The environmental consequences of blockchain technology: A Bayesian quantile cointegration analysis for Bitcoin

Abstract

During recent years, there is a widespread belief among researchers and academicians that the Bitcoin usage is imposing an additional burden on the environment inducing climate change.Although several studies have focused on issues related to the energy consumption of the basic cryptocurrencies, an open question remains regarding the environmental depiction of the Bitcoin. By resorting to Bayesian analysis and quantile cointegrated vector autoregression (CQVAR) model techniques, this study seeks to disentangle the driving forces that shape the carbon footprint of the Bitcoin. The sample used in the empirical analysis consists of a daily panel dataset covering 51 developing and developed countries over the years 2016-2018. The empirical findings corroborate a causal effect between the use of the Bitcoin and its underlying carbon dioxide emissions generated by the increasing energy load. The Bayesian CQVAR is associated with positive marginal posterior means for most of the covariates of the model across all the estimated quantiles. In contrast, there is a negative and statistically significant relationship between Bitcoin miner's revenue and carbon emissions, uncovering a multimodal distribution pattern of the marginal posterior densities which is stronger at higher than in lower quantiles. This finding, suggests that the lower (higher) miner's Bitcoin revenues the more abrupt (gradual) the effect on environmental degradation. Therefore, a sustainable energy strategy focusing on the penetration of renewable energy sources along with the use of energy-efficient mining hardware will alleviate the carbon footprint of the Bitcoin.

Bitcoin Transaction Fees, Miners' Revenue, Concentration and Electricity Consumption: A Failing Ecosystem

“…Lastly, there is a lot of attention regarding Bitcoin's carbon footprint, with many researchers providing evidence of Bitcoin's negative impact on the environment. Authors such as Di Febo et al (2021) and Polemis and Tsionas (2021) suggest that miners could be incentivized to use clean energy sources. We highly disagree with this proposal as there is clearly not enough justification for it.…”

“…Di Febo et al (2021) found the relation of Bitcoin price and carbon credits to be only in one direction and greater in downside quantiles as compared to the upside, suggesting an extreme carbon market behaviour in times of elevated risk in Bitcoin, i.e., asymmetric reaction patterns with respect to Bitcoin gains and losses. A study from Polemis and Tsionas (2021) focusing on the effects of Bitcoin miners' revenue on carbon dioxide emissions revealed that miners' revenue negatively affects environmental degradation.…”

“…Easley et al (2019) and Tsang and Yang (2021) examined the economics of transaction fees and concluded that transaction fees increase when transaction congestion occurs. The rest of the articles used in this paper have focused on Bitcoin mining energy consumption (Das and Dutta, 2019;de Vries, 2020;Corbet et al, 2021;Huynh et al, 2022), carbon footprint (Stoll et al, 2019;Polemis and Tsionas, 2021;Di Febo et al, 2021) and sustainable mining (Truby, 2018;de Vries, 2019). Das and Dutta (2019) concluded that the Bitcoin mining business is not sustainable unless efficient mining and cheap electricity sources are relied upon.…”

“…Nevertheless, they found a positive relationship between Bitcoin price and electricity consumption, suggesting no financial incentives for miners to switch to sustainable electricity sources. Stoll et al (2019), Polemis and Tsionas (2021) and Di Febo et al (2021) examined the externalities related to Bitcoin mining such as carbon emissions to gauge further discussion on the costs and benefits of Bitcoin. Truby (2018) explored ways of promoting environmentally sustainable development of blockchain applications.…”

The Dynamic Linkage Among Bitcoin, Clean Energy and Stock Market: Evidence by TVP-VAR

“…According to a recent analysis by Jiang et al (2021), maintaining the Bitcoin block chain in 2024 will require 296.59 Twh, leading to producing 130.50 million metric tons of carbon. Polemis and Tsionas (2021) conducted an investigation in 50 countries to find the causal relationship among Bitcoin usage and Co2 emissions. Surprisingly, lower Bitcoin miner returns have a rapid effect on environmental circumstances.…”