In a tweet on Wednesday, Tesla CEO Elon Musk said the company will no longer accept Bitcoin as payment for its cars, citing concerns over the energy expenditure of Bitcoin mining.
The news came as quite a shock to Bitcoin flag-wavers.
Musk wrote, “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.”
Tesla & Bitcoin pic.twitter.com/YSswJmVZhP
— Elon Musk (@elonmusk) May 12, 2021
Tesla began accepting BTC as payment in February, after it bought $1.5 billion worth of Bitcoin for its balance sheet. The news of Tesla’s buy-in moved the market—from $39,000 at the time of the announcement on February 8 to $53,000 a week later.
That also led to some blowback from climate-conscious consumers, who found Tesla’s foray into Bitcoin at odds with its pro-environment image. Some Tesla shareholders also didn’t love the move, seeing it as a distraction that has nothing to do with the company’s core business. By the end of February, analysts like Dan Ives of Wedbush were saying Tesla stock had become “heavily tied” to the price of Bitcoin.
Bitcoin uses something called proof of work (PoW) to coordinate consensus from all the computers that run the Bitcoin blockchain software. To secure the network, specialized computers race to solve complex cryptographic puzzles. The first to do so wins a small amount of minted Bitcoin as a reward. Since speed is important, the “miners” with the most computing power win most often. And that power uses up a lot of electricity. A recent study from Cambridge University estimated the annual power consumption to be higher than Argentina’s.
Bitcoin defenders argue that much of the network runs on clean, renewable energy sources, including hydropower. A September 2020 report, also out of Cambridge, estimates that 39% of the network’s power comes from renewables. Crypto asset manager CoinShares pegs the figure as high as 77%.
But Elon Musk has seen enough, at least for now. “Tesla will not be selling any Bitcoin and we intend to use it for transactions as soon as mining transitions to more sustainable energy,” he wrote, before adding that the company is “looking at” cryptocurrencies with a smaller carbon footprint.
