Bitcoin’s central promise as a currency is that you can spend it in exchange for goods and services. You know, the way you do with any kind of currency. However, as many analysts have pointed out, the cryptocurrency standard functions much more like a high-risk security investment than like a digital coin you use to buy things.
The notable exception to this came for a few months in 2021, between March and May, when electric automaker Tesla accepted Bitcoin as payment for vehicles. This decision added a sudden air of legitimacy to the coin’s aura and had investor sentiment skyrocket. Bitcoin’s highest-ever price, not coincidentally, was seen in April.
However, Tesla swiftly reversed course, dropping Bitcoin as an official form of payment due to its negative environmental impact. The company’s decision drove home a downward trend for Bitcoin that it hasn’t quite managed to pull itself out of yet.
Musk Suggests Tesla Could Resume Accepting Bitcoin
However, on Wednesday, at the B-Word conference, Musk suggested that Tesla could begin accepting Bitcoin as payment again, on one condition. “I wanted a little bit more due diligence to confirm that the percentage of renewable energy usage is most likely at or above 50%, and that there is a trend towards increasing that number, and if so Tesla would resume accepting Bitcoin” the Tesla CEO told reporters.
“Most likely the answer is that Tesla would resume accepting bitcoin.”
Musk’s suggestion seems to have lifted Bitcoin enthusiasts’ spirits, as the currency lifted around five percent going into trading on Thursday. As of the time of this writing, the price of Bitcoin is around $32,000. Ethereum, another popular currency, was up nearly twelve percent, bringing its price to just under $2,000.
For some Bitcoin enthusiasts, the suggestion that cryptocurrency could negatively impact the environment seems bizarre. How could a completely digital currency have any impact on the physical world, let alone a negative impact on the environment? The answer is that cryptocurrency actually is extremely bad for the environment in ways that it doesn’t need to be, resulting in environmentalist outcry when Tesla began accepting cryptocurrency as a form of payment.
Since most modern cryptocurrency standards rely on a “proof of work” method to generate coins, and transactions require verification via the currency’s blockchain, both creating and exchanging cryptocurrency draws down considerable power. That power, in turn, is mostly created by fossil fuels like coal.
From an environmentalist’s perspective, there is no upside to cryptocurrency. It is a purely hypothetical currency that is created when someone flips a switch on a computer that kicks out pollution. Crypto miners soak in very high amounts of power from their local power grid and generate no physical goods to show for it. The end result is that they access a string of numbers that some enthusiasts have ascribed value to.
Put simply, crypto mines are machines that pollute for the sake of pollution, as far as environmentalists see it.
A Better Way?
Instead of having crypto stakeholders using a ton of energy to create their coins, thus showing they’ve put in the “work” to have them, crypto could pivot to a model called “proof of stake”. In a proof of stake model, a miner’s power to generate new coins is based on the number of coins they currently hold. This would also allow miners to validate their transactions using their coins as the “collateral,” putting them up to prevent anyone from attempting fraudulent transactions.
This method is preferred by many environmentally-minded crypto enthusiasts, but it’s received some pushback from the existing Bitcoin community. Some enthusiasts insist that Bitcoin’s energy use is nothing compared to the power pulled in by manufacturing and industry in the US and that they’re being unfairly targeted for their energy use.
Musk hopes his company can help push Bitcoin and other cryptocurrencies into a more sustainable model. “Tesla’s mission is accelerating the advent of sustainable energy. We can’t be the company that does that and also not do appropriate diligence on the energy usage of Bitcoin,” he told reporters Wednesday.
Musk Addresses Pump and Dump Accusations
Some critics have accused Musk of promoting currencies like Dogecoin or Bitcoin in order to quickly offload his own investments at a higher price. However, he claims that he still holds his cryptocurrency and that he wants to see the standard succeed long-term.
“I might pump, but I don’t dump,” Musk insisted while speaking to reporters. “I definitely do not believe in getting the price high and selling.”
Among Bitcoin’s many critics and regulatory opponents, Musk insists he’s not one of them. Some have pointed out that two of Musk’s own companies, Tesla and SpaceX, officially hold reserves of Bitcoin.
Put simply, Musk tells reporters “I would like to see Bitcoin succeed.”