Tesla has just given bitcoin a big boost that is likely to lead to more greenhouse gas emissions through the energy-hungry crypto-currency. 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, honestly a more believable endorsement than one that comes from people like Elon [Musk] what the future holds, ”says Garrick Hileman, head of research at crypto-asset company blockchain.com and a visiting fellow at the London School of Economics.
When prices are high, bitcoin’s ‘mining’ rises – creating new currencies by verifying transactions. But while mining is practically taking place, it is leading to greenhouse gas emissions that are fueling a real-world climate crisis. This is contrary to Tesla’s mission to “accelerate the world’s transition to sustainable energy.” With its embrace of bitcoin, it is accelerating the rise of a cryptocurrency that is swallowing energy quite unsustainably or at least inefficiently. according to design.
Bitcoin was created to eliminate the need for a third party, such as a bank, to oversee financial transactions. But without a bank’s security systems, bitcoin records are kept safe and accurate by requiring miners to solve ultra-complex numerical problems. Miners need energy-hungry machines to solve these problems, which are driving the climate pollution associated with bitcoin. This is a system called ‘proof of employment’, which is deliberately difficult to dissuade people from taking over the records. It is also becoming expensive to mine bitcoin because of the cost of the machines and all the energy it pumps.
“It has to be more profitable to play by the rules than to cheat, that’s actually the whole idea behind it all,” says Michel Rauchs, a research subsidiary at the Cambridge Center for Alternative Finance. “And the only way you can do it reliably online is by burning electricity through the computer puzzles.”
If bitcoin were a country, its annual electricity consumption would rank 30th in the world. According to the Cambridge Center for Alternative Finance, which maintains an updated estimate of bitcoin’s energy consumption, it uses just less than the amount of energy Norway consumes and slightly more than Argentina. The energy consumption of Bitcoin has been rising steadily since October as the price of bitcoin has risen. The bubble may burst, but Tesla’s bid for bitcoin has given the price of bitcoin – and the release of carbon dioxide – an extra boost.
“I think it’s worrying that there is no tool to reduce the impact other than the price,” said Susanne Köhler, a doctor at Aalborg University in Denmark, who published an article on bitcoin’s environmental impact in 2019. . The machines that exploit bitcoin have become more efficient over time, but this has not solved the energy problem of bitcoin. Because bitcoin is built on the basis of inefficiency, its mysteries become more and more difficult as devices solve it better.
“This is something that as long as that ‘proof of work’ mechanism does not change, the situation will not change in the future, ‘says Rauchs. ‘The higher the bitcoin price, the more profitable it is to mine. So, the more miners want to participate in the competition, and the more electricity, if any, will be burned – no matter how energy efficient the underlying equipment is. ”
Other cryptocurrencies have begun to move away from using ‘proof of work’ as a kind of security system, Köhler points out. Emerging alternatives do not drain as much energy. For example, a model called ‘proof of stake’ does not require as many complex puzzles to validate transactions. Climate-conscious consumers may want to keep such differences in mind, whether they are interested in cryptocurrencies or electric vehicles.
Buyers worried about climate change may want to consider electric vehicles from other carmakers, says John Quiggin, a professor of economics at the University of Queensland, who calls Tesla’s decision in an email “environmental vandalism”. “If you’m worried about the energy transition, you might want to look at General Motors, which may be late for the party, but at least you can not imagine them going to use bitcoin,” Quiggin said in an interview.
Tesla’s $ 1.5 billion purchase of bitcoin would technically inflate its carbon footprint as a company. If it is considered an investment, it will be part of the company’s “indirect” emissions. Indirect emissions also include pollution in the supply chain and through the use of its products. These indirect emissions already make up a majority of Tesla’s carbon footprint, as for many companies, according to its 2018 sustainability report, however, it did not disclose figures for its indirect emissions as a company in its 2019 report.
Finding out the entire carbon footprint of bitcoin is even harder. Miners are regularly on the move, chasing cheap electricity wherever they can get it. The source of the electricity is difficult to locate. Most bitcoin is mined in China, where it can be fed by dirty coal or renewable hydropower that is plentiful during the wet season in the country.
The future carbon footprint of Bitcoin is also difficult to analyze. New rules and policies, such as setting deadlines to boost clean energy or imposing a carbon tax on bitcoin mining, could eventually reduce the toll of bitcoin on the climate. But without a coordinated global effort to tackle climate change, miners can move to evade regulations on bitcoin and its energy consumption.
Fortunately, the dirtiest predictions of a bitcoin-powered energy apocalypse have not come true. A 2017 study predicted that bitcoin mining would eat up all the world’s energy by 2020. While 2020 had many problems, it was not one of them.