The Rise of Bitcoin, Economic Inequality and the Ecology

Abstract

What do we know about the interrelations between economic inequality, ecology and the increased use of Bitcoin? The aim of the paper was to empirically test the relationship between economic and ecological effects related to the increase in Bitcoin’s network hashrate in a selection of countries that have the highest influx of crypto-mining. To test these three types of relationships, I collected a dataset concerning Bitcoin indicators, economic indicators and ecological indicators that were obtained from multiple trustworthy sources: OECD, World Bank, Fred Data, World Inequality Database (WID). Handling the data challenges, I used this unique panel dataset to explore the relationship between Bitcoin’s hashrate and two types of outcomes: (i) economic outcomes (such as the GDP which as we know relates to inequalities through the Kuznets curve) or direct measures of inequality (such as, income inequality (GINI) and the share of people with top 1% of income and 1% of wealth), and (ii) ecological outcomes (such as carbon emissions, carbon footprint and electronic waste). I found that the Bitcoin currency associates with certain redistribution of wealth, but the accumulation of crypto-currency-related wealth itself remains still concentrated in the wealth of the top 1%. Also, there is evidence for certain nonlinearities in the relationships with the ecological degradation, echoing the concept of the Kuznets curve.