Not even a month ago, Bitcoin found a drastically sharp
crash following several questionable tweets concerning
Tesla’s plan to dump the cryptocurrency. The drop comes
as no surprise, however, as Elon Musk continues to be
Bitcoin’s biggest influence.
Musk has been one of Bitcoin’s earliest supporters, and his famous tweets have only promoted the cryptocurrency to thrive in past years. But, his recent Twitter conversations have only encouraged a dip in Bitcoin’s value as he hinted at their “breaking up” with a Linkin Park meme and a broken heart emoji. After all they’ve been through, is Musk’s relationship with Bitcoin coming to an end?
To give you an idea of why Elon Musk has decided to take a step back from Bitcoin, we’ll dive deep into cryptocurrency mining and whether it has anything to do with the Tesla CEO’s big decision.
As many users know, Bitcoin—the virtual
currency—operates on software that records all
transactions and data. The digital ledger is what is
called a “blockchain.”
Blockchain is the primary reason why Bitcoin works. Blockchain is a type of distributed ledger technology, which records individual transactions with cryptographic signatures, or hashes. Each block is individually encrypted. With millions of users worldwide, and the consistent addition of blocks to the chain, Bitcoin’s blockchain only gets more secure with use. No one “owner” or overall controller of the software means that nobody can steal or cheat the system from behind the scenes.
When a Bitcoin transaction is made, a unique “key” is created and sent to a network—or a computer farm. Here, people employ supercomputers to help do the complex math and verify the transaction. Once it’s verified, a new block is created and added to the chain, providing its encrypted record. This process is called “mining.” People can assist in verifying transactions, and with each new block that a miner adds to the chain, they’re rewarded with bitcoins.
So, what does Bitcoin mining have to do with Musk’s
Back in March, Tesla’s CEO claimed that the company would begin accepting Bitcoin for purchases shortly. However, only a few months later, Musk went back on his decision to accept BTC payments and, instead, tweeted Tesla’s latest policy in May, which explained that “Tesla has suspended vehicle purchases using Bitcoin. We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions.”
Minutes after Musk sent the tweet, Bitcoin’s value dipped approximately 7 percent. Nonetheless, Musk explains that Tesla still believes in the potential of cryptocurrency within the economy; however, they won’t accept any kind unless it can report less than 1 percent of Bitcoin’s fossil fuel emissions.
Many BTC supporters were outraged after Musk’s
claims—cryptocurrency versus carbon emissions has not
necessarily been a secret; so, why did he support
Bitcoin until now?
The reason behind Musk’s sudden swerve on Bitcoin isn’t blatant. However, plenty of ideas have been tossed around regarding his seemingly unexpected worry about carbon emissions. Some suspect Musk merely didn’t understand the carbon footprint that crypto mining has until now, while others claim that can’t be true due to Bitcoin’s not-to-subtle impact on the environment.
Other speculations allege that company regulations may have impacted Tesla’s decision. Tesla’s return policy for Bitcoin payments worked out in their favor as customers would only get back the equivalent dollar amount of the original purchase when Bitcoin was valued higher. The policy may have easily led to many risks with accounting, warranties, and other consumer protection laws in the United States.
Despite plenty of backlash and criticism from various
crypto advocates, including Peter McCormack, who
that Musk’s decision concerning Bitcoin’s fossil fuel
emissions was “poorly informed,” information has
surfaced about cryptocurrency’s sustainability. After
all, it seems impossible for a digital currency to have
environmental implications. But, following a rocky
fallout with BTC, could Elon Musk be right?
Believe it or not, Bitcoin mining is incredibly energy-extensive, with a power network that uses an excessive amount of real-world energy. The network, with many hands mining Bitcoin at all times, can handle at least 176 quintillion computations per second. Not to mention, the Bitcoin network alone utilizes more energy than entire countries, including Sweden, Argentina, Pakistan, and Malaysia, use within a year. As the value of Bitcoin increases, energy efficiency becomes less of a concern. Blocks will become more difficult to compute as transactions become larger, ultimately using more and more energy over time.
The primary concern with using excessive amounts of energy is the energy sources. China is home to at least 65 percent of Bitcoin miners, where they rely on coal as their main energy source. Among other commonly-used fossil fuels, coal is one of the largest contributors to carbon emissions. Burning coal results in carbon dioxide production, which, in turn, negatively impacts the environment and encourages climate change. Bitcoin mining claims approximately 36 million tons of carbon dioxide emissions every year.
Although Elon Musk has encouraged a considerable decrease in Bitcoin’s value since his public dump on Twitter, the tech billionaire has his reasons. As a major supporter of BTC, Musk did his best to take a step in a sustainable direction. Until it chooses more energy-efficient practices for mining cryptocurrency, who knows what’s in store for Bitcoin next?