The More You Know: Energy Labelling Enables More Sustainable Cryptocurrency Investments

Andreea-Elena Dragnoiu, Moritz Platt*, Zixin Wang, Zhixuan Zhou

*Corresponding author for this work

Research output: Chapter in Book/Report/Conference proceedingConference paperpeer-review

1 Citation (Scopus)
314 Downloads (Pure)

Abstract

The energy consumption of popular cryptocurrencies varies greatly: cryptocurrencies based on proof-of-work (e.g. Bitcoin) consume much more electricity than their counterparts that use alternative consensus mechanisms, such as proof-of-stake (e.g. Ethereum). Nevertheless, proof-of-work cryptocurrencies dominate the market. We investigate whether energy labelling, i.e., displaying electricity consumption information on centralized exchanges, influences consumers' product preferences. We conduct a control/treatment study: during this study, participants with an interest in cryptocurrencies (N = 200) are presented with a fictitious cryptocurrency exchange user interface. The treatment group is shown a user interface that displays energy labels, while the control group receives no information related to electricity consumption. Participants then declare how likely they are to acquire particular cryptocurrencies. We measure the treatment effect and find a significant negative correlation (p = 0.002) between being exposed to energy labels and expressing a strong preference for energy-inefficient cryptocurrencies. Based on this finding, we reflect on the sustainability issues of cryptocurrencies and discuss how energy labelling on centralized exchanges can be applied to nudge investors away from energy-inefficient cryptocurrencies. This indicates that regulators would be well advised to consider energy labelling to address the adverse climate impacts of cryptoassets.

Original languageEnglish
Title of host publicationProceedings - 2023 IEEE 43rd International Conference on Distributed Computing Systems Workshops, ICDCSW 2023
PublisherIEEE
Pages73-78
Number of pages6
ISBN (Electronic)9798350328127
DOIs
Publication statusPublished - 2 Nov 2023
EventWorkshop on Fintech and Decentralized Finance - Hong Kong, Hong Kong
Duration: 18 Jul 2023 → …
Conference number: 1

Publication series

NameProceedings - 2023 IEEE 43rd International Conference on Distributed Computing Systems Workshops, ICDCSW 2023

Workshop

WorkshopWorkshop on Fintech and Decentralized Finance
Abbreviated titleFiDeFix
Country/TerritoryHong Kong
CityHong Kong
Period18/07/2023 → …

Keywords

  • User Experience
  • Sustainable Finance
  • ESG Investing
  • Electricity Consumption
  • Energy Labels
  • Sustainability Indicators

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