure that transactions are transparent and safe from tampering but continuously requires additional storage space, known as blocks. Those blocks are validated by miners, who are often awarded tokens for their work, running code around the clock on special hardware called rigs. That process consumes the same amount of energy annually (around 78.5 terawatt hours) as nations like Chile, Austria and Finland. “Adding cryptocurrencies to a portfolio will make it less green,” says Gerald Moser, the chief market strategist at Barclays Private Bank, noting that mining generates the same amount of electronic waste as countries like Luxembourg because mining equipment generally becomes obsolete every 18 months or so.
To validate blocks, many cryptocurrencies, including bitcoin, use a mechanism known as proof-of-work, which requires vast amounts of code and energy—run by many competing miners—to solve complicated cryptographic problems. Cardano argues that its alternative proof-of-stake consensus mechanism is “superior in terms of energy conservation” because it selects a specific user to validate blocks based on who has the largest stake in a protocol, forgoing much of the energy-hungry competition. There’s still a debate around which method is more secure.
WHAT TO WATCH FOR
More regulation. Last week, new Securities and Exchange Commission Chair Gary Gensler suggested that the agency may be gearing up for a long-awaited crypto crackdown in light of the market’s recent boom, telling CNBC: “To the extent that something is a security, the SEC has a lot of authority, and a lot of crypto tokens—I won’t call them ‘cryptocurrencies’ for this moment—are indeed securities.”
The SEC is investigating Ripple for the alleged sale of securities. Announced in December, the investigation briefly wiped out more than half of the token’s market value before cryptocurrencies started soaring again. The SEC has added pressure to the investigation in recent days, and though it’s another more sustainable bitcoin alternative, XRP is down 4% over the past 24 hours.