The environmental effects of cryptocurrencies
Shaen Corbet, Larisa Yarovaya · 2020
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.