Elon Musk shouldn\u2019t hold his breath waiting for bitcoin to become environmentally friendly enough for Tesla to take it as payment. Musk announced yesterday that Tesla was walking away from the cryptocurrency because of the fossil fuels used for bitcoin mining and transactions. In the announcement, he left the door open for Tesla to accept bitcoin again if mining the cryptocurrency eventually runs on \u201cmore sustainable energy.\u201d But some experts caution that renewable energy is not a silver bullet for bitcoin\u2019s sustainability problem. <\/p>\n
\nTesla & Bitcoin pic.twitter.com\/YSswJmVZhP<\/p>\n
\u2014 Elon Musk (@elonmusk) May 12, 2021\n<\/p><\/blockquote>\n
The Verge <\/em>spoke with Alex de Vries, a digital currency economist who has consistently called out bitcoin\u2019s growing greenhouse gas emissions. He runs the blog Digiconomist<\/em>, which keeps a running tab on bitcoin\u2019s estimated energy use and emissions. While some other researchers and blockchain enthusiasts have been more optimistic about the potential for renewable energy to slash bitcoin\u2019s emissions, de Vries has published papers arguing that the climate calculations just don\u2019t add up. The Verge<\/em> spoke with de Vries about why he\u2019s still skeptical about bitcoin going green through renewables, other ways the cryptocurrency could cut its pollution, and how bitcoin compares to alternatives like Dogecoin.<\/p>\n
This interview has been lightly edited for length and clarity.<\/em><\/p>\n
Did you have any reaction to the <\/strong>news in February<\/strong> that Tesla was going to accept bitcoin for payments?<\/strong><\/p>\n
I was shocked at the time because bitcoin isn\u2019t an ESG-friendly currency. We know that a big part of the mining is done by using Chinese coal; that\u2019s something that isn\u2019t new information. Mining itself is a really big lottery where the machines that are participating are just generating useless computations all the time so they\u2019re literally wasting resources for making new blocks for this blockchain. It\u2019s really weird that a company that has a mission statement that involves decarbonizing the planet gets involved with a currency that ultimately involves the waste of natural resources, specifically fossil fuels.<\/p>\n
\u201cI was shocked at the time\u201d<\/q><\/aside>\nThe bitcoin network is responsible for 55 million metric tons of CO2 annually, which is as much as a nation like Singapore. Ironically, it\u2019s also more than the entire estimated net gains from deploying electric vehicles.<\/p>\n
What was your reaction to yesterday\u2019s news that Elon decided to backtrack on that?<\/strong><\/p>\n
Well, my initial response was better late than never. <\/p>\n
In his statement, Elon Musk says that they\u2019re doing this because of an increasing amount of fossil fuels used for bitcoin mining. Now in all honesty, there hasn\u2019t been that much change. Let\u2019s be real, Tesla announced that it would accept bitcoin two months ago, and not that much has changed since then. The total amount of resources going into the network has gone up by a bit, but we already knew that was primarily Chinese coal. <\/p>\n
It\u2019s interesting that Musk says Tesla will go back to bitcoin \u201cas soon as mining transitions to more sustainable energy.\u201d Do you think that can happen? Why or why not?<\/strong><\/p>\n
In all honesty, it makes no sense. <\/p>\n
In the past few years, miners have only been getting renewables from the south of China, that has been their only major source of renewables. And it doesn\u2019t last. It lasts for only four months a year and because the production is seasonal. <\/p>\n
\u201cIn all honesty, it makes no sense\u201d<\/q><\/aside>\nThat\u2019s the problem with renewable energy sources in general: they can\u2019t provide these machines with 24\/7 power all year long. For example, it was recently argued that miners could be using solar power for bitcoin mining, which sounds like a great idea. But if you read what should happen to do that, bitcoin miners would need to be shut down during half the day in order to make that work.<\/p>\n
That makes no sense if you\u2019re an investor in these machines, because you\u2019re paying a whole lot of money for a device that the moment you get, it starts becoming obsolete. If you miss out on half a day, you\u2019re missing out on a level of income that\u2019s just never going to come back. You want to have these machines running 24\/7 if you want to maximize your profit, which is a lot easier if you\u2019re running on Chinese coal than if you\u2019re running on solar power for half a day \u2014 so there\u2019s no real incentive to do that.<\/p>\n
