As Tesla Halts Use Of Bitcoin Over Energy Use Concerns, Here Are The Environmental Issues With Cryptocurrency

by Bhaswati Guha Majumder - May 14, 2021 10:55 AM +05:30 IST
As Tesla Halts Use Of Bitcoin Over Energy Use Concerns, Here Are The Environmental Issues With CryptocurrencySpaceX, Tesla and Neuralink co-founder Elon Musk. (Mark Brake/Getty Images)

Tesla CEO Elon Musk has announced that the company will suspend the use of Bitcoin for the purchase of vehicles, citing environmental issues related to the cryptocurrency.

The billionaire wrote on Twitter: "We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel."

Following this announcement, the price of Bitcoin plunged by more than 11 per cent.

In February 2021, Tesla announced that it would start accepting Bitcoins as a payment mode for its electric vehicles.

At that time the company also said that it has already bought $1.5 billion (roughly Rs. 10,930 crores) worth of this cryptocurrency, before accepting it as payment for cars in March—that caused a roughly 20 per cent surge in Bitcoin.

The decision to reject Bitcoin payments is unusual, especially in the case of Musk who has been a very vocal supporter of cryptocurrencies.

Earlier his aerospace company SpaceX also announced that it will launch a satellite funded entirely by another cryptocurrency, Dogecoin, to the Moon in the first quarter of next year.

It is unclear whether he has second thoughts about the cryptocurrency funded satellite project.

However, just a few days ago, on 11 May, Musk asked his followers on Twitter that whether Tesla should accept Dogecoin, a cryptocurrency that became popular thanks to the billionaire’s frequent tweets about the memecoin.

Cryptocurrency And Environmental Issues

These digital currencies have their own regulations and are created through a process called mining.

The process includes the usage of computers which solve complex mathematical algorithms.

As cryptocurrency is being mined more and more, this algorithm keeps getting longer and more complex—and average computers fail to do.

So, to mine cryptocurrencies, special computers with colossal processing powers are required which consume a massive chunk of the electricity supply.

Mining cryptocurrency is a very energy-intensive process that usually relies on electricity, generated with fossil fuels, specifically coal.

Some studies also claim that bitcoin stands a significant chance to accelerate global warming while producing carbon dioxide that could push the world’s temperature above 2 Degree Celsius within less than three decades.

According to the latest data from the University of Cambridge, bitcoin consumes over 178 Terawatt-hour (TWh) annually, ranking it in the top 30 energy consumers if it was a country.

Edward Moya, a senior market analyst at the currency trading firm OANDA believes that the environmental impact from bitcoin mining was one of the biggest risks from the entire crypto market.

According to Ben Dear, CEO of Osmosis Investment Management: "We are of course very concerned about the level of carbon dioxide emissions generated from bitcoin mining."

As reported, Dear’s company is an investor managing almost $2.2 billion in assets that hold Tesla stock in several portfolios.

Meltem Demirors, chief strategy officer at digital asset manager CoinShares Group, said: "Elon was getting a lot of questions and criticisms and this statement allows him to appease critics while still keeping Bitcoin on his balance sheet."

However, in the recent Tweet Musk did not clarify whether there was any Tesla vehicle sold using bitcoins.

But he noted that Tesla is looking at other cryptocurrencies which use “<1 per cent of Bitcoin's energy/transaction".

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