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Is Bitcoin's Carbon Footprint Persistent? Multifractal Evidence and Policy Implications
Bikramaditya Ghosh1, Elie Bouri2
1Symbiosis Institute of Business Management (SIBM), Symbiosis International (Deemed University) (SIU), Bengaluru 560017, India.
Entropy (Basel, Switzerland)
|May 28, 2022
Summary
Bitcoin mining
Area of Science:
- Environmental Science
- Computer Science
- Economics
Background:
- Bitcoin mining is energy-intensive, posing risks to ecological balance.
- High energy consumption in Bitcoin could lead to lasting policy implications.
- The study addresses the environmental impact of Bitcoin's energy demands.
Purpose of the Study:
- To analyze long memory in Bitcoin Energy Consumption Index (BECI) data.
- To determine if Bitcoin's energy consumption patterns necessitate permanent policy interventions.
- To investigate the persistence of energy consumption in Bitcoin mining.
Main Methods:
- Utilized fractionally integrated GARCH (FIGARCH) and multifractal detrended fluctuation analysis (MFDFA).
- Estimated the fractional integrating parameter and computed the Hurst exponent to measure long memory.
- Analyzed daily BECI data (upper bound, lower bound, average) from February 2017 to January 2022.
Main Results:
- Found strong autocorrelation in distant series observations, indicating long memory in most BECI data.
- Observed mean-reversion in the first difference of the data series.
- Confirmed the persistent nature of Bitcoin's energy consumption patterns.
Conclusions:
- The presence of long memory supports the implementation of permanent policies for alternative energy in Bitcoin mining.
- Transitory policies may become ineffective due to the persistent nature of energy consumption.
- Alternative consensus mechanisms (proof-of-stake, proof-of-space) or carbon policies (taxes, credits) are suggested to mitigate environmental damage.
Keywords:
Bitcoin carbon footprintBitcoin miningFIGARCHHurst exponentMFDFAenergy consumptionlong memorypermanent policyMore Related Videos
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