Strong Bitcoin supporters polled Elon Musk's Crypto Bona Fides on Wednesday evening after the CEO of Tesla Inc. said the company would end its experiment to sell its electric vehicles on Bitcoin, as "the rapidly increasing use of fossil fuels" degrades the digital asset .
Musk's announcement went through the crypto markets and sent Bitcoin
The prices dropped sharply shortly after 6 p.m. Eastern when Musk made the statement on Twitter.
Energy consumption related to the digital mining of Bitcoin has become a hot button issue in digital asset circles due to the associated environmental concerns. Recent research has shown that extracting Bitcoin digitally uses just as much energy as small countries.
Read: Tesla shares and Bitcoin fall after Elon Musk says crypto auto sales will be halted due to energy consumption in mining
However, energy consumption is not at the center of the argument, but rather the implicit carbon footprint left by Bitcoin mining. In a whitepaper from the crypto asset management company CoinShares from 2019 it says: "The real problem is not whether Bitcoin consumes a lot of energy, but where this energy comes from."
Bitcoin is mined by solving complex computational problems and uses a proof-of-work protocol. It is a system that requires enormous amounts of energy to be used to verify and support the Bitcoin network, where miners are rewarded by receiving the virtual assets.
Miners are verifiers of transactions, and the reward system incentivizes them to support the blockchain by confirming each transaction in the chain and creating a new immutable block, hence the term blockchain. Mining is arguably the backbone of Bitcoin, which makes it safe and decentralized.
Energy consumption tends to increase as the price of Bitcoin increases. Mining rewards will drop through 2140 when the 21 millionth and final bitcoin is mined.
All in all, the subject of Bitcoin and its environmental friendliness is complicated, but its supporters are ready to defend it.
Anthony Pompliano, founder of Morgan Creek Digital, tweeted that 75% of bitcoin mining is powered by renewable energy:
Pompliano may be referring to a 2020 University of Cambridge Global Cryptoasset Benchmarking study which found that 76% of cryptocurrency miners use electricity from renewable energy sources as part of their energy mix. According to the report, nearly 62% of miners use hydropower.
Critics of Bitcoin's environmental impact often point out that 60% to 70% of Bitcoin is currently mined in China, where two-thirds of its electricity comes from polluting coal.
However, a 2019 report by the Paris-based International Energy Agency found that bitcoin mining facilities are typically "concentrated in remote areas of China with rich water or wind resources (cheap electricity)."
The same report also compares concerns about Bitcoin's energy consumption with the advent of the internet. A 1999 Forbes article stated: “Somewhere in America, every time a book is ordered online, a lump of coal is burned. ”Refers to the growth of Amazon.com
Last month, Musk agreed to a tweet from Twitter
CEO Jack Dorsey argues that Bitcoin "creates incentives for renewable energies".
Michael Saylor, CEO of business analytics pioneer MicroStrategy Inc., which has become one of Bitcoin's largest corporate owners, suggested in a tweet that those who are concerned about Bitcoin's energy consumption are getting this wrong.
Saylor argued that "no incremental energy is used" that goes into Bitcoin transactions outside of mining.
There may be another irony in Musk's demeanor since Tesla
Lithium battery vehicles are also increasingly criticized for their environmental impact. A New York Times article last week cited the case that the environmental impact of lithium mining is often overlooked in pursuit of an EV future in the US and elsewhere in the world. The appetite for lithium is likely to increase tenfold in the coming years.
"Our new need for clean energy could do more harm, even though it is intended to do good," the Times quoted Aimee Boulanger, executive director of the Responsible Mining Safeguard Initiative.
A 2019 article on Medium also notes that gold mining and banking are more energy consuming than bitcoin mining.