FinTech Notes Volume 2022 Issue 006: Digital Currencies and Energy Consumption (2022)

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Digital Currencies and Energy Consumption

Author:

Mr. Itai Agur

Mr. Itai Agur
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https://orcid.org/0000-0002-6150-737X

Jose Deodoro

Jose Deodoro
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Xavier Lavayssière

Xavier Lavayssière
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Soledad Martinez Peria

Soledad Martinez Peria
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Mr. Damiano Sandri

Mr. Damiano Sandri
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Hervé Tourpe

Hervé Tourpenull

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, and

Mr. German Villegas Bauer

Mr. German Villegas Bauer
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Series:: Fintech Notes

Volume/Issue:: Volume 2022: Issue 006

Publication Date:: 07 Jun 2022

DOI:: https://doi.org/10.5089/9798400208249.063

ISBN:: 9798400208249

ISSN:: 2664-5912

Pages:: 30

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

Series:: Fintech Notes

Volume/Issue:: Volume 2022: Issue 006

Language:: English

Publication Date:: 07 Jun 2022

DOI:: https://doi.org/10.5089/9798400208249.063

ISBN:: 9798400208249

ISSN:: 2664-5912

Pages:: 30

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

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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.

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FinTech Notes

ISSN:: 2664-5912

Publisher:: International Monetary Fund

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