Purpose This study investigates the impact of transitioning from the proof-of-work (PoW) to the proof-of-stake (PoS) consensus protocol on the relationship between cryptocurrency volatility and energy shocks. Design/methodology/approach We exploit the random nature of the transition to the PoS consensus algorithm as a quasi-natural experiment. We analyze this issue for the volatility processes of four digital currencies with high market capitalization using GARCH models. Findings Our cross-sectional findings suggest that after the transition to the PoS consensus protocol, cryptocurrency volatility becomes significantly less responsive to energy market shocks. Originality/value The findings of this study advocate for the migration from the energy-intensive PoW consensus protocol to the more environmentally sustainable PoS protocol. Moreover, this study advances the literature on green finance by documenting a strong case for cryptocurrency stakeholders to switch to the PoS protocol.
Grobys et al. (Tue,) studied this question.