6 industry. Some Bitcoin stakeholders had already signed the Crypto Climate Accord, a private sector-led initiative launched in April 2021 that represents a commitment to increase the use of renewable electricity to 100% by 2030. Such commitments may need to be strengthened with compliance mechanisms to support their credibility. However, even if the Bitcoin mining industry manages to increase the use of renewable electricity
, the use of the latter for Bitcoin mining is not without its own controversy. In November 2021, the Swedish Financial Supervisory Authority and Environmental Protection Agency called fora ban on cryptocurrency mining over concerns that the use of renewable electricity for mining could delay the energy transition of essential services.
Furthermore, research on Bitcoin mining has shed light on a variety of ESG issues.
While they do not significantly contribute to the carbon emissions generated by the Bitcoin network, issues such as electronic waste generation cannot immediately be addressed merely by increasing the use of renewable electricity. A rapid solution to Bitcoin’s carbon footprint is not within sight. While other blockchain systems rely on more energy-efficient consensus mechanisms
, the likelihood of changing the proof of work mechanism in Bitcoin is negligible due to its enormous complexity. Even Ethereum, which established a goal to switch from proof of work to proof of stake since its inception six years ago
, still has not fully migrated to the more energy-efficient alternative. While Bitcoin accounts for roughly two thirds
of the total energy demand of all cryptocurrencies
, however, more energy-efficient consensus mechanisms have also elicited environmental concerns. For cryptocurrencies to succeed in mainstream finance, users, investors and other stakeholders must collectively shift incentives towards the use of more renewable electricity sources in networks to overcome environmental issues. If this transition succeeds
, cryptocurrencies may provide valuable lessons for other industries and processes that face similar environmental issues.