An Analysis of the Environmental Impacts of Crypto Assets

In 2008, Bitcoin, the first crypto asset, came to the forefront as a means of exchange that could undermine state authority with its decentralized structure based on blockchain infrastructure. A few years after the release of Bitcoin, its popularity increased and it took its place in financial markets. At the same time, other crypto assets with similar infrastructures, such as Ethereum, emerged as competitors to Bitcoin, claiming to be faster, more efficient, and more environmentally friendly. Nevertheless, Bitcoin still constitutes more than half of the crypto asset market today. Although environmentalism is frequently discussed, the electricity consumption used for the production and use of crypto assets and the environmental impacts resulting from this consumption are not sufficiently addressed. The level of carbon dioxide emissions, one of the main contributors to global warming, continues to increase day by day. In this study, the contribution of the production and use processes of crypto assets to carbon dioxide emissions, either directly or indirectly, will be examined, and their place in total energy consumption and their environmental impacts will be investigated. Although there are other crypto assets such as Ethereum with more efficient and less energy-consuming infrastructures called Proof of Stake, Bitcoin still plays a major role in the crypto asset market. According to the findings of the analysis conducted using the Driscoll-Kraay Estimator, energy consumption, Bitcoin transaction volume, and foreign direct investment have a statistically significant and positive effect on carbon dioxide emissions. Renewable energy consumption has a statistically significant and negative effect on carbon dioxide emissions. According to the result of the interaction coefficient in which Bitcoin transaction volume and primary energy consumption are evaluated together, these two variables have a statistically significant and negative effect on carbon dioxide emissions, indicating that their marginal impact on emissions decreases. Keywords: Crypto Assets, Energy Consumption, Environmental Sustainability, Driscoll-Kraay Estimator, Panel Data.