Cryptocurrency energy consumption: Analysis, global trends and interaction
-
DOIhttp://dx.doi.org/10.21511/ee.14(2).2023.04
-
Article InfoVolume 14 2023, Issue #2, pp. 49-59
- Cited by
- 609 Views
-
335 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
The rapid spread of cryptocurrencies is one of the most relevant trends today. One of the significant risks of their spread is the increase in energy consumption, which has a negative impact on the environment due to carbon emissions. This requires the development of a scientific toolkit for assessing relationships and predicting the impact of cryptocurrencies on energy consumption, which is the aim of this paper.
With the correlational regression analysis, the model of the dependence of spending on IT sector, energy consumption of Bitcoin, Ethereum and global capitalization of the cryptocurrency market was conducted, based on statistical data from Statista.com, Сoinmarketcap.com and International Data Corporation. To check the possible relationship, tests for the adequacy of the results obtained (Fisher’s test, Student’s t-test) confirmed the correctness of coefficients for independent variables.
The results showed a significant direct correlation (Multiple R is 95%) of spending on IT sector, energy consumption and global capitalization of the cryptocurrency market. The established relationships allowed predicting that Bitcoin energy consumption may reach 142 Terawatt hours per year in 2026. And its impact on environment by mining in 2022 was at least 27.4 Mt of CO2 emission.
As a proposal, a conclusion was made on the expediency of linking mining to the use of certain sources of electricity production, such as “residual” natural gas, nuclear power, renewable energy sources. The obtained results and conclusions may be used as a basis for political decisions in the field of energy efficiency and climate change mitigation.
- Keywords
-
JEL Classification (Paper profile tab)Q40, C21, O16, O33
-
References44
-
Tables6
-
Figures3
-
- Figure 1. Bitcoin energy consumption index
- Figure 2. Comparison of real and predicted data of spending on digital transformation technologies and services worldwide
- Figure 3. Prediction of Bitcoin energy consumption worldwide in 2023–2026 (tWh)
-
- Table 1. CO2 emission in main Bitcoin mining centers
- Table 2. Input data for regression analysis
- Table 3. Collinearity checking
- Table 4. Summary output for the model
- Table 5. Fisher’s test checking
- Table 6. Coefficients for the model and the T-test checking
-
- Andrae, A. (2020). New perspectives on internet electricity use in 2030. Engineering and Applied Science Letter, 3(2), 19-31.
- Attarzadeh, A., & Balcilar, M. (2022). On the dynamic return and volatility connectedness of cryptocurrency, crude oil, clean energy, and stock markets: a time-varying analysis. Environmental Science and Pollution Research, 29(43), 65185-65196.
- Badea, L., & Mungiu-Pupӑzan, M. C. (2021). The Economic and Environmental Impact of Bitcoin. IEEE Access, 9, 48091-48104.
- Brukhanskyi, R. F., & Spilnyk, I. V. (2019). Crypto assets in the system of accounting and reporting. The Problems of Economy, 2, 145-156.
- Bublyk, Y., Shapoval, Y., Shpanel-Yukhta, O., & Brus, S. (2023). Effect of financial access on cashless economy: The case of Ukraine. Banks and Bank Systems, 18(1), 91-102.
- Chokor, A., & Alfieri, E. (2021). Long and short-term impacts of regulation in the cryptocurrency market. The Quarterly Review of Economics and Finance, 81, 157-173.
- CoinMarketCap. (2023). Total Cryptocurrency Market Cap. Online market data.
- Corbet, S., Lucey, D., Urquhart, A., & Yarovaya, L. (2019) Cryptocurrencies as a financial asset: A systematic analysis. International Review of Financial Analysis, 62, 182-199.
- Dittmar, L., & Praktiknjo, A. (2019). Could Bitcoin emissions push global warming above 2 °C? Nature Climate Change, 9, 656-657.
- Ferreira, A., & Sandner, P. (2021). Eu search for regulatory answers to crypto assets and their place in the financial markets’ infrastructure. Computer Law & Security Review, 43, 105632.
- Gallersdörfer, U., Klaaßen, L., & Stoll, C. (2020). Energy consumption of cryptocurrencies beyond bitcoin. Joule, 4(9), 1843-1846.
- Ghabri, Y., Rhouma, O. B., Gana, M., Guesmi, K., & Benkraiem, R. (2022). Information transmission among energy markets, cryptocurrencies, and stablecoins under pandemic conditions. International Review of Financial Analysis, 82, 102197.
- Hougan, M., & Lawant, D. (2021). Cryptoassets: the guide to bitcoin, blockchain, and cryptocurrency for investment professionals. CFA Institute Research Foundation.
- Huynh, A., Duong, D., Burggraf, T., Luong, H. T. T., & Bui, N. H. (2022). Energy Consumption and Bitcoin Market. Asia-Pac Financ Markets, 29, 79-93.
- Huynh, T. L. D., Shahbaz, M., Nasir, M. A., & Ullah, S. (2020). Financial modelling, risk management of energy instruments and the role of cryptocurrencies. Annals of Operations Research, 313, 47-75.
