Do Crypto Investors Care about Energy Use and Climate Change? Evidence from Ethereum’s Transition to Proof-of-Stake

25 Pages Posted: 13 Feb 2024

See all articles by Dirk G. Baur

Dirk G. Baur

University of Western Australia - Business School; Financial Research Network (FIRN)

Jonathan R. Karlsen

The University of Western Australia; Digital Finance CRC

Date Written: January 15, 2024

Abstract

This paper analyses the transition of Ethereum (ETH) from the energy-intensive Proof-of-Work (PoW) to the less energy-intensive Proof-of-Stake (PoS). We analyze returns, volatility, return correlations and volume of ETH, ETC and Bitcoin for all events in the lead-up to the actual change from PoW to PoS also labelled “the merge.” The analysis suggests that some investors value the less energy-intensive mining mechanism and invest in ETH. However, since the overall effect is weak, we conclude that despite all the media attention and the stated concerns about the high energy-intensity of Bitcoin and PoW, most investors do not react to the change with an increased investment in Ethereum.

Keywords: Ethereum, Bitcoin, Proof-of-Stake (PoS), Proof-of-Work (PoW), ESG, carbon emissions, climate change

JEL Classification: G18, O31, O32, O33, Q02

Suggested Citation

Baur, Dirk G. and Karlsen, Jonathan R., Do Crypto Investors Care about Energy Use and Climate Change? Evidence from Ethereum’s Transition to Proof-of-Stake (January 15, 2024). Available at SSRN: https://ssrn.com/abstract=4695229 or http://dx.doi.org/10.2139/ssrn.4695229

Dirk G. Baur (Contact Author)

University of Western Australia - Business School ( email )

School of Business
35 Stirling Highway
Crawley, Western Australia 6009
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Jonathan R. Karlsen

The University of Western Australia ( email )

35 Stirling Highway
Crawley, WA Western Australia 6009
Australia

Digital Finance CRC ( email )

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