You published a paper that argued that renewable energy will not solve bitcoin\u2019s sustainability problem \u2014 can you walk me through why? <\/strong><\/p>\n
A big amount of bitcoin miners can always cause problems no matter what type of energy they\u2019re using. It can lead to outages if mining becomes really popular in the particular spot. What also might be happening is that you\u2019re using renewable energy that you could have used a different way to clean up the grid elsewhere.<\/p>\n
Even if, hypothetically speaking, this whole network was running on renewable energy. Still, it doesn\u2019t solve the sustainability issues of bitcoin. Bitcoin uses excessive amounts of hardware. You have a bunch of specialized equipment that can only do bitcoin mining. The moment they become unprofitable, there\u2019s nothing you can do with them. You can\u2019t repurpose them, you can\u2019t use them as a home computer. It\u2019s trash. And they don\u2019t last very long, on average maybe one and a half years. So you\u2019ve got millions of devices that are becoming obsolete extremely fast. That just results in a big pile of electronic waste down the line. It\u2019s already the case that a single bitcoin transaction is equivalent to throwing away an iPhone 12 mini in terms of materials, that\u2019s already how bad it is.<\/p>\n
Are there better solutions to bitcoin\u2019s sustainability problem? <\/strong><\/p>\n
The good thing is that Elon Musk did mention the alternative cryptocurrencies that don\u2019t have the same environmental impact. This is a very important point because the energy consumption issue in bitcoin relates to the proof of work algorithm. That is a specific part of the bitcoin software that is not necessarily present in alternative cryptocurrencies because there\u2019s different ways to do the block creation process. In bitcoin, it depends on computational power, but there are alternatives. Proof of stake is the most popular one.<\/p>\n
Cryptocurrencies that don\u2019t have the same environmental impact<\/q><\/aside>\nThe second largest cryptocurrency of the moment, Ethereum, is right now running proof of work but is planning to change that to proof of stake. What that does is it makes the block creation process depend on wealth, rather than computational power, so there\u2019s no incentive to have energy-hungry specialized hardware. That fixes both the energy need, as well as the hardware need. If you have something running on proof of stake, it wouldn\u2019t even be 0.1 percent of the energy needed to run bitcoin. <\/p>\n
If Ethereum can turn to proof of stake, theoretically, so can bitcoin, which would actually fix the environmental issues. But so far there has been no move inside the community to make such things happen.<\/p>\n
Musk has also talked up Dogecoin in the past. How does Dogecoin compare to bitcoin? Do you see it becoming as bad for the climate as bitcoin? <\/strong><\/p>\n
The thing is, if something runs on proof of work, which is the case in Dogecoin, then it\u2019s just as bad as bitcoin. The impact that Dogecoin has currently is a lot smaller than bitcoin, but that\u2019s because the value of Dogecoin is a lot less and these things are directly related with each other. That\u2019s kind of been the essence of my work over the past few years. There is a direct relationship between the value of these assets, how much money is being earned by the miners, and how much they\u2019re spending on electricity. Very simply said, the more valuable an asset, the more money will be made by miners, the more they will spend on resources like hardware and energy. So, the fact that Dogecoin has a smaller impact than bitcoin is just because the value is a lot less, but if they were the same size, the impact would be equally bad.<\/p>\n
\u201cJust as bad as bitcoin\u201d<\/q><\/aside>\nWe\u2019ve already started to see the value of bitcoin drop after Musk\u2019s announcement. Are we starting to see emissions or energy use fall as well?<\/strong><\/p>\n
No. The price has gone down by maybe 15 percent. That does reduce the potential future emissions of the network. But it doesn\u2019t reduce today\u2019s emissions because, right now, bitcoin mining is extremely profitable. As it stands, the network\u2019s impact will still continue to increase, unless the price goes down by a lot more.<\/p>\n
How much more would it take to see a decline in emissions?<\/strong><\/p>\n
I wrote about that in a paper recently. The current price is still around $50,000 per coin today, although I haven\u2019t checked it for the past hour. Below $30,000, that\u2019s where the current energy consumption would start to go down, so it has a long way to go. That\u2019s kind of the bottom line.<\/p>\n","protected":false},"excerpt":{"rendered":"
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