Technological Aspects and Environmental Consequences of Mining Encryption

Abstract

Introduction. The digital economy has significantly changed not only the types, forms and mechanism of payments, but also the form of money itself. Electronic money is becoming more popular, which increases the relevance and importance of the study of technical aspects and environmental consequences of mining encryption. The choice of equipment for cryptocurrency mining and its impact on the environment remains a rather debatable issue. It is also not clear how to calculate the costs of mining cryptocurrencies in order to determine the cost of such coins which creates obstacles to the normal reflection in the accounting of such activities in the future and the payment of the corresponding taxes on such operations where cryptocurrencies are involved.
 Aim and tasks. The study aims is to investigate modern approaches to cryptocurrency mining and the characteristics of the mining process itself, as well as the selection of the main equipment and a list of costs to ensure this activity takes into account the environmental consequences of mining encryption.
 Results. Cryptocurrency mining is the process of creating digital currencies. All transactions in the network are not processed by any central authority, but by any user connected to the network. The creation of cryptocurrency, i.e. its emission, is the acquisition of certain property rights. Determining the cost of mining, for example, one bitcoin depends on the amount of resources spent: the depreciation of the equipment that was used to generate new blockchain blocks and the monthly costs of its maintenance, the cost of high-speed Internet service, the configuration of the mining software product on a particular pool, combined electricity costs.
 Conclusions. The development of the cryptocurrency market has both positive and negative consequences at the micro and macro levels. Advantages include independence from the state-regulated banking system and general accessibility; high economic efficiency of mining; transparency of transactions, confidentiality and anonymity, security of data owners; high data security against external influences and attacks; absence of time or territorial restrictions; general availability and lack of need to create centralized data repositories; effective mechanism against theft, counterfeiting and inflation, irreversible nature of transactions. At the macro level, the advantages are the high capitalization of cryptocurrencies, which can contribute to meeting the financial needs of the state as a whole and independence from the state. Therefore, further accounting of such a specific asset as cryptocurrency requires detailed research.

Cryptocurrencies’ Impact on Accounting: Bibliometric Review

“…These criteria include being acquired through exchange, used for debt repayment, and potentially distributed to owners. Makurin (2023) highlights the challenges in Ukraine due to cryptocurrency accounting ambiguity and the absence of an appropriate framework for domestic and international transactions.…”

“…Finally, it affects mining costs, which include IT equipment and software, electricity consumption, and personnel wages needed to operate the system (Kolková 2018;Zadorozhnyi et al 2018;Zianko et al 2022). Makurin (2023) breaks down the specific costs of mining one bitcoin, highlighting factors such as equipment depreciation and maintenance (Peters et al 2015), high-speed internet access, software, and electricity costs. Considering these ongoing aspects, Makurin et al (2023) advocate for revaluing cryptocurrencies on the balance sheet to reflect their current market value.…”

“…The comparison can be influenced by inputs such as the current market price (the value of one unit of cryptocurrency) (Derun and Mysaka 2022;Procházka 2018;Proelss et al 2023;Zadorozhnyi et al 2018), market capitalization (the overall value of the market) (Yang and Hamori 2021;Proelss et al 2023;Zianko et al 2022;Peters et al 2015), trading volume (the total volume of cryptocurrencies traded in a specific period) (Yang and Hamori 2021;Zianko et al 2022;Peters et al 2015), or regulatory landscape (compliance and clarity of regulations) (Derun and Mysaka 2022;Yang and Hamori 2021;Proelss et al 2023;Zianko et al 2022;Makurin et al 2023;Peters et al 2015). The reliability of the information is influenced by the volatility of the cryptocurrency market (Luo and Yu 2022;Proelss et al 2023;Makurin 2023;Makurin et al 2023), leading to uncertainty when making comparisons between different markets (Zianko et al 2022;Makurin et al 2023). Secondly, the income approach is typically used for traditional assets.…”

“…The acquisition of cryptocurrency through initial coin offerings (ICO) or mining is a laborious and costly process that affects accounting practices (Barros et al 2023;Harrast et al 2022;Makurin 2023;Luo and Yu 2022;Zadorozhnyi et al 2018). Additionally, crypto mining (Corbet et al 2020;Makurin et al 2023) and taxation (Bellucci et al 2022;Pelucio-Grecco et al 2020;Volosovych and Baraniuk 2018) are highlighted as significant areas in accounting for digital assets (Angeline et al 2021).…”