Shouldn’t the world’s largest electric car maker know how an electrical network works? You hoped so, but Elon Musk’s latest foray into cryptocurrency comments makes you wonder. A few days after promoting Dogecoin on Saturday Night Live and asking his Twitter followers if he should accept payments on the digital token based on Shiba Inu, the most prominent Bitcoin bull in the world [decried] digital currency on the same social platform, helping to bring a 15% drop to its lowest price level in three months.
Tesla “suspended purchases of vehicles using Bitcoin” due to the rapid increase in cryptocurrency fossil fuel consumption, in particular coal, in its electronic mining operations, Musk wrote in a tweet. The company will not sell its $ 2.48 billion in shares, but plans to use it “as soon as mining transitions to more sustainable energy,” he wrote.
The company may have a long wait. This is due to something that should be obvious to most people, but that is barely noticed in the angry debates about the carbon footprint of cryptography. Proof-based digital currencies, such as Bitcoin, are not powered by renewable energy or fossils. Like any other major electricity user, they are buying their energy from a network that has a series of generators connected to it. If Tesla is planning to keep its Bitcoin pending mining for “transitions to more sustainable energy”, it will not be selling until China’s power grid is decarbonized somewhere near 2060.
Thanks to the IP address data from computers connected to the main Bitcoin mining pools, we know a lot about the location of the world’s cryptographic mines. So far this year, about 69% of calculations have taken place in China, with about half just in the Xinjiang region, which weighs a lot of coal. Inner Mongolia, another coal-fired region, is also prominent, as are hydroelectric-powered Sichuan and Yunnan.
It is very simplistic, however, to say that Bitcoins extracted in Sichuan are cleaner, because electricity is fungible. If the hydroelectricity generated at the Three Gorges Dam is not used to produce cryptographic evidence, it will supply energy to homes, factories or high-speed trains and thus reduce the coal energy market. As a result, digital currency mining is not displacing other electricity consumers – it is only increasing demand on the network, forcing operators to connect more generators to prevent blackouts.
This is important, because one of the biggest sources of incremental carbon emissions in the world today is the huge fleet of new coal-fired power plants underway in China. In January, there were about 88 gigawatts being built, according to Global Energy Monitor, a group that is pushing for the elimination of coal. These power plants are unlikely to profit as they are, but their prospects would be even more bleak if it weren’t for the additional demand for cryptography.
Bitcoin is on track to account for about 5.4% of China’s electricity demand, according to a study published in Nature Communications last month, and will consume up to 350 terawatt hours of electricity in 2024. The number is remarkably close to the 385 TWh that these coal plants under construction would generate if they operated at a typical 50% local capacity. In contrast, the entire UK consumed only 284 TWh in 2020.
In the past, there have been problems with the reduction of Chinese renewable energy due to the lack of grid capacity. In that circumstance, it is possible that Bitcoin could have used energy that would otherwise have been wasted – but the billions spent building the high voltage transmission network mean that the restriction has almost disappeared as a problem in recent times. Now there is no shortage of electricity being transported to where it is needed. Long-distance electricity transmission has increased by about 44% in the past three years, to 613 TWh in 2020 – about eight times what Bitcoin platforms have consumed worldwide. Within the provinces, 1,536 TWh were moving along the same power lines.
This leaves Musk and Tesla in trouble. Despite their promise not to trade in Bitcoin until their carbon footprint improves, ‘hodlers’ who keep their cryptography for life are just as responsible for the network’s emissions as those who buy and sell on the blockchain. Proof-of-work calculations that guide the use of cryptographic energy are not only performed to record new transactions, but to sustain the entire network and verify ownership of every Bitcoin already extracted, including Tesla’s own treasure.
State Grid Corp, which runs China’s main electricity grid, does not even expect emissions to peak until 2025. If Tesla is going to stay in its current situation until the blockchain runs on low carbon energy, it will take decades in the future. future.
David Fickling is a columnist for Bloomberg Opinion covering commodities, as well as industrial and consumer companies.
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