The environmental effects of cryptocurrencies

Abstract

This chapter discusses the environmental aspects of cryptocurrency markets and as to how their rapid growth can influence the environment and through which channels this process manifests.While it is not popular discussion among investors, we find that environmental issues can be of interest by wider society, students, policy makers and stakeholders of FinTech companies. Environmentalism has a long history, and controversy around this subject is remains quite substantial, thus to not make our discussion over-complicated, in this chapter we will focus on the area where to date, we possess the most thorough data and evidence through which we can build the case, namely electricity consumption associated with the mining of cryptocurrencies. The total carbon footprint of the industry is now estimated to have surpassed that of many large industrial nations. This chapter investigates the multiple knock-on effects and consequential behaviour of this rapid growth in energy usage, such as an increase in global temperature, the growth of mining companies who have targeted third world infrastructures, and the complete shutdown of the internet as we know it. Saying that, we encourage investors not to ignore these environmentalism matters, since we also show that electricity consumption is proven to be one of the commonly used variable in valuation of mineable cryptocurrencies and identification of their fair value, which affect investments returns and should be considered in their trading strategies.

An index of cryptocurrency environmental attention (ICEA)

“…Surprisingly, 296.59 Twh pf energy consumption will generate 130.50 million metric tons of carbon emission output, which is more than the annual carbon emission output of Czechia and Qatar. As for Ethereum, in June 2017, the entire network of Ethereum already consumed a small country's worth of electricity (for example, Cyprus) (Corbet and Yarovaya, 2020).…”

Transactions of Cryptocurrency in the Perspective of Islamic Finance and Economics

“…Currently, cryptography is also used as the code or secret key for virtual currencies, such as Bitcoin, in the implementation of blockchain technology. The task is to work based on encryption algorithms specifically designed to validate and verify transactions (Ausop & Aulia, 2018;Corbet & Yarovaya, 2020;Alonso et al, 2021).…”

Do financial innovations influence bank performance? Evidence from China

“…8. The emerging technologies, such as blockchain, cryptocurrency and big data, are widely applied in the various fields of the financial industry (Corbet et al, 2020a(Corbet et al, , 2022c. Cryptocurrency, in its various forms, has presented several avenues of influence, presenting significant benefits in the areas of cross-border financial transfers, portfolio diversification (Katsiampa et al, 2019a(Katsiampa et al, , 2019bCorbet and Katsiampa, 2020) and a digital store of value (as per the work of Nguyen et al, 2020;Leung and Nguyen, 2019;Corbet et al, 2020bCorbet et al, , 2020cCorbet et al, , 2021.…”