Fernando Alberca | Tesla backs down on bitcoin. The electric vehicle manufacturer has suspended the use of bitcoin as a means of payment to buy its products. The reason for this decision was given on Twitter by the CEO of the company himself, Elon Musk, on Thursday May 13 shortly after midnight. “Tesla has suspended the purchase of vehicles with bitcoin. We are concerned about the rapid increase in the use of fossil fuels for bitcoin mining and transactions, especially coal, which has the worst emissions of all fuels,” explained the South African entrepreneur. He thus reversed the measure taken just three months ago to accept bitcoin as a means of payment.
Following the publication of the Tesla CEO’s tweet, the price of bitcoin plummeted by more than 15%. The main cryptocurrency has gone from trading at around $54,000 to falling to $46,000 at 2 a.m. Spanish peninsular time.
Notwithstanding, Musk wanted to make it clear his statement is limited to bitcoin and, at any rate, those digital currencies working with a proof-of-work protocol in which the energy expenditure is considerable. This is what is known as mining, in an analogy with the process of gold extraction. In this case, bitcoin miners use powerful computers to solve complex mathematical calculations to validate blocks of transactions and protect the network. These powerful computers are very energy-intensive, although much less than the power required to move all the heavy machinery of the gold mining industry, which bitcoin is trying to replace as a store of value.
In fact, Tesla’s CEO noted in his tweet: “Cryptocurrencies are a good idea on many levels and we believe they have a promising future, but this cannot be at the expense of the environment.”
However, Musk pointed out that, for now, his company will not sell any of the 43,200 bitcoins it has in its treasury (three months ago, Tesla invested $1.5 billion in bitcoin. Just a couple of weeks ago it sold 10% of its digital currency reserves to check the market could provide the necessary liquidity at any time). Musk also clarified on Twitter that “Tesla intends to use bitcoin for transactions as soon as cryptocurrency mining becomes more energy sustainable.”
Furthermore, the Tesla CEO says his company is “studying, as a means of payment, other cryptocurrencies that use less than 1% of the energy per transaction that bitcoin requires.”
In October 2020, Cambridge University presented a study estimating that only 39% of the energy used to mine proof-of-work cryptocurrencies came from renewable sources.
Today, many cryptocurrencies such as Cardano or Polkadot run on a proof-of-stake protocol, which is far more energy efficient. And many other digital currencies are moving from proof-of-work to proof-of-stake, as is happening with Ethereum, the second largest cryptocurrency by market capitalisation. In addition, some cryptocurrency projects do not even have miners because they do not work with blockchain technology. An example of this is Iota, which uses the Tangle, based on a mathematical concept called Directed Acyclic Graph (DAG).