Elon Musk, a well-known business tycoon, has recently said that his company Tesla will again resume accepting Bitcoin as a mode of payment if the cryptocurrency improves on its environmental credentials. The owner of SpaceX emphasized that Tesla stopped accepting Bitcoin because of the huge energy required for mining the cryptocurrency.
Earlier in February this year, Tesla announced that it would start accepting Bitcoin as one of the legitimate payment methods for its electric cars. Soon, the company withdrew its decision citing the large carbon footprints associated with Bitcoin. It is also important to note that in the same month of February 2021, Tesla invested a huge amount of $1.5 billion in Bitcoin, which led to the unprecedented boost in the value of Bitcoin, the largest cryptocurrency by market capitalization. However, the currency cannot sustain the momentum as many headwinds, including the heavy energy required for its mining, took the wind out of its sails.
The primary reason behind heavy energy usage is the consensus protocol used by Bitcoin called proof-of-work. Even the second-largest cryptocurrency, Ethereum, works on the same principle. The proof-of-work requires miners to solve very complex problems, which, in turn, mandates the use of large computers with high processing capacities.
Bitcoin mining firms are very large in size and scale of operations and run thousands of high-capacity hardware and software to solve the problems required for mining Bitcoin. In order to run these operations, an enormous amount of electricity and power resources are required, and this is exactly why Bitcoin mining is a contentious issue – especially from the viewpoint of the environment. In comparison to proof-of-work, another consensus mechanism for mining digital currencies is proof-of-stake which is quite energy efficient and requires very little electricity to support its operations.
It is unlikely that Bitcoin will make a transition from proof-of-work to the proof-of-stake mechanism. Efforts are already underway to replace the sources of energy that support the mining operations of Bitcoin from non-renewable to renewable. Elon Musk has assured that in case Bitcoin reaches a target of 50% mining from renewable energy sources, his company will again start accepting the digital currency as one of the payment methods for purchasing its electric cars. This announcement is in line with his previous tweet in June wherein he said that if Bitcoin miners confirm that 50% of the energy for Bitcoin mining has come from renewable sources, Tesla will again start accepting Bitcoin as a payment method for its cars.