Ever since Elon Musk publicly commented on Bitcoin’s energy consumption, the sustainability of coins and token has been a major topic on all news channels. The discussion has remained one-dimensionally focused on energy consumption, however. Until now, anyway. From today onwards, the Green Crypto Research Sustainability Rating for cryptocurrencies is publicly available.
At Green Crypto Research, we believe that the sustainability of any cryptocurrency needs to be assessed holistically – similar to industry standards for stocks, real estate, or bonds.
Problem solved – technically
Bitcoin went live in 2009 when the iPhone 3 was Apple’s newest innovation, and 4G networks for mobile phones were not yet available. While Bitcoin was visionary in its time, its technology has since evolved little and is pretty much outdated in 2021. Today, blockchain technology has brought forth cryptocurrencies that surpass Bitcoin in every aspect, no matter whether it is speed, security, and decentralization. And best of all: they do so using a fraction of its energy consumption - up to one million times less energy per transaction! Easily.
In other words, the environmental damage caused by cryptocurrencies might have long been fixed, if only one wanted to.
Sustainability includes social justice and governance
A key argument continuously brought forward in favor of cryptocurrencies is their potential to transform and democratize the financial system. Firstly, by making “banking” available for everyone, even the 30 plus percent of the global population, who do not have a bank account. Secondly, their decentralized structure may prevent monopolies and make the financial infrastructure fairer and more secure. It’s what we call the social impact and governance in sustainable finance.
But do cryptocurrencies actually do that? Is it socially inclusive if a single Ethereum transaction can cost up to USD 100? Or is it fair governance if the Binance foundation owns more than 50% of all available Binance coins and thus has an absolute majority for all strategic decisions regarding the blockchain and its development?
The first ESG rating for cryptocurrencies
A sustainable or green cryptocurrency should have a low environmental footprint, a positive social impact, and a governance structure that ensures fairness and security for all participants. Therefore, at Green Crypto Research, we have developed a holistic framework to determine the sustainability of cryptocurrencies across the three dimensions: environmental footprint, social impact, and governance (ESG). To date, we have already evaluated ten cryptocurrencies and summarized our assessments for you. True to the motto: Taking the scene by keeping it green!
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What is the GCR Sustainability Rating?
The GCR Sustainability Rating is the first ESG rating tailored to cryptocurrencies and adjusted accordingly. It reflects the holistic assessment of a cryptocurrency and is composed of three individual scores:
The GCR Sustainable Rating is a relative ranking, meaning that the best cryptocurrency in each category receives an A rating, while the worst receives a D rating. The overall rating ("GCRS rating") is based on three individual ESG categories. An average score is calculated for each category. The overall rating corresponds to the worst ESG score so that failures in a single category cannot be compensated for by good scores in the other two. Thus, if a cryptocurrency is judged not to be environmentally sustainable, it cannot make up for the poor rating with adequate social standards or good governance.