Cryptocurrency blockchain and its carbon footprint: Anticipating future challenges

Ujkan Q. Bajra, Ermir Rogova, and Sefer Avdiaj

Technology in Society, 2024, vol. 77, issue C

Abstract: This study investigates the environmental impact of cryptocurrency blockchain technology, specifically focusing on the adoption of Bitcoin and Ethereum. Utilizing instrumental regression analysis, it examines the consensus mechanisms—Proof of Work (PoW) and Proof of Stake (PoS)—and their association with carbon footprint. The findings reveal a clear correlation between the adoption of PoW-based cryptocurrencies like Bitcoin and carbon emissions. Notably, PoW-based cryptocurrencies generate approximately 0.86 metric tons of carbon emissions per transaction, which is significantly higher than PoS-based transactions like Ethereum. Concerns also arise regarding the sustainability of Bitcoin mining after the fourth halving period and potential shortages in PoW-based mining resources. As mining rewards decrease, the challenge of timely block creation intensifies. By projecting future BTC mining phases, the study anticipates diminishing rewards in each halving period, potentially leaving around 2500 BTC units available for mining by 2120. This suggests that achieving the full 21 million BTC may prove practically unattainable within the current blockchain framework. Furthermore, the research highlights the speculative and risky nature of cryptocurrencies lacking regulatory oversight, which tends to attract irresponsible investors. It stresses the importance of developing a nuanced understanding of the environmental implications of PoW cryptocurrencies and advocating for responsible innovation. Additionally, the study underscores the necessity of considering the monetary policy implications and raising awareness among investors to ensure responsible decision-making.

Keywords: Cryptocurrency blockchain; Environmental impact; Carbon footprints; Proof of Work (PoW); Proof of Stake (PoS); Bitcoin (search for similar items in EconPapers)
JEL-codes: C G O P18 Q4 Q5 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:teinso:v:77:y:2024:i:c:s0160791x24001192

DOI: 10.1016/j.techsoc.2024.102571

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