mesmerice resilient cyber-physical systems for enhanced security

The project compiles a method to assess the negative externalities caused by crypto-assets and proposes regulatory measures to reduce them.

The project at a glance

Start date:

01 Jul 2024
Duration in months:

13
Funding:

DG-FISMA
Principal Investigator(s):

Gilbert FRIDGEN

Laurent Zibell (external)

About

The rapid development of crypto-assets based on distributed ledger technologies offers potential benefits for the EU economy but also raises concerns about energy use and wider environmental impacts. In response, the European Commission launched a preparatory action on the “development of a methodology and sustainability standards for mitigating the environmental impact of crypto-assets”. MESMERICE synthesised and extended existing research to build an independent, life-cycle based methodology for quantifying the environmental, social and governance impacts of crypto-asset consensus mechanisms. Using the EU Environmental Footprint approach, the study assessed five major crypto-assets (Bitcoin, Ethereum, Solana, XRP and DAI) and benchmarked them against traditional financial services. The results show that most assessed crypto-assets provide services with relatively low environmental impact, broadly comparable to or lower than conventional payment and value-storage options. However, Proof-of-Work (the consensus mechanism used by Bitcoin) has orders-of-magnitude higher electricity use and greenhouse gas emissions, with global annual emissions estimated at around 74 MtCO₂e and energy use projected to grow further towards 2030. The study also highlights concentrated validation, governance vulnerabilities and slightly weaker social conditions in crypto-related data centres. Building on this evidence, MESMERICE explored options for an EU sustainability standard. It identified feasible voluntary and targeted mandatory measures, especially for crypto-asset service providers, such as limiting portfolios to energy-efficient crypto-assets and improving disclosure and governance profiles, thereby supporting the implementation of MiCAR and wider EU sustainable-finance policies.

Organisation and Partners

Digital Financial Services and Cross-Organisational Digital Transformations Research Group (FINATRAX)
Interdisciplinary Centre for Security, Reliability and Trust (SnT)
Trinomics