Bitcoin Mining and Climate Damage

Monday, 26 August 2024

3:30 PM – 5:00 PM                            

Venue: Gaia Lecture Theatre 8 (#ABS-03-LT8)

Chairperson: Asst Prof Jinggong Zhang

Abstract

We propose a tractable dynamic equilibrium model to study the impact of Bitcoin mining on climate damage. To incorporate miners’ endogenous exit and entry with technology innovation, a critical modeling step is to draw on the idea of Dammon, Spatt, and Zhang (2001) and Ben Tahar, Soner, and Touzi (2010) to track the average operating costs rather than the exact operating costs, thus overcoming the difficulty of strong path-dependency incurred by the interaction among endogenous exit, entry, and technology innovation. The model can capture empirical co movements of miners’ computing power and mining revenue. The model predicts that Bitcoin mining is not economically sustainable in terms of long-term climate damage. This is joint work with Min Dai. Shuaijie Qian, and Ling Qin.

About the Speaker

Steven Kou is Allen and Kelli Questrom Professor in Finance at Boston University. He teaches courses on FinTech, quantitative finance, and risk management. Currently, he is a co-editor for Digital Finance and has served on editorial boards of many journals, such as Operations Research, Management Science, Mathematics of Operations Research, and Mathematical Finance. He is a fellow of the Institute of Mathematical Statistics and won the Erlang Prize from INFORMS in 2002. Some of his research results have been incorporated into standard MBA textbooks.