- International Data Corporation (IDC). (2022). IDC Spending Guide Sees Worldwide Digital Transformation Investments Reaching $3.4 Trillion in 2026.
- Ji, Q., Ripple, R. D., Zhang, D., & Zhao, Y. (2022). Cryptocurrency Bubble on the Systemic Risk in Global Energy Companies. Energy Journal, 43, 65-87.
- Kaabia, O., Abid, I., Guesmi, K., & Sahut, J. (2020). How do Bitcoin price fluctuations affect crude oil markets? Gestion 2000, 37(1), 47-60.
- Katsiampa, P., Corbet, S., & Lucey, B. (2019). Volatility spillover effects in leading cryptocurrencies: A BEKK-MGARCH analysis. Finance Research Letters, 29, 68-74.
- Krause, M., & Tolaymat, T. (2018). Quantification of energy and carbon costs for mining cryptocurrencies. Nature Sustainability, 1(11), 711-718.
- Li, J., Li, N., Peng, J., Cui, H., & Wu, Z. (2019). Energy consumption of cryptocurrency mining: A study of electricity consumption in mining cryptocurrencies. Energy, 168, 160-168.
- Lin, M. Y., & An, C. L. (2021). The relationship between Bitcoin and resource commodity futures: Evidence from NARDL approach. Resources Policy, 74, 102383.
- Lloyd, I. (2020). Information technology law. Oxford University Press, USA.
- Mannaro, K., Pinna, A., & Marchesi, M. (2017). Crypto-trading: Blockchain-oriented energy market. AEIT International Annual Conference. Cagliari, Italy.
- Masanet, E., Shehabi, A., Lei, N., Vranken, H., Koomey, J., & Malmodin, J. (2019). Implausible projections overestimate near-term Bitcoin CO2 emissions. Nature Climate Change, 9(9), 653-654.
- Meiryani, M., Tandyopranoto, C. D., Emanuel, J., Lindawati, A. S. L., Fahlevi, M., Aljuaid, M., & Hasan, F. (2022). The effect of global price movements on the energy sector commodity on bitcoin price movement during the COVID-19 pandemic. Heliyon, 8(10), e10820.
- Mora, C., Rollins, R. L., Taladay, K., Kantar, M. B., Chock, M. K., Shimada, M., & Franklin, E. C. (2018). Bitcoin emissions alone could push global warming above 2 C. Nature Climate Change, 8(11), 931-933.
- Moussa, W., Mgadmi, N., Béjaoui, A., & Regaieg, R. (2021). Exploring the dynamic relationship between Bitcoin and commodities: New insights through STECM model. Resources Policy, 74, 102416.
- Nabilou, H. (2019). How to regulate bitcoin? Decentralized regulation for a decentralized cryptocurrency. International Journal of Law and Information Technology, 27(3), 266-291.
- Neumueller, A. (2023). Blockchain sustainability beyond Bitcoin: Ethereum under the microscope. Cambridge: Cambridge Judge Business School, University of Cambridge.
- Omura, A., Cheung, A., & Su, J. J. (2023). Does natural gas volatility affect Bitcoin volatility? Evidence from the HAR-RV model. Applied Economics, 1-12.
- Our world in data. (2022). Carbon intensity of electricity.
- Roeck, M., & Drennen, T. (2022). Life cycle assessment of behind-the-meter Bitcoin mining at US power plant. The International Journal of Life Cycle Assessment, 27, 355-365.
- Schinckus, C., Nguyen, C., & Chong, F. (2022) Cryptocurrencies’ hashrate and electricity consumption: evidence from mining activities. Studies in Economics and Finance, 39(3), 524-546.
- Slozko, O., & Pelo, A. (2015). Problems and Risks of Digital Technologies Introduction into E-Payments. Transformations in Business & Economics, 14(1), 225-235.
- Statista. (2022). Distribution of Bitcoin mining hashrate from September 2019 to January 2022, by country.
- Statista. (2023a). Bitcoin energy consumption worldwide from February 2017 to May 1, 2023.
- Statista. (2023b). Ethereum energy consumption worldwide from May 2017 to May 1, 2023.
- Statista. (2023c). Spending on digital transformation technologies and services worldwide from 2017 to 2026 (in trillion U.S. dollars).
- Statista. (2023d). Bitcoin energy consumption transaction compared to that of VISA as of May 1, 2023 (in kilowatt-hours).
- Statista. (2023e). Consumption of primary energy worldwide from 2011 to 2021, by source.
- Treiblmaier, H. (2023). A comprehensive research framework for Bitcoin’s energy use: Fundamentals, economic rationale, and a pinch of thermodynamics. Blockchain: Research and Applications, 100149.
- Wang, Y., Lucey, B., Vigne, S. A., & Yarovaya, L. (2022). An index of cryptocurrency environmental attention (ICEA). China Finance Review International, 12(3), 378-414.
- Yukun, L., & Tsyvinski, A. (2021) Risks and Returns of Cryptocurrency. The Review of Financial Studies, 34(6), 2689-2727.