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Just over two months after Elon Musk’s Tesla shocked crypto investors by suspending Bitcoin (BTC) payments, the billionaire investor reopened the door. Musk says Tesla will accept Bitcoin payments again, as long as there is evidence that at least 50% of mining is powered by renewable energy.
Speaking at this week’s B Word Bitcoin conference, the crypto enthusiast said, “There appears to be a positive trend in Bitcoin’s energy consumption.” He explained that a large number of heavy-duty coal-fired power plants that were used for mining, especially in China, had been closed.
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Why did Tesla withdraw from Bitcoin payments?
When Tesla said in February that he would accept Bitcoin payments and had bought $ 1.5 billion worth of BTC, it was seen as proof that crypto was going mainstream. Indeed, some attribute the announcement to the start of the bull run that led to Bitcoin’s all-time high of over $ 64,000 in April.
However, in May, Musk announced that he would suspend Bitcoin payments due to environmental concerns. The move coincided with China’s crackdown on cryptocurrency exchanges and services, and cryptocurrency prices have started to fall across the board.
Musk explained the decision, “Tesla’s mission is to accelerate the interest in sustainable energy. We cannot be the company that does this and not exercise due diligence on the use of the bitcoin energy. “
He also pointed out that he – along with Tesla and SpaceX – intended to hold onto their Bitcoin. “I could pump, but I’m not vacuuming,” he said.
Why choose to accept Bitcoin payments again?
Musk began hinting in June that Tesla could accept Bitcoin payments if there was evidence of heavy use of renewables. This week he went further: “I think we want to do a little more due diligence to confirm that the percentage of renewable energy use is most likely equal to or greater than 50% and that there is a trend of increasing that number, “he said.” If so, Tesla will start accepting Bitcoin again. “
Musk considers hydropower, geothermal, and nuclear as good options for Bitcoin mining. He stressed that he didn’t expect Bitcoin to be “pure as dragged snow”. But as long as mining companies make a “conscious and determined effort” to move towards renewables, Musk says Tesla can back that up.
Listening to him speak, there seems to be a flaw in his logic. He believes Bitcoin miners were pushed into coal because the price rose so quickly that renewable energy sources couldn’t keep up. As the price of Bitcoin increased, the number of companies mining Bitcoin increased, as did its carbon footprint.
Unlike coal, it is not easy to quickly double or triple the production of renewable energy. But following Musk’s logic, if the price of Bitcoin rises again, we could end up in exactly the same cycle. But the hope may be that this time around, mining companies won’t be forced to use coal to fuel growth.
Can Bitcoin Ever Be Sustainable?
Bitcoin faces a huge environmental challenge. By design, it is not operated in an energy efficient manner. There are new, more eco-friendly cryptocurrencies with different models that consume a fraction of the energy. But we can’t easily revamp how Bitcoin works.
Since we cannot reduce its energy consumption, Bitcoin supporters see renewables as a solution. Indeed, Square CEO Jack Dorsey, who also spoke at the conference, argues that Bitcoin may in fact incentivize the use of renewable energy. Square and Ark Invest recently published an article describing how Bitcoin mining could accelerate a transition to more sustainable energy sources.
One of the problems that renewable energy companies face is that periods of high production (when the sun or the wind is strong) do not always coincide with periods of high demand (when people come home from work and television). The document advocates that if the miners were to work with renewable energy and storage companies, it could help mitigate these fluctuations in supply and demand.
On the other side, environmentalists argue that if Bitcoin increases its consumption of renewable energy, it will do nothing to solve the planet’s carbon consumption problem. It will just mean that other industries will use more coal.
According to a report by international energy activists, the IEA, renewables accounted for nearly 30% of the world’s electricity supply last year. If that number does not increase, the risk is that Bitcoin will only shift demand from other sectors. And finally, moving the problem around won’t make much of a difference.
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