FinTech Notes

Digital Currencies and Energy Consumption

By Itai Agur, Jose Deodoro, Xavier Lavayssière, Soledad Martinez Peria, Damiano Sandri, Hervé Tourpe, German Villegas Bauer

June 7, 2022

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Itai Agur, Jose Deodoro, Xavier Lavayssière, Soledad Martinez Peria, Damiano Sandri, Hervé Tourpe, and German Villegas Bauer. Digital Currencies and Energy Consumption, (USA: International Monetary Fund, 2022) accessed November 21, 2024

Summary

Whether in crypto assets or in CBDCs, design choices can make an important difference to the energy consumption of digital currencies. This 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 and derives implications for the design of environmentally friendly CBDCs. For distributed ledger technologies, the key factors affecting energy consumption are the ability to control participation and the consensus algorithm. While crypto assets like Bitcoin are wasteful in terms of resources, other designs could be more energy efficient than existing payment systems.

Subject: Blockchain and DLT, Central Bank digital currencies, Digital currencies, Economic sectors, Financial crises, Financial markets, Payment systems, Technology, Virtual currencies

Keywords: Bitcoin, Blockchain and DLT, CBDC, CBDC user payment, Central Bank digital currencies, Central Bank Digital Currency, Crypto assets, Digital currencies, Distributed Ledger technology, DLT, Energy consumption, Energy efficiency, Environmental impact, FINTECH note, Global, Payment systems, Payments, Title page, User payment, Virtual currencies

Publication Details

  • Pages:

    30

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    FinTech Notes No 2022/006

  • Stock No:

    FTNEA2022006

  • ISBN:

    9798400208249

  • ISSN:

    2664-5912

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