Over the last few weeks, Elon Musk seems to be having a bit of fun with Bitcoin. With one tweet, Musk sends Bitcoin ‘s prices trading at record levels. Then with the next, the cryptocurrency sees its value crash. One moment, Musk announces Tesla will be accepting Bitcoin for sales. The next, he pulls back the offer, citing the poor sustainability of cryptocurrency mining. Given that cryptocurrency isn’t highly regulated, Musk could make a fortune timing his tweets with his company’s stock activities. But in all likelihood, that’s not the primary issue that Musk and Bitcoin face.
It’s well known that Bitcoin and others have a cryptocurrency mining problem. Issues related to sustainability of cryptocurrency practices have caught the eye of many, including Musk. As the demand for Bitcoin and other cryptocurrencies have increased, so has mining practices. And since cryptocurrency mining absorbs a sizable amount of energy, individuals and agencies alike are calling for change. Thus, sustainability of cryptocurrency issues lies at the heart of Musk’s tweets. And it’s also something Bitcoin needs to address if they plan on maintaining market advantage.
“We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel. Cryptocurrency is a good idea on many levels, and we believe it has a promising future, but this cannot come at great cost to the environment.” – Elon Musk, CEO and Founder of Tesla
The Sustainability of Cryptocurrency Problem
Once upon a time, there was a debate as to whether cryptocurrency had staying power. The debate has since vanished. Cryptocurrency offers many advantages that will guarantee its future, including faster, cheaper and more reliable transactions. Major companies are investing heavily in cryptocurrencies as well. That not only includes companies like Tesla but also PayPal, Visa, and Square. And there are increasing options for cryptocurrency with Bitcoin being among the best known. But currently, they all face sustainability issues when it comes to energy use that needs to be addressed.
Musk and Bitcoin both recognize the potential for cryptocurrency in the future. They also realize that issues surrounding sustainability of cryptocurrency stand in the way of that potential. In order to generate enough cryptocurrency to meet demand, mining procedures must take place that consume huge amounts of electricity. (Read more about the energy-consumption downside to cryptocurrency in this Bold story.) At the present time, cryptocurrency mining relies heavily on non-sustainable energy sources, including fossil fuels like coal. These energy resources impose serious threats to the climate that make the sustainability of cryptocurrency questionable. This is why Musk and Bitcoin have temporarily parted ways.
“I would definitely expect reduced appetite going forward. First, because of the loss of momentum from a technical perspective, but also because of the extreme sensitivity on environmental issues.” – Felix Dian, Founder of MVPQ Capital, London
Ideological Differences Between Musk and Bitcoin
In order to delve into the sustainability of cryptocurrency issue a bit more, it’s important to appreciate underlying motivations. For Musk, he co-founded PayPal and understands currency markets quite well. But after selling PayPal, he wanted to pursue sustainable transportation solutions that he believed was imperative. This has led him to introduce the world to Tesla Motors, offering fully-electric, high-performance, luxury cars. It also allowed him to revolutionize the space industry through reusable rockets and rocker boosters with SpaceX. Thus, despite Musk and Bitcoin sharing common interests in currency innovations, the similarities stop there.
Bitcoin started without a particular focus on the long-term sustainability of cryptocurrency. Instead, it was launched as an open-source software in 2009 by a group of unknown founders. Using blockchain protocols, Bitcoin was more focused on decentralizing a digital currency that could be readily validated. In doing so, it could revolutionize currency industries while enhancing transactions across the globe. But as Bitcoin and other cryptocurrencies grew, so did their carbon footprint. And while some cryptocurrencies are trying to address these issues, Bitcoin has not yet done so. This is where Musk and Bitcoin have a key underlying philosophical difference.
“We take a longer view, and investors would be right to do the same. The key question is whether we think [Bitcoin] is going to last? The answer is yes.” – Greg King, CEO of Osprey Funds
The Future of Cryptocurrency
Since February of this year, Bitcoin’s electricity consumption rose 163 percent as its stock prices increased. This is what grabbed Musk’s attention, and it also triggered concern industry-wide about the sustainability of cryptocurrency. Currently, a New York legislative bill is being considered that would prohibit further cryptocurrency mining until further evaluations. Likewise, many cryptocurrencies are exploring the use of renewable energy sources. The Twitter drama between Musk and Bitcoin is therefore being used to evoke change that might be beneficial.
One organization pursuing better sustainability of cryptocurrency is the Cryptocurrency Climate Accord. This group has over 40 supporters that want Bitcoin to be powered by 100% renewable energy by 2025. They are also working toward standards within this sector for energy use that both Musk and Bitcoin could accept. In addition to these pursuits, other alternatives to the current high-energy-consuming blockchain protocols exist. One involves XRP Ledger, which does not require proof-of-work and is 120 times more energy efficient.
Mixed Signals from Musk
The sustainability of cryptocurrency issue between Musk and Bitcoin has been highly publicized as of late. But that doesn’t mean Musk is down on cryptocurrency in general. For one, he has stated he is working with Dogecoin developers to improve their platforms and protocols. Tesla also continues to have $1.5 billion in Bitcoin investments. Thus, despite his concerns about the sustainability of cryptocurrency, it appears Musk still believes in its future. Recent tweets may simply be his way of getting others’ attention to encourage change that is climate friendly. If this is the case, then the saga between Musk and Bitcoin is far from over.
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