Digital Currencies and Energy Consumption
FinTech Notes, June 7, 2022
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- Digital Currencies and Energy Consumption
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Bibliographic details
- Authors: Itai Agur, Jose Deodoro, Xavier Lavayssière, Soledad Martinez Peria, Damiano Sandri, Hervé Tourpe, Germán Villegas-Bauer
- Published: June 7, 2022
- Series: FinTech Notes
- DOI: https://doi.org/10.5089/9798400208249.063
Key findings
- Design choices can make an important difference to the energy consumption of digital currencies.
- For distributed ledger technologies, the key factors affecting energy consumption are the ability to control participation and the consensus algorithm.
- Crypto assets like Bitcoin are characterized as wasteful in terms of resources.
- Other digital-currency designs could be more energy efficient than existing payment systems.
Comparative energy profile and evidence base
- The paper establishes the main components and technological options that determine the energy profile of digital currencies.
- It draws on academic and industry estimates to compare digital currencies to each other and to existing payment systems.
Implications for CBDC design
- The analysis derives implications for the design of environmentally friendly CBDCs.
- Policy-relevant levers highlighted:
- Control of participation in the ledger (permissioned vs permissionless architectures).
- Choice of consensus algorithm (energy-intensive proof-of-work versus more efficient alternatives).
Scope and framing
- Covers both crypto assets and central bank digital currencies (CBDCs).
- Emphasizes technological design choices as central determinants of energy consumption outcomes.
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- Digital Currencies and Energy Consumption; June 7, 2022