Tesla will 'most likely' resume accepting bitcoin as a form of payment once the mining rate for the cryptocurrency reaches 50% renewables, CEO Elon Musk said Wednesday at a virtual panel discussion hosted by the Crypto Council for Innovation, remarks that are in line with statements he made last month on Twitter.
Tesla started accepting bitcoin as a form of payment in February, the same time that the company purchased a historic $1.5 billion in bitcoin — before reneging on its decision just three months later, citing environmental concerns.
Cryptocurrencies get a bad rap for energy usage because they do indeed use up an awful lot of energy, at least many of them do. Bitcoin and Ethereum, the space’s two biggest currencies, use a mechanism called proof-of-work to power their networks and mint new blocks of each currency. The “work” is solving complex cryptographic problems and miners do so by stringing together high-end graphics cards to tackle these problems. Major mining centers have thousands of GPUs running around the clock.
While Ethereum has already committed to transitioning away from proof-of-work to something called proof-of-stake, which vastly reduces energy usage, Bitcoin seems less likely to make this transition. So, becoming “eco-friendly” likely doesn’t mean making any major underlying changes to Bitcoin, but rather shifting what energy sources are powering those mining centers.
While Bitcoin’s global mining network does clearly lean on renewables, it’s pretty difficult to get exact insights on what the spread of renewables usage is given how, ahem, decentralized the grid is. What is clear is that it’s going to take some unprecedented transparency from the global network to even give Musk a starting point here to judge Bitcoin’s current or future “eco-friendliness,” and in all likelihood Musk will have a lot of wiggle room to make this decision based on anecdotal data whenever he wants.
Today’s comments come as no surprise: He tweeted in June, “When there’s confirmation of reasonable (~50%) clean energy usage by miners with positive future trend, Tesla will resume allowing Bitcoin transactions.”
This is inaccurate. Tesla only sold ~10% of holdings to confirm BTC could be liquidated easily without moving market.
When there’s confirmation of reasonable (~50%) clean energy usage by miners with positive future trend, Tesla will resume allowing Bitcoin transactions.
— Elon Musk (@elonmusk) June 13, 2021
His comments do give him plenty of wiggle room, however. “As long as there is a conscious effort to move bitcoin miners toward renewables then Tesla can support that,” he added later in the talk. A large portion of bitcoin mining was done in China, where cheap coal and hydropower made it slightly more economical; but Musk noted that some of these coal plants have been shut down (and a large portion of miners in China have started to migrate abroad, in response to mining crackdowns by the Chinese party).
It should also be noted that his concerns over bitcoin’s environmental impact have caused controversy in the bitcoin community, with some arguing that bitcoin receives an oversized amount of scrutiny relative to its actual energy consumption. Twitter CEO Jack Dorsey, who also participated in the virtual panel, has actually argued that bitcoin can incentivize the transition to renewable energy. A white paper published by the Bitcoin Clean Energy Initiative, a program created by Square, argues that bitcoin mining could make renewables even cheaper and more economically feasible than they are today.
Musk's comments, as ambiguous as they were, shows he still exerts considerable power over cryptocurrency markets. Bitcoin price fell below $30,000 on Monday, after hitting an all-time high of over $63,000 in April. But after the billionaire founder revealed more details about his and his companies’ holdings at the virtual panel, the price rebounded.
In addition to personal bitcoin holdings and Tesla’s bitcoin holdings, his aerospace company SpaceX also owns bitcoin. Musk added that he also personally owns ether and (of course) dogecoin. The price for all three cryptocurrencies rose after his comments.