A recent paper by Sweden’s central bank, Riksbank, explored the potential climate impact of retail central bank digital currency (CBDC) models. While it found the energy usage of a DLT-based e-krona could be similar to that of cards, it depends on the design, particularly the degree of decentralization. It’s assumed that volumes would be on the scale of cash usage.
The authors outlined three models, including a centralized, semi-centralized and decentralized model. In all cases, the central bank is the sole issuer of the CBDC and verifies all transactions.
From an energy perspective, the paper concluded that a semi-centralized blockchain might be desirable, because a larger number of nodes for a more decentralized network would use more energy. Any blockchain adopting Bitcoin-style Proof of Work is out of the question, but Proof of Stake and any flavor of Byzantine Fault Tolerant (BFT) consensus is likely palatable.
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