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NATURE COMMUNICATIONS | https://doi.org/10.1038/s41467-021-22256-3 ARTICLE relocated to conduct Bitcoin mining operation in the hydro-rich area in the SR scenario. Consequently, this naturally lowers the associated carbon emission cost in comparison to the BM scenario. In general, the carbon emission intensity of the Bitcoin blockchain still far exceeds the average industrial emission intensity of China under different policy interventions, including limiting Bitcoin mining access, altering the miner energy consumption structure and implementing carbon emissions tax. This result indicates the stable high carbon emission property of Bitcoin blockchain operations. Nevertheless, it is rather surprising to arrive at the conclusion that the newly introduced cryptocurrency based on disruptive blockchain technology is expected to become an energy and carbon-intensive industry in the near future. Discussion The current Proof-of-Work consensus algorithm used in the Bitcoin blockchain can potentially undermine the wide imple- mentation and the operational sustainability of the disruptive blockchain technology. Overall, Bitcoin is a typical and pioneer- ing implementation of blockchain technology. Its decentralized transaction characteristics and consensus algorithm provide a novel solution for trust mechanism construction, which can be beneficial and innovative for a variety of industrial development and remote transactions. In recent years, blockchain technology has been introduced and adopted by abundant traditional industries which seek to optimize their operation process in the real world28, such as supply chain finance29, smart contract30, international business and trade31, as well as manufacturing operations32. In addition, a national digital currency based on blockchain technology, namely Digital Currency Electronic Pay- ment (DCEP), is scheduled and designed by The People’s Bank of China, which is expected to replace the current paper-currency- based M0 supply in China. However, the current consensus algorithm of Bitcoin, namely Proof-of-Work, gives rise to the hash rate competitions among Bitcoin miners for its potential block reward, which attracts an increasing number of miners to engage in an arms race and raise the energy consumption volumes of the whole Bitcoin blockchain. As a result, although PoW is designed to decentralize Bitcoin transactions and prevent inflation, we find that it would become an energy and carbon-intensive protocol, which eventually leads to the high carbon emission patterns of Bitcoin blockchain operation in China. The evidence of Bitcoin blockchain operation suggests that with the broaden usages and applications of blockchain technology, new protocols should be designed and scheduled in an environmentally friendly manner. This change is necessary to ensure the sustainability of the network—after all, no one wants to witness a disruptive and promising technique to become a carbon-intensive technology that hinders the carbon emission reduction efforts around the world. The auditable and decentralized transaction properties of blockchain provide a novel solution for trust mechanism construction, which can be bene- ficial and innovative for a variety of industrial development and remote transactions. However, the high GHG emission behavior of Bitcoin blockchain may pose a barrier to the worldwide effort on GHG emission management in the near future. As a result, the above tradeoff is worthy of future exploration and investigation. Different from traditional industries, the carbon emission flows of emerging industries such as Bitcoin blockchain operation are unaccounted for in the current GDP and carbon emissions cal- culations. Without proper accounting and regulation, it is rather challenging to assess the carbon emission flows of these new industries using traditional tools such as input–output analysis. Through system dynamics modeling, our analysis constructs the emission feedback loops as well as captures the carbon emission patterns. Furthermore, we are able to conduct emission assess- ment and evaluate the effectiveness of various potential imple- mentable policies. Through scenario analysis, we show that moving away from the current punitive carbon tax policy con- sensus to a site regulation (SR) policy which induces changes in the energy consumption structure of the mining activities is more effective in limiting the total amount of carbon emission of Bit- coin blockchain operation. Overall, our results have demonstrated that system dynamics modeling is a promising approach to investigate the carbon flow mechanisms in emerging industries. At the same time, we acknowledge there exists some limitations to our study and outline future directions for research. First, to reflect the true designed fundamental value of Bitcoin as intended by Nakamoto, our model assumes that the long-term Bitcoin price is primarily influenced by halving mechanism of Bitcoin mining rewards and is subjected to a linear increase every time a reward halving occurs. While the historical average Bitcoin price between each reward halving occurrence has generally followed this pattern since 2014, it is extremely volatile in real market operation and is subjected to the influence of other factors such as investor expectations. Therefore, a degree of uncertainty remains as to whether the linearity price assumption would hold, parti- cularly as the Bitcoin market continues to grow into the future. Furthermore, our site regulation (SR) scenario assumes no cost on miners from relocating to clean-energy-based regions. In reality, there may be certain costs associated with this action, such as transportation. Therefore, although our results suggest that a site regulation (SR) policy may be more effective that the current punitive carbon tax policy consensus in limiting the total amount of carbon emission of Bitcoin blockchain operations, it is important to note that these are simulations arising from system dynamics modeling and are limited by the assumptions above. Second, the projected carbon emissions of Bitcoin blockchain operation related to electricity production depends on the source which is used for its generation. In all of except for the Site Reg- ulation (SR) scenario, we do not consider the potential changes of the Chinese energy sector in the future, which implies that miners would predominantly operate in the coal-based area. While this is certainly true as the current electricity mix in China is heavily dominated by coal, a series of efforts to incentivise electricity production on the basis of renewable energy sources (www.iea.org) and policies to increase the price for electricity generated on the basis of coal have been implemented. Consequently, these renew- able energy-related efforts and policies can potentially affect the electricity consumption and subsequently, the amount of related carbon emission generated from Bitcoin blockchain operation. Third, it is important to note that although our results suggest that with the broaden usage and application, blockchain tech- nology could become a carbon-intensive technology that hinders the carbon emission reduction efforts around the world, as with any prediction model, many unforeseeable uncertainties could happen in the future that could cause the reality to deviate from the prediction. While it is true the blockchain technology, and Bitcoin as one of its applications, is, and increasingly will play a significant role in the economy, ultimately, the choice of adopting and using this technology lies in the hands of humans. Conse- quently, we should carefully evaluate the trade-offs before applying this promising technology to a variety of industries. Methods This paper constructs a BBCE model to investigate the feedback loops of Bitcoin blockchain and simulates the carbon emission flows of its operations in China. In view of the complexity of Bitcoin blockchain operation and carbon emission process, the BBCE modeling for Bitcoin carbon emission assessment is mainly based on the following assumptions: (1) The electricity consumption of the Bitcoin mining process mainly consists of two types of energy: coal-based energy and hydro-based energy. (2) Bitcoin price is extremely volatile in real market NATURE COMMUNICATIONS | (2021)12:1938 | https://doi.org/10.1038/s41467-021-22256-3 | www.nature.com/naturecommunications 7PDF Image | carbon emission flows and sustainability of Bitcoin blockchain
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