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A Look Back: Tesla Suspending Bitcoin Payments In 2021
Tesla CEO Elon Musk announced in May 2021 that his company will no longer accept Bitcoin as a payment for its vehicles. For the uninitiated, Tesla started accepting crypto assets as the payments for products sold in the U.S. in March 2021. Musk said the increasing use of fossil fuels in mining operations was the reason behind the suspension. “We are concerned about the rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal,” Musk tweeted. After the announcement the value of BTC dropped by 5%. At that time, the company said it was looking for cryptocurrencies that use less than 1% of energy used in BTC transactions.
Earlier this decision of Tesla wasn’t widely accepted however it did help in increasing the hype around the cryptocurrency. Contrary to popular belief, Tesla wasn’t the first company to accept Bitcoin. Around the year 2014 and 2015, various companies such as Overstock.com Inc, Expedia Group Inc., Dell Technologies Inc. and Expedia Group Inc. introduced Bitcoin payments. But they quickly dropped the asset due to its lack of use. Now, PayPal Holdings Inc becomes the latest company to allow its millions of U.S users to sell, buy and hold cryptocurrencies.
Musk also said that they believe that crypto has a promising future ahead and is amazing at many levels. But it shouldn’t come at the cost of negative harm to the environment. Musk said his company will again start accepting BTC if the process of mining BTC starts using sustainable energy resources. Tesla aims to create a world which makes use of sustainable energy resources while Bitcoin is energy in-efficient. Hence, it contradicts with the company’s goal.
Present: Tesla Cutting Down On 75% Of Its Bitcoin Holdings
In 2021, the company betted big on Bitcoin and invested $1.5 billion in Bitcoin in the first quarter. Musk campaigned for Bitcoin’s enormous advantages over fiat money. Zach Kirkhon, Chief Financial Officer at Tesla, revealed that they invested in Bitcoin because the company was looking for a place to store cash and at the same time earn some profit.
Cut to present, Tesla has dropped crypto assets worth $936 million in the second quarter of 2022. In its new investor findings, the company revealed it has cut off its Bitcoin holdings by 75%. Tesla’s financial summary in the second quarter noted that the company’s profitability was apparently affected by Bitocin’s impairment. Bitcoin is a decentralized entity. But, in recent months, it is witnessed that global issues such as war in Ukraine, rising inflation and increased interest rates have indirectly affected the asset class.
Bitcoin was trading at over $24,000 on Wednesday. The price of the asset dropped reaching below the $23,000 mark as of Thursday morning, after the company made the sell-off announcement.
Bitcoin Energy Consumption
Some cryptocurrencies including Bitcoin require energy in large amounts to do crypto mining. The United States is one of the largest crypto mining hubs. It accounts for 37.84% of Bitcoin Mining. Every year Bitcoin mining produces around 36 kilotons of electronic waste. And it is unlikely that Bitcoin will change its consensus algorithm.
There is no sure-shot way of calculating total energy consumption by Bitcoin and crypto mining. However, the network’s hashrate and consumption by commercially-available mining rigs help in reaching close to it. According to the estimation by the Cambridge Bitcoin Electricity Consumption Index, Bitcoin uses 0.38% of global electricity (85 TWh). While its production process accounts for about 0.13% of global energy production (218 TWh of energy). This is more than the usage of Belgium and Finland.
Carbon Footprint Of Cryptocurrency Mining
It is quite difficult to calculate the carbon footprint of cryptocurrency. Fossil fuels are known to be the major energy source in most countries where mining takes place. However, in many instances it is witnessed that the miners opt for a cheaper energy source in order to be profitable. It means that in many cases they depend on alternative energy installations.
According to the estimation, the Bitcoin network accounts for producing around 3 million tons of carbon dioxide per year. This is equivalent to the amounts generated by Turkmenistan. Meanwhile, Ethereum mining accounts for 35.4 million tons of carbon dioxide emissions. It is equivalent to the amount produced by New Zealand.
Digiconomist revealed the combined energy consumption of the Bitcoin (130.73 TWh) and Ethereum (63.47 TWh) networks is 194.2 TWh per year. The U.S, Kazakhstan and China are the countries where most of the mining activities are conducted. Around 76% of the energy consumed in China is generated from coal and crude oil, according to the Center for Strategic and International Studies.
38% of mining occurs in the U.S, China accounts for around 21% in the global hash rate. According to EIA data, the major source of the U.S most electricity is burning fossil fuels. Kazakhstan also majorly uses fossil fuels and conducts around 13% of the world’s Bitcoin mining. Hence these three countries are responsible for 72% of the world’s Bitcoin mining and heavily relies on fossil fuels.
Musk Says He Never Asked People To Buy Dogecoin
Additionally, Musk says Tesla will continue to hold his “favorite cryptocurrency,” Dogecoin. However, the price of Dogecoin still dropped by one percent on Friday morning as opposed to the increase in price which usually happens.
In another shocking revelation, Elon Musk denied a popular suggestion that he influenced people into investing in Dogecoin. The statement by Musk came after he was sued for $258 billion by a Dogecoin investor. The investor accused Musk of running a pyramid scheme to support the cryptocurrency.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
