Elon Musk says Tesla won’t use or accept bitcoin until he can be sure it’s produced sustainably. But he may be waiting some time.
Musk announced his new position in a major U-turn on Wednesday, prompting speculation among some experts about whether he had a plan to wean the crypto industry off the fossil fuels that power “mining,” the energy-intensive process that creates coins.
Tesla could itself take an active role in helping make bitcoin greener by investing in new projects aimed at boosting the use of renewable energy in mining, according to more than a dozen cryptocurrency specialists.
Musk and Tesla certainly have the resources to support existing efforts to fully move bitcoin to renewable energy. But such ventures could take years to get off the ground.
Another potential route is for Tesla to shift from bitcoin to more eco-friendly digital currencies that don’t rely on mega-computers spawning new tokens, according to experts.
Yet this too presents major headaches, not least gaining broad crypto industry agreement for software changes and resolving regulatory concerns over smaller coins.
Musk tweeted that while Tesla would no longer accept payment in bitcoin – two months after announcing that it would – the company wouldn’t sell its bitcoin holdings, instead intending to use them when mining became greener energy.
Tesla is also looking at other cryptocurrencies that use less than 1% of the energy burned by bitcoin, he added.
It is highly unlikely that Musk had been unaware until now of the environmental concerns surrounding bitcoin production.
The move may represent an attempt to bolster Tesla’s environmental credentials amid growing competition in the electric vehicle sector, says Sasja Beslik, head of sustainable business development at Bank J Safra Sarasin in Zurich.
“My indication of this is that it is a way to further strengthen the brand,” he said. “It’s up to them to hold any currency they want. But given the fact that it has a heavy CO2 footprint...it is a challenging thing.”
After his original tweet, Musk followed the next day with a chart showing bitcoin’s power consumption.
“Energy usage trend over past few months is insane,” he wrote.
Environmentalists have criticised bitcoin’s energy consumption and its reliance on fossil fuels for years, not months.
“As it stands, the use of bitcoin doesn’t align with Tesla’s own mission statement,” said Alex De Vries, founder of research platform Digiconomist.
“That’s not something that suddenly happened during the past two months in which Tesla first decided to accept bitcoin.
“The network was already running on fossil fuels like Chinese coal — nothing has really changed in such a short timeframe.”
Bitcoin mining uses about the same amount of energy annually as Egypt did in 2019, data from the University of Cambridge shows.
Much of it is powered by coal, the dirtiest of all fossil fuels.
Chinese miners accounted for about 70% of production, data from the university shows.
Many use fossil fuels, switching to renewables like hydropower during the rainy summer months.
Tesla could invest in greener mining options. It could create by itself groups of bitcoin miners that use green energy, or connect customers to mining pools.
Projects globally are looking for ways to shift bitcoin mining towards cleaner energy, or at least to reduce its carbon footprint, from repurposing heat generated by mining using flare gas — a by-product from oil extraction — for crypto mining.
Payments company Square Inc, run by Twitter CEO Jack Dorsey, last year said it would give $10mn to support firms boosting the use and efficiency of renewables in the bitcoin sector.
In theory, blockchain experts have said, it would be possible to track which bitcoins have been produced sustainably, also giving Tesla an option to only accept greener bitcoins.