Carbon-Neutral Bitcoin for Nation States

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Abstract

Sovereign adoption of bitcoin, whether as legal tender or in treasury reserves, increases the profitability of energy-intensive bitcoin mining, creating significant carbon emissions. This paper explores methods for adopting bitcoin while mitigating or eliminating associated carbon emissions. We survey three solutions: regulation/taxation, carbon offsetting, and finally, state-directed or state-supported carbon-neutral mining, arguing for the advantages of the latter. We then compare two ways of executing this last approach: (1) the state must mine all its bitcoin holdings; (2) the state must mine the same percentage of mining as its percentage of all bitcoin holdings. We show that (2) is a superior method, and that a nation state can adopt bitcoin in a carbon-neutral manner with a relatively small investment in carbon-neutral mining. At present levels of bitcoin mining and bitcoin pricing, an annual allocation of around 1% of the state’s bitcoin holdings towards mining will suffice, and may generate a positive return. El Salvador is used throughout as a case study, and we make specific suggestions for how much El Salvador should mine to achieve carbon neutrality with respect to their bitcoin holdings.

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APA

Cross, T., & Bailey, A. M. (2023). Carbon-Neutral Bitcoin for Nation States. In Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics) (Vol. 13412 LNCS, pp. 55–65). Springer Science and Business Media Deutschland GmbH. https://doi.org/10.1007/978-3-031-32415-4_4

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