Ethereum: Navigating the Blockchain’s Sustainability Versus Profit Dilemma

by Ernesto Dal Bó and Guo Xu

The popularity of Blockchain—and its application to cryptocurrencies in particular—has soared in recent years. Blockchain platforms are completely decentralized, relying on networks of participants to securely validate transactions without a central authority. Existing cryptocurrencies use a validation process called Proof of Work (PoW), a form of cryptography that requires a network of “miners” to commit their own computing power by solving complex cryptographic puzzles. Miners who create and publish new blocks are rewarded. But there is now a growing concern that the amount of electricity required to run PoW networks has become unsustainable: the Bitcoin network, for instance, requires the same amount of electricity as a small country. Vitalik Buterin, the co-founder of Ethereum, has proposed a new validation model called Proof-of-Stake (PoS). This case explores the challenges associated with incentivizing participants to transition in a more sustainable, but unproven new model.


Pub Date: November 1, 2020

Discipline: Ethics

Subjects: Ethics, Cryptocurrency, Blockchain, Financial technology, Energy, Environmental sustainability, Strategy, Stakeholders

Product #: B5964-PDF-ENG

Industry: Financial services, Internet services

Geography: United States, Switzerland

Length: 3 page(s)

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