Bitcoin’s productivity trap
Gill M, Stinner J, Tyrell M (2026)
Publication Type: Journal article
Publication year: 2026
Journal
Book Volume: 161
Article Number: 109505
DOI: 10.1016/j.eneco.2026.109505
Abstract
Input efficiency gains often decouple digital technologies from rising resource use as they scale. Does the same apply to Bitcoin’s resource-intensive Proof-of-Work (PoW) mechanism? This paper develops a formal framework to assess this question. Our results show that the efficiency effect does not occur. The reason is that the protocol embeds a perfectly competitive rent-seeking game with fixed output, placing Bitcoin in a productivity trap: efficiency gains expand resource use without increasing output. The mechanism is structural, as PoW computations serve solely as costly signals rather than productive output. Our model shows that efficiency gains from surplus renewable energy, while lowering CO2 emissions, induce additional mining activity which increases e-waste and may offset environmental benefits. A multilaterally implemented Pigouvian tax could correct these externalities without reducing network output, whereas unilateral taxation may exacerbate them through carbon leakage. This underscores both the theoretical possibility and the practical difficulty of achieving a “green Bitcoin.”
Involved external institutions
Germany (DE)How to cite
APA:
Gill, M., Stinner, J., & Tyrell, M. (2026). Bitcoin’s productivity trap. Energy Economics, 161. https://doi.org/10.1016/j.eneco.2026.109505
MLA:
Gill, Maximilian, Jona Stinner, and Marcel Tyrell. "Bitcoin’s productivity trap." Energy Economics 161 (2026).
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