Lessons from crypto assets for the design of energy efficient digital currencies

Itai Agur, Xavier Lavayssière, Germán Villegas Bauer, Jose Deodoro, Soledad Martinez Peria, Damiano Sandri and Hervé Tourpe

Ecological Economics, 2023, vol. 212, issue C

Abstract: This paper considers the energy profile of the main components and technological options of digital currencies, including crypto assets. Digital currencies differ widely in energy consumption depending on how they are designed. We draw on academic, institutional, and industry estimates of the energy use resulting from the processing and settlement of payments to compare digital currencies to each other and to existing payment systems. Results show that, depending on their designs, digital currencies have the potential to aid in reducing energy consumption compared to the current payment system. Energy efficient designs limit payment system actors and redundancies. For distributed ledger technologies (DLT), the key factors affecting energy consumption are the ability to control participation and the consensus algorithm. Estimates for prospective non-DLT digital currencies match the lowest energy consumption of the DLT-based designs. We discuss the relation between these findings and the energy profile of potential Central Bank Digital Currencies (CBDC) that are under consideration.

Keywords: Crypto assets; Digital currencies; CBDC; Distributed ledger technology; Energy consumption (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0921800923001519
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolec:v:212:y:2023:i:c:s0921800923001519

DOI: 10.1016/j.ecolecon.2023.107888

Access Statistics for this article

Ecological Economics is currently edited by C. J. Cleveland

More articles in Ecological Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().