Tesla has only given a big boost to bitcoin, which is likely to result in more greenhouse gas emissions from energy-hungry cryptocurrencies. After Tesla bought $ 1.5 billion in bitcoin and announced that it would accept bitcoin as payment in the future, the price of bitcoin reached an all-time high.
“It’s hard to imagine, frankly, more credible endorsement than it comes from people like Elon [Musk] who figure out the future, ”says Garrick Hileman, head of research at cryptographic device company blockchain.com and a visiting fellow at the London School of Economics.
When prices are high, bitcoin “mining” – creating new coins by controlling transactions – spins up. Even though this mining is practically done, it results in greenhouse gas emissions that cause a climate crisis in the real world. This runs counter to Tesla’s mission to “accelerate the world’s transition to sustainable energy”. By embracing bitcoin, it accelerates the rise of a cryptocurrency that absorbs energy quite unsustainably, or at least inefficiently, According to Plan.
Bitcoin was created to eliminate the need to oversee financial transactions for a third party, such as a bank. But without the bank’s security systems, bitcoin records are kept safe and accurate as miners are required to solve ultra-complex numerical problems. Miners need energy-intensive machines to solve these problems, which controls the climate pollution associated with bitcoin. This is a system called ‘proof of work’ that is intentionally difficult in order to dissuade people from trying to take over or damage records. Bitcoin mining also becomes expensive due to the cost of the machines and all the energy they dazzle.
“It should be more profitable to follow the rules than fraud, in fact, this is the whole idea behind it all,” says Michel Rauchs, a research fellow at Cambridge’s alternative financial center. “And the only way you can do it online in a reliable way is to burn electricity through computer puzzles.”
If bitcoin were a country, its annual electricity consumption would rank 30th in the world. It barely uses the amount of energy consumed by Norway, and slightly more than Argentina, says the Cambridge Center for Alternative Finance, which keeps up-to-date estimates of bitcoin’s energy consumption. Bitcoin energy consumption has been rising steadily since October as bitcoin prices soared. This bubble may burst, but Tesla’s bid for bitcoin has increased the price of bitcoin – and its carbon footprint.
“I think I’m concerned that there doesn’t seem to be a tool to reduce the impact other than price,” says Susanne Köhler, a PhD fellow at Aalborg University in Denmark, who published an article in 2019 on the environmental impacts of bitcoin. Bitcoin mining machines became more efficient over time, but this did not solve the energy problem of bitcoin. As bitcoin is built on a lack of efficiency, its puzzles become more and more difficult as the tools solve them more and more.
“This is something as long as the mechanism of‘ proof of work ’does not change, this situation will not change in the future,” Rauchs says. “The higher the price of bitcoin, the more profitable mine is. So the more miners you want to compete in, and the more electricity will burn out – no matter how energy efficient the underlying equipment is. “
Other cryptocurrencies have begun to move away from using “proof of work” as a form of security, Köhler points out. Emerging alternatives do not draw as much energy. For example, a model called “proof of bet” does not require as many complex puzzles to validate transactions. Climate-conscious consumers should keep this kind of difference in mind, whether they are interested in cryptocurrencies or electric vehicles.
Buyers worried about climate change may also consider electric vehicles from other automakers, says John Quiggin, a professor of economics at the University of Queensland who called Tesla’s decision “environmental vandalism” in an email. “If you’re worried about the energy transition, maybe you should look at General Motors, who may be late for the party, but at least he can’t imagine they’re going to go into bitcoin,” Quiggin said. an interview.
Tesla’s $ 1.5 billion purchase of bitcoin would technically increase Tesla’s carbon footprint. If it is considered an investment, it will be part of the “indirect” output of the company. Indirect emissions also include pollution along the supply chain and from the use of its products. These indirect emissions already account for the majority of Tesla’s CO2 emissions, as is the case for many companies, According to its 2018 Sustainability Report. However, the company’s indirect issuance number was not disclosed in its 2019 report.
Guessing the total carbon footprint of bitcoin is even more complicated. Miners are often on the move and chase cheap electricity wherever they can get it. The source of this current is difficult to trace. Most bitcins are mined in China, where they are fed by dirty coal or renewable hydropower plants that are plentiful during the country’s wet season.
The future carbon footprint of Bitcoin is similarly difficult to analyze. New rules and policies, such as setting deadlines for increasing clean energy or imposing a carbon tax on bitcoin mining, could ultimately minimize climate change for bitcoin. But without a concerted global effort to tackle climate change, miners could circumvent the rules on bitcoin and its energy use.
Fortunately, the most severe predictions of bitcoin-driven energy apocalypse have not materialized. A 2017 study predicted that bitcoin mining would consume all of the world’s energy by 2020. While 2020 had many problems, this is not one of them.