In one of his tweets early this morning, Elon Musk has announced that Tesla will accept Bitcoin for vehicle purchases. He also says that Tesla will operate full nodes to support the Bitcoin network and run open-source software related to the cryptocurrency on its servers.
Right now, the option to pay in Bitcoin is only available in the United States. Musk says he plans to add the option for other countries by the end of the year.
The move is already being criticized for Bitcoin’s energy usage. A Cambridge study covered by Business Insider says that the energy used by Bitcoin “mining”, or using computing power to process batches of transactions known as blocks, has jumped by 80% since the beginning of 2020 and now uses 128 terrawatt-hours annually. Much of the increase could be explained by Bitcoin’s recent jump to an all-time high of over $50,000 per bitcoin.
On the flip side, Bitcoin enthusiasts jumped to its defense, saying that Bitcoin miners like to find sources of cheap renewable energy like hydroelectric power to increase their profitability. Bloomberg noted in December that Sweden and Norway are seen as friendly toward Bitcoin mining partly because of their ramping up of hydroelectric power generation, which has caused energy costs to drop in those countries.
Its defenders say that the modern banking industry also requires electricity to function. So does the mining of precious metals, which is also notorious for releasing toxic chemicals into the environment. Even the ability to use social media to complain about Bitcoin’s energy usage requires energy, both in the form of Twitter running its servers and people running their devices and connecting to the Internet in order to do so.
What it amounts to is that the demand for what cryptocurrency insiders call “sound money” is unlikely to go down anytime soon. All forms of money creation, from moving bits in a digital ledger to printing dollar bills to mining gold, is going to require energy.
Elon Musk has recently praised cryptocurrencies like Bitcoin and Dogecoin as potentially being the payment option and store of value of choice in a future that includes Martian colonies. Recent regulatory filings also revealed that Tesla has acquired $1.5 billion in Bitcoin. (Musk’s attempt to sell a musical non-fungible token (NFT) for Dogecoin has apparently fallen through.) This caused a spike in the prices of Bitcoin, Dogecoin, and a minor cryptocurrency called Marscoin.
How many people will actually use Bitcoin to buy a Tesla, especially considering Bitcoin’s notoriously high transaction fees? As one Twitter user put it:
Perhaps Tesla would do well to add cryptocurrency payment options with lower fees, like the Dogecoin he likes so much and Bitcoin Cash with its ability to hold onto a slot in the Top 15 on CoinMarketCap by market cap despite a recent rift with cryptocurrency mining company ABC over a dispute on how to allocate mining rewards, ongoing branding issues, and criticism from Bitcoin maximalists. But for large purchases like Tesla’s electric vehicles, which typically start in the five figures in dollar prices, Bitcoin is a good start.