Proof-of-work versus proof-of-stake coins as possible hedges against green and dirty energy

Agata Kliber and Barbara Będowska-Sójka

Energy Economics, 2024, vol. 138, issue C

Abstract: This article examines whether high- and low-environmental impact cryptocurrencies play a role as hedging instruments for green and non-green energy instruments. We differentiate between cryptocurrencies with two types of consensus mechanisms, proof-of-work and proof-of-stake, which reflect the energy demand used for the coins’ confirmation. We obtain volatilities and dynamic conditional correlations from stochastic volatility models and apply them to calculate hedge ratios. Based on the sample from 15 January 2019 to 15 September 2022, we find that clean coins provide equally good protection, measured by the hedge effectiveness, as compared to dirty coins. Yet, in each case, such effectiveness was time-varying and insignificant in some periods. Overall, cryptocurrencies are more effective hedges for oil than for clean energy assets.

Keywords: Cryptocurrencies; Oil; Green energy; Hedge; Proof-of-work; Proof-of-stake (search for similar items in EconPapers)
JEL-codes: F64 G11 G17 G41 Q49 Q55 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:138:y:2024:i:c:s0140988324005280

DOI: 10.1016/j.eneco.2024.107820

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