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Cryptocurrency blockchain and its carbon footprint: Anticipating future challenges

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  • Bajra, Ujkan Q.
  • Ermir Rogova,
  • Avdiaj, Sefer

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.

Suggested Citation

  • Bajra, Ujkan Q. & Ermir Rogova, & Avdiaj, Sefer, 2024. "Cryptocurrency blockchain and its carbon footprint: Anticipating future challenges," Technology in Society, Elsevier, vol. 77(C).
    • Handle: RePEc:eee:teinso:v:77:y:2024:i:c:s0160791x24001192
    DOI: 10.1016/j.techsoc.2024.102571
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    More about this item

    Keywords

    Cryptocurrency blockchain; Environmental impact; Carbon footprints; Proof of Work (PoW); Proof of Stake (PoS); Bitcoin;
    All these keywords.

    JEL classification:

    • C - Mathematical and Quantitative Methods
    • O - Economic Development, Innovation, Technological Change, and Growth
    • P18 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Energy; Environment
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • G - Financial Economics

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