Trading in Cryptocurrency comes at a well know cost to the environment, yet its use has continued to grow exponentially. While its acceptance as an alternative to traditional currencies continues to gain momentum, large corporations are caught at a juncture between keeping up with the latest digital technology and striving to reduce their carbon footprint. After recently backing away from Bitcoin as a payment method, Tesla is now investing in a new strategy that the company hopes will make cryptocurrency a more environmentally friendly solution for consumers.
Tesla has led the way as an innovative company on a mission to reduce our dependance on fossil fuels. While they are best known for their mass market electric vehicles, the company (through its subsidy Tesla Energy) also produces solar panels and energy storage to power homes and even entire electrical grids. After initially accepting bitcoin as a viable payment option for consumers, Tesla recently backed away from the cryptocurrency, citing environmental concerns as a key reason for the decision. CEO Elon Musk tweeted that whilst he saw the value of bitcoin mining and transactions, its usage came at a “great cost to the environment”, and the company would no longer be using or supporting the cryptocurrency.
The use of cryptocurrency comes at a great cost to the environment.
Cryptocurrency Has A Pollution Problem
Climate change has become a hot topic in recent years. As the general public becomes better informed with regard to the impact of fossil fuels and industrial pollution, governments and companies are feeling the pressure due to a rising demand for ecologically friendly goods and services. Cryptocurrency falls into the former category, as the computational power required to mint new coins (‘mining’) and validate transactions via blockchain technology requires copious amounts of energy. Bitcoin, the most popular form of cryptocurrency, currently uses more electricity than all of the fridges in the United States combined, and this figure is only set to rise as the digital currency becomes more popular. It also only accounts for a single flavour of cryptocurrency – there are several hundred in use as of this writing, with an increasing number being added to crypto exchanges all the time.
Clearly something needs to be done to address this growing issue. All that energy requires power, which is overwhelming serviced by fossil fuels. Governments have been slow to act, though there is some progress. The United States government has begun to explore the risk of cryptocurrencies, with an executive order recently signed by President Biden in a bid to marshal federal agencies to examine its stability and highlight potential risks to consumers, among other assessments. Notably absent from the directive are environmental criteria, allowing industry to fill the void currently left open by the slow crawl of policymakers.
A Greener Future
Tesla’s $1.5B stake in Bitcoin last year was a clear signal from the automaker that it sees a future in the digital currency. The company has now doubled down on that commitment by announcing plans to invest in green infrastructure in a bid to offset the reliance on fossil fuels required to power future bitcoin transactions. In partnership with Block (formerly Square) and Blockstream, the partners are financing a US $12million dollar dedicated Bitcoin mining facility in Texas, with Tesla supplying a 3.8 Megawatt Tesla Solar array, alongside a 12 megawatt-hour Tesla ‘Megapack’ system to power the facility. Upon completion in late 2022 the project will be a 100% solar powered endeavour. The backers have also committed to provide rolling analytics on energy usage, available for public consumption and accessible via web browsers.
This will be the biggest test of Bitcoin’s viability to date, a huge bet that the public (and policy makers) will get to see unfold in real time.
This will be the biggest test of Bitcoin’s viability to date, a huge bet that the public (and policy makers) will get to see unfold in real time. The trio are hoping that the facility will provide proof of concept on zero-emission infrastructure for crypto usage, in turn silencing the biggest criticism of the digital currency and accelerating widespread adoption. If unsuccessful, this may provide little more than a stumbling block toward a future, less energy hungry inception of blockchain technology. However, should it fail in spectacular fashion, it may provide critics of the platform with even more ammunition to campaign against its implementation. Hopefully the bet pays off, incentivising other companies to explore ways they can further offset, or actively reduce, their own carbon emissions via sustainable means.
Either way, when it comes to environmental preservation, we could certainly use more innovative thinking.
