- In early February, Tesla bought around $1.5 billion bitcoin and announced that it will soon accept bitcoin as payment
- This undermines Tesla’s green credentials given bitcoin’s huge energy consumption
- Green cryptocurrencies like SolarCoin show potential as alternatives
In early February, Tesla announced that they had bought around $1.5 billion worth of bitcoin, and that they will soon be accepting bitcoin as payment for their products. Tesla and bitcoin both share volatile pricing and a knack for dividing opinions, and the announcement sent shockwaves through the stock market. Bitcoin’s price rose 19.3% overnight, and in the ensuing days soared up to $57,489 per bitcoin, up 47.9% from before the announcement. This meant that, for the first time, bitcoin hit a $1 trillion market valuation. The relationship between Tesla and bitcoin became close enough for Forbes to map out the influence of Elon Musk’s tweets on cryptocurrency prices.
Whilst many anticipate cryptocurrencies becoming a mainstream method of payment, others are sceptical, including Bill Gates – who advises those with less money than Elon Musk (briefly the richest person in the world) to “watch out” and avoid investing in bitcoin.
Critics deride bitcoin as useless, saying it lacks real intrinsic value and utility. Others steer clear due to the riskiness of bitcoin’s inherent lack of centralisation: no bank is going to cover losses from digital theft. This lack of centralisation has made it the currency of choice on the black market.
Another major drawback is bitcoin’s environmental impact. This is starkly at odds with what Tesla, a leader in the clean energy revolution, is supposed to represent. Bitcoins are created via an extremely energy-intensive digital mining process. The massive energy requirements mean that bitcoin miners use the cheapest energy possible, which is often sourced from coal. Recent estimates from the University of Cambridge suggest that bitcoin mining uses over 121 terawatt hours of energy per year – more than the whole of Argentina. Tesla’s purchase of bitcoin raised the currency’s price, and with it the incentives for more miners to fire up the supercomputers, to the dismay of environmental campaigners.
Bitcoin is the largest and most well-known cryptocurrency, but thousands of others exist. Among them are green and environmentally friendly alternatives. While they aren’t yet as mainstream as bitcoin, they have the potential to expand in the future, especially as consumers globally are increasingly concerned about the environmental impacts of their economic choices.
There are two ways of greening up cryptocurrencies. One, known as green energy mining, involves mining the currencies using environmentally-friendly energy sources. This is an increasingly popular option that can apply to established cryptocurrencies, including bitcoin, as demonstrated by the recent expansion of hydro-electric powered bitcoin mining facilities by Australian firm Iris Energy. Iris, having mined bitcoin for two years in a single 9 megawatt facility, will triple its computing power and bitcoin-mining potential thanks to the latest round of investment.
Alternatively, some cryptocurrencies are directly linked to environmentally-friendly projects or incentivise green behaviours. SolarCoin is a prominent example. Fifty times more energy efficient to mine than Bitcoin, SolarCoin incentivises the production of solar energy by paying verified producers of solar power one SolarCoin per Megawatt-Hour (MWh) of energy produced. SolarCoin currently trades at just over $0.03 per coin, but with the hope, according to the initiative’s founders, of growing to $20 or $30 in the future.