ESG Aspects of Cryptoassets

This report on ESG Aspects of Cryptoassets aims to address the prevailing misconceptions surrounding the energy consumption associated with Bitcoin mining. It highlights that Bitcoin’s absolute energy consumption is actually lower than that of traditional monetary and payment systems it seeks to disrupt. Comparatively, both gold mining and the legacy financial system consume a greater amount of energy than Bitcoin mining. Additionally, the Bitcoin mining industry is recognized as one of the most sustainable sectors globally in terms of its energy mix.

The fiat monetary system, in contrast, presents several negative externalities, including recurring asset price bubbles, systemic banking crises, and pervasive inflation, which erode purchasing power. These negative effects could be mitigated by adopting a hard money standard based on a scarce asset like Bitcoin.

Furthermore, Bitcoin mining companies are actively addressing concerns related to carbon emissions and promoting strategies to reduce them. The variability in electricity demand from Bitcoin mining can stabilize the electric grid and encourage the growth of renewable energy sources such as wind and solar power. Moreover, repurposing wasted heat and utilizing flared and vented gas in Bitcoin mining contribute significantly to a net reduction in carbon emissions. The industry also supports carbon-offset projects. Notably, the ongoing progress of Moore’s Law is expected to drive continuous improvements in energy efficiency in the future.

Rather than condemning Bitcoin mining, it is crucial for environmental organizations to recognize its substantial role in achieving net-zero emissions and mitigating the negative externalities associated with the current fiat monetary system. Bitcoin mining contributes to both societal and environmental benefits, warranting acknowledgment and collaboration for a more sustainable future.

The ”View From The Citadel” deep dive report on ESG Aspects of Cryptoassets is written by André Dragosch, Head of Research at Deutsche Digital Assets.

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