See all articles

A Sustainable Approach to Crypto Investing

See how our experts have built a Sustainable crypto portfolio.

By Boris Khentov

SVP of Product Strategy & Sustainable Investing |

Published Oct. 12, 2022

A Sustainable Approach to Crypto Investing Oct 12, 2022 7:59:00 AM See how our experts have built a Sustainable crypto portfolio. Crypto requires large amounts of computing power for its underlying blockchain technologies to operate. Some critics of cryptocurrency have even suggested that the required computing power could lead to an energy crisis. For example, each year Bitcoin uses more electricity than the entire country of Argentina, a population of around 45 million. Crypto’s sustainability has been a concern of governments and industry critics alike. Leading with Cautious Optimism The sustainability concerns around crypto are worth taking seriously. At Betterment, we see a couple of reasons for cautious optimism. Not all blockchains are the same when it comes to energy consumption. Generally, Proof of Stake blockchains are more sustainable than Proof of Work blockchains. (Proof of Work and Proof of Stake are two of the main methods to validate cryptocurrency transactions.) Some blockchains are working to improve their energy efficiency. One way to do this is by migrating from Proof of Work to Proof of Stake. Building a Sustainable Crypto Portfolio For our Sustainable Crypto portfolio, we look to balance diversification and sustainability, by looking to both cryptocurrencies that transact sustainably, and to those on networks with a path to sustainability. We start with all the crypto assets which meet our overall selection criteria, then factor in the following considerations: We keep assets that currently transact on lower energy intensive blockchains, such as Proof of Stake. We also consider keeping any assets that transact on a Proof of Work blockchain, if there is a credible roadmap to migrate to Proof of Stake. We exclude assets that transact on Proof of Work blockchains, without a credible roadmap to migrate to Proof of Stake. Ethereum: A Path to Sustainability At Betterment, we’re taking a forward-looking approach as we assess the sustainability path of any given cryptocurrency. Ethereum is a great example of a leading cryptocurrency that is moving along a path to sustainability. In September of 2022, Ethereum migrated from Proof of Work towards Proof of Stake in an event dubbed “the Merge.” It is estimated that Ethereum’s total energy use may decrease by 99.95% as a result. Ethereum is a perfect example of a crypto project that is executing on a plan to advance along the sustainability spectrum, thus making its way into our Sustainable Crypto portfolio. We believe that the Merge can be seen as analogous to a net-zero commitment made by a massive global enterprise. We expect more projects to follow in Ethereum’s footsteps, and begin to address the sustainability concerns around their operations. Moreover, as the industry evolves, we expect more projects to make sustainability their core focus.

See how our experts have built a Sustainable crypto portfolio.

Crypto requires large amounts of computing power for its underlying blockchain technologies to operate. Some critics of cryptocurrency have even suggested that the required computing power could lead to an energy crisis. For example, each year Bitcoin uses more electricity than the entire country of Argentina, a population of around 45 million. Crypto’s sustainability has been a concern of governments and industry critics alike.

Leading with Cautious Optimism

The sustainability concerns around crypto are worth taking seriously. At Betterment, we see a couple of reasons for cautious optimism.

Not all blockchains are the same when it comes to energy consumption. Generally, Proof of Stake blockchains are more sustainable than Proof of Work blockchains. (Proof of Work and Proof of Stake are two of the main methods to validate cryptocurrency transactions.)

Some blockchains are working to improve their energy efficiency. One way to do this is by migrating from Proof of Work to Proof of Stake.

Building a Sustainable Crypto Portfolio

For our Sustainable Crypto portfolio, we look to balance diversification and sustainability, by looking to both cryptocurrencies that transact sustainably, and to those on networks with a path to sustainability.

We start with all the crypto assets which meet our overall selection criteria, then factor in the following considerations:

We keep assets that currently transact on lower energy intensive blockchains, such as Proof of Stake.
We also consider keeping any assets that transact on a Proof of Work blockchain, if there is a credible roadmap to migrate to Proof of Stake.
We exclude assets that transact on Proof of Work blockchains, without a credible roadmap to migrate to Proof of Stake.

Ethereum: A Path to Sustainability

At Betterment, we’re taking a forward-looking approach as we assess the sustainability path of any given cryptocurrency. Ethereum is a great example of a leading cryptocurrency that is moving along a path to sustainability.

In September of 2022, Ethereum migrated from Proof of Work towards Proof of Stake in an event dubbed “the Merge.” It is estimated that Ethereum’s total energy use may decrease by 99.95% as a result. Ethereum is a perfect example of a crypto project that is executing on a plan to advance along the sustainability spectrum, thus making its way into our Sustainable Crypto portfolio.

We believe that the Merge can be seen as analogous to a net-zero commitment made by a massive global enterprise. We expect more projects to follow in Ethereum’s footsteps, and begin to address the sustainability concerns around their operations. Moreover, as the industry evolves, we expect more projects to make sustainability their core focus.

Invest in a Sustainable Future

As investors big and small are increasingly viewing all investments through a sustainability lens, crypto will feel this pressure to evolve—and our experts at Betterment will be here to guide you on a path to sustainable crypto investing.