The world of digital currency shook when Elon Musk, the CEO of Tesla who is also the Chief Designer of SpaceX announced that his company will not accept Bitcoin for any vehicle purchases. He said that cryptocurrency was a big menace for the environment and used fossils in large numbers. This news led to a huge hue and cry amongst the investors and also led many to ponder about the prospects of cryptocurrency.
Major Concerns in Bitcoin Usage
Bitcoin is a digital currency that can be exchanged, bought and sold directly without the use of any banks for supervision. According to Forbes, the founder Satoshi Nakamoto( psuedo name) believed in the need for an electronic payment system which used cryptographic proof as a basis, instead of trust. In order to complete the whole process of every Bitcoin transaction, there is record maintained through a public ledger in order to avoid any faking or discrepancy in the undertaking. Bitcoin uses the medium of Blockchain technology and is publicly accessible to those who have a link. There are unique codes and encryption patterns that are verified to complete the entire process.
While the currency is merely a virtual one, there is a process of verification that takes up huge amounts of energy. According to the The Independent, there are many auditors involved in the currency generation and validation through a procedure called “mining”. That exercise calls for the miners to guess a number which is released every 10 minutes to generate a specific code. There is a lot of mathematical coding and calculation in a very small span of time. To solve the complex equations, the computers and supercomputers are put to use with the aim of finding the right code as quick as possible. According to the Digiconomist founder Alex de Vries, a single Bitcoin transaction can leave a “carbon footprint of 360 kg” which is extremely high when compared to a 500 mg from a visa transaction.
The Bitcoin mining industries are thus heavily dependent on fossils and coal for energy consumption. According to BBC, China has more than 75% of the total mining around the world. The sites have been established in areas that have coal deposits and cheap electricity provisions. In fact according to a report, the Chinese bitcoin operations will cross the total electricity consumption of Italy and Saudi Arabia by 2024.
Implications of the Change in Policy
As a consequence of the massive emissions from Bitcoin mining, Elon musk announced that his company will no longer accept digital currencies. This has been done keeping in mind the extreme consequences on the environment and climate change goals. In addition to that, the cryptocurrency exchange Binance has been under probe due to accusations of illegal trade by the United States Justice Department and the Internal Revenues Services. Bitcoin fell by 12% after Musk’s announcement.
There are many complications involved in the whole incident. There are some questions being raised regarding Elon Musk’s decision . There have been brainstorming with regard to the many other forms of cryptocurrencies that have resorted to environment friendly ways. There are also indicators of Chinese stakes in the entire process. There are of course challenges like black outs reported in Georgia in the US due to high consumption of power. There is also an additional concern about the hike in the demand of microprocessing chips due to the dependency on short-lived hardware in the process of bitcoin mining. According to The Independent, the annual power consumption of China’s Bitcoin industry is expected to rise up to 297 terawatt-hours by 2024 which is comparable to the carbon emissions of Czech Republic and Qatar together.
Tesla as a company is known to advocate environment friendly vehicles and promotes a green revolution. Thus, Elon Musk’s decision fails into the line of its policy. This will bring down the power consumption and will also help along the lines of the climate change programmes which are working towards decreasing the carbon emission rate.
Bitcoin is one amongst the many cryptocurrencies in the market at the moment. The others have shown a rise since Musk’s declarations and. Cambridge University released a report called the Cambridge Bitcoin Electricity Consumption Index, according to which, Bitcoin is amongst the top 30 electricity consumers of the world. The world is currently struggling by a common but natural enemy and countries everywhere are making efforts to fight it. There are reports suggesting that a cleaner and greener earth would help avoid similar dangers in future directly as well as indirectly by enhancing the general health of people.
Bitcoin and such cryptocurrencies are definitely an advancement that changes the market of the digital world. However, the options need to be evaluated precisely before it is too late.