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Eliminating Environmental Costs to Proof-of-Work-Based Cryptocurrencies: A Proposal

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  • Gabriel Mathy

    (American University)

Abstract

The process of mining Bitcoin consumes an enormous amount of electricity. This is an inherent feature of cryptocurrencies that are proof-of-work based. Instead, I propose an alternative algorithm for Bitcoin that would reduce the electricity usage on the order of trillions. Rather than adjusting the difficulty of Bitcoin mining upward when more miners are devoting computing power to mining, the returns to mining would be reduced downward. Rather than the current situation where Bitcoin’s difficulty is in the trillions, the mining difficulty could be set to the theoretical minimum, one, reducing electricity usage proportionally.

Suggested Citation

  • Gabriel Mathy, 2023. "Eliminating Environmental Costs to Proof-of-Work-Based Cryptocurrencies: A Proposal," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 49(2), pages 206-220, April.
    • Handle: RePEc:pal:easeco:v:49:y:2023:i:2:d:10.1057_s41302-023-00235-4
    DOI: 10.1057/s41302-023-00235-4
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    References listed on IDEAS

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    More about this item

    Keywords

    Cryptocurrencies; Environmental costs of cryptocurrencies; Microeconomic modeling;
    All these keywords.

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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