Is Bitcoin's Carbon Footprint Persistent? Multifractal Evidence and Policy Implications release_t4xk5efrfvhljly3frv2b5uhka

by Bikramaditya Ghosh, Elie Bouri

Published in Entropy by MDPI AG.

2022   Volume 24, Issue 5, p647

Abstract

The Bitcoin mining process is energy intensive, which can hamper the much-desired ecological balance. Given that the persistence of high levels of energy consumption of Bitcoin could have permanent policy implications, we examine the presence of long memory in the daily data of the Bitcoin Energy Consumption Index (BECI) (BECI upper bound, BECI lower bound, and BECI average) covering the period 25 February 2017 to 25 January 2022. Employing fractionally integrated GARCH (FIGARCH) and multifractal detrended fluctuation analysis (MFDFA) models to estimate the order of fractional integrating parameter and compute the Hurst exponent, which measures long memory, this study shows that distant series observations are strongly autocorrelated and long memory exists in most cases, although mean-reversion is observed at the first difference of the data series. Such evidence for the profound presence of long memory suggests the suitability of applying permanent policies regarding the use of alternate energy for mining; otherwise, transitory policy would quickly become obsolete. We also suggest the replacement of 'proof-of-work' with 'proof-of-space' or 'proof-of-stake', although with a trade-off (possible security breach) to reduce the carbon footprint, the implementation of direct tax on mining volume, or the mandatory use of carbon credits to restrict the environmental damage.
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Type  article-journal
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Date   2022-05-05
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DOI  10.3390/e24050647
PubMed  35626532
PMC  PMC9141479
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