Hooray! A Story About Elon Musk And Bitcoin Where You Don't Have To Pretend Either Makes Sense!
Billionaire creepazoid/visionary/cult figure Elon Musk announced yesterday that his car company, Tesla Motors, will no longer accept Bitcoin as payment for cars, because of concerns about the astonishing amount of energy used in making Bitcoin happen. As with many times when Elon Musk Says A Thing, the announcement set off a bit of a panic, with the value of Bitcoin plunging and cryptocurrency markets losing something like $385 billion in value yesterday.
In the announcement, Musk said he was "concerned about rapidly increasing use of fossil fuels for bitcoin mining and transactions, and especially coal, which has the worst emissions of any fuel," and while Tesla won't be selling off any of its Bitcoin holdings — about $2.5 billion, which seems like rather a lot — it will hold off any further Bitcoin trading until the cryptocurrency "transitions to more sustainable energy."
Now, before we go any further, let us reassure you that this is an energy and environment story, not a cryptocurrency story. You don't have to understand anything about no "blockchain" or "public ledgers" or anything, beyond knowing that in order to add a version of the scarcity that makes money "money," Bitcoin can only be mined with dedicated computers that must solve incredibly complex math problems in order to be able to trade the imaginary currency. (If you do want to understand Bitcoin more, then what is wrong with you, and you can find a good introduction in this Chris Hayes podcast, which is remarkably non sleep-inducing).
All that computing power eats up a lot of energy, as CNBC explains:
Critics of bitcoin have long been wary of its impact on the environment. The cryptocurrency uses more energy than entire countries such as Sweden and Malaysia, according to the Cambridge Bitcoin Electricity Consumption Index. [...]
So-called miners run purpose-built computers to solve complex math puzzles in order to make a transaction go through. This is the only way to mint new bitcoins.
Miners do not run this operation for free. They have to shell out huge sums on specialized equipment. A key incentive of bitcoin's model, known as "proof of work," is the promise of being rewarded in some bitcoin if you manage to solve its complex hashing algorithm.
University of Sussex business professor Carol Alexander points out that the "difficulty" of the computing tasks necessary to make new baby Bitcoins has been increasing in recent years, resulting in higher energy usage. Miners have an incentive to locate their big damn computing facilities where they can get cheap electricity. In some cases, that's near hydroelectric plants, so good for them, but it also means a lot of operations in China, where cheap coal is more the norm.
Now, there's also some debate about how bad for climate Bitcoin actually is, because it's complicated. There's the massive amount of coal energy being used in China, but some Chinese regions, like Inner Mongolia, have actually announced they'll shut down crypto operations to reduce energy consumption.
Some proponents of Bitcoin insist that Bitcoin uses only a tenth of the energy of the conventional banking system, which sounds really nice until you consider that Bitcoin accounted for just .4 percent of the world's money supply in 2020, which means it's using a hell of a lot of energy for the amount of economic activity it represents.
Bitcoin fans also like to argue that cryptocurrency miners go where electricity is cheapest, and that means that as green power reaches parity with electricity generated by fossil fuel plants, then crypto production will use the green stuff. Already, CNBC reports, "In China, the province of Sichuan is known to attract miners due to its cheap electricity and rich hydropower resources."
But even that could represent a less than ideal scenario for the climate emergency, as Quartz explains:
The electrical grid will become less carbon-intensive over time, but that green energy could be absorbed by bitcoin, said Alex de Vries, a digital currency economist who authored Mar. 10 article in the journal Joule about bitcoin energy consumption. "Renewable energy that we could have used to clean up the grid will go to bitcoin mining instead," he said.
Ultimately, Musk's move may have more to do with public relations than anything else. The growing perception that cryptocurrency is bad for global warming may not be great for a guy who wants to sell electric cars as part of the solution, and shareholders may simply be far happier if they don't have to fend off accusations of climate hypocrisy.
It's also worth pointing out that Musk has been talking up a competing cryptocurrency, Dogecoin, which like Bitcoin relies on similar high-energy-use computing. But he's not selling Teslas in exchange for that one, at least not yet. On Tuesday, he asked his bejillions of Twitter followers if they'd like the option, and then he turned right around and said Wednesday that he was ending Bitcoin purchases of his cars out of concern for the environment.
Gosh, what a mercurial genius. Fuck him and fuck crypto. Let's just focus on getting green infrastructure built, please.
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Doktor Zoom's real name is Marty Kelley, and he lives in the wilds of Boise, Idaho. He is not a medical doctor, but does have a real PhD in Rhetoric. You should definitely donate some money to this little mommyblog where he has finally found acceptance and cat pictures. He is on maternity leave until 2033. Here is his Twitter, also. His quest to avoid prolixity is not going so great.