Elon Musk revealed that Tesla will halt all BTC transactions due to environmental concerns, with the firm set to look at more energy-efficient cryptocurrencies.
On May 13, Elon Musk sent shockwaves across the crypto markets by revealing that Tesla will no longer accept any BTC payments for cars until Bitcoin mining becomes more environmentally sustainable.
Musk notes that while Tesla waits for Bitcoin to move to renewable energy, the firm will be looking at “other cryptocurrencies” that use less than 1% of Bitcoin’s energy per transaction.
Tesla & Bitcoin pic.twitter.com/YSswJmVZhP
— Elon Musk (@elonmusk) May 12, 2021
The tweet sent much of the crypto community into a frenzy of speculation as to what other crypto assets Tesla may be exploring.
Social influencer “The Cryptic Poet,” told his 45,000 Twitter followers that he predicts Tesla will “either use ETH or XRP,” however user “Massimo” pointed out that if Tesla uses ETH in its current state — which uses Proof-of-Work just like Bitcoin does — it might as well be “staying with BTC.”
My prediction: Tesla will select either use ETH or XRP.
— The Cryptic Poet (@1CrypticPoet) May 12, 2021
According to an analysis by TRG data centers, Bitcoin is estimated to average around 700 kilowatt-hours, or KWh, per transaction. While it uses around as much power each year as the Netherlands, it’s annual carbon footprint is closer to Singapore’s according to Digiconomist, presumably due to the use of cheap renewable power for a considerable proportion of mining. (Note: estimates of power consumption per transaction are controversial, so they are simply used here as a very rough comparative tool).
Ethereum and PoS
Ethereum consumes an estimated 62.56 KWh, per transaction. The Ethereum network is currently secured using the same energy-inefficient consensus method as Bitcoin — Proof-of-Work, or PoW. Digiconomist estimates the Ethereum’s network’s annual carbon footprint is comparable to that of the country Sudan.
However, these issues are set to be resolved with the network’s forthcoming transition to ETH 2.0, which will introduce Proof-of-Stake, or PoS. According to Nimbus, PoS consensus is estimated to be 99% more energy-efficient than PoW.
Earlier this month Rocket Pool contributor Joe Clapis proved the point by running 10 Eth2 validators for 10 hours on his front lawn using a power bank and a hard drive connected to a Raspberry Pi.
But all Proof-of-Stake chains are arguably 99% more efficient than Bitcoin, so Tesla could pretty much choose any of them, from Solana to Cardano, and everything in between.
Ripple (XRP) could be Tesla’s choice in the immediate term (depending on the SEC lawsuit), as all XRP tokens were pre-mined and XRP’s transactions incur a tiny amount of energy of just 0.0079 KWh according to TRG data centers. Ripple regularly puts out blog posts and releases touting how energy efficient it is in comparison to Proof-of-Work blockchains.
Stellar Lumens (XLM) also follows the model of XRP as all of its tokens were minted at genesis. The network also uses the Stellar Consensus Protocol, or SCP, to rely on for authentication of transactions which reportedly requires less energy than the PoW and PoS stake models.
Algorand could be a contender. Not only does it run on Pure Proof-of-Stake but the team announced its blockchain had become fully carbon-neutral on April 22. Algorand has also partnered with Spanish fin tech firm, ClimateTrade who are building a CO2 marketplace that enables companies to track their emissions in pursuit of broad sustainable goals. The firms will work together to implement a sustainability oracle to make the network carbon-negative.
Elon Musk’s long-standing favorite Dogecoin could be the dark horse (dark dog?) in this race. The meme coin actually piggybacks much of its mining on the Litecoin network, which uses Proof-of-Work. But while Bitcoin mining employs the ultra-complex SHA-256 algorithm, Dogecoin and Litecoin are mined using Scrypt