Blockchain Consensus Protocols, Energy Consumption and Cryptocurrency Prices

29 Pages Posted: 20 Jun 2019 Last revised: 27 Nov 2019

See all articles by Niranjan Sapkota

Niranjan Sapkota

University of Vaasa

Klaus Grobys

University of Vaasa; University of Jyväskyla

Date Written: June 13, 2019


Cryptocurrencies employ different consensus protocols to verify transactions. While the Proof-of-Work consensus protocol is the most energy consuming protocol, Proof-of-Stake and Hybrid consensus protocols have been introduced which consume considerably less energy. We employ portfolio analysis to explore whether energy is a fundamental economic factor affecting cryptocurrency prices. Surprisingly, our results suggest that, on average, cryptocurrencies employing Proof-of-Work consensus protocols do not generate returns that are significantly different from those that incorporate Proof-of-Stake consensus protocols. Even more surprising is that our results show that cryptocurrencies that incorporate Hybrid consensus protocols generated significantly higher average return than the other groups. A possible explanation for that phenomenon may be that investors’ demand for cryptocurrencies that they perceive as offering more trust is larger than for those that carry potential risks of blockchain manipulation.

Keywords: Cryptocurrency, Bitcoin, Blockchain, Consensus protocol, Energy efficiency, Momentum

JEL Classification: G12, G14

Suggested Citation

Sapkota, Niranjan and Grobys, Klaus, Blockchain Consensus Protocols, Energy Consumption and Cryptocurrency Prices (June 13, 2019). Available at SSRN: or

Niranjan Sapkota

University of Vaasa ( email )

P.O. Box 700
FIN-65101 Vaasa, FI-65101

Klaus Grobys (Contact Author)

University of Vaasa ( email )

P.O. Box 700
Wolffintie 34
FIN-65101 Vaasa

University of Jyväskyla ( email )


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