The Real Environmental Impacts of Bitcoin
Bitcoin falls after Elon Musk publicly reconsiders his position
Bitcoin uses a lot of energy by design in order to ensure that the network is secure and decentralized. Critics who find that Bitcoin has no utility will believe that the energy used is being wasted. There has been a common criticism that Bitcoin is highly damaging to the environment. The frequent argument is that Bitcoin mining that primarily takes place in China is powered by fossil fuels. In reality, China is continuing to adopt renewable energy, while losing market share to Canada and the U.S. with more renewable energy powered grids, leading to more environmentally sustainable Bitcoin mining. Although the traditional banking system and Gold mining are still much larger systems than the Bitcoin network, it is important to note that these monetary systems have much higher energy expenditure than Bitcoin mining.
Elon Musk recently tweeted that Tesla would no longer accept Bitcoin as payment, citing environmental concerns around Bitcoin mining practices and rising energy usage. This tweet came after news that a private-equity firm revived a fossil-fuel power plant for the purpose of mining Bitcoin. Despite this new anecdote of Bitcoin’s negative climate impact, the narrative that Bitcoin is bad for the environment does not hold up. Most Bitcoin is mined using renewable energy because it has become the cheapest form of energy available for Bitcoin miners. This alone makes Bitcoin one of the greatest financial incentives for the adoption of renewable energy. Additionally, Bitcoin miners are consistent consumers of energy, which gives them the ability to stabilize power grids. This is significant because a considerable amount of energy production is wasted due to a lack of demand and/or capable energy storage. When power grids have a surplus of energy, they can monetize it by selling it to Bitcoin miners. In a way, the Bitcoin network could serve as the largest, financially incentivized battery in the world.
So what does Tesla, the battery company do from here. Elon Musk is certainly one of the greatest minds of our time and he knows a lot about how money works as the former co-founder of PayPal. We may be about to witness another case of marketing genius from the Tesla CEO. Here is what I think is possible from here. Tesla unveils a new part of their business model where they allow their customers to monetize surplus energy by mining Bitcoin using their solar powered power-walls, bringing cryptocurrency mining to the masses in an environmentally sustainable way. While this idea is highly unlikely, it was just as unpredictable that Tesla would invest one billion dollars of its treasury reserve into Bitcoin a few months ago. While Bitcoin is facing criticism of its energy use, it has fallen more than 50% from all time highs. It must be understood that the conception of a new asset class will not come without objections and massive fluctuations in price. Both volatility and skepticism are a definitive part of Bitcoin and Elon has made it clear that Tesla has not sold its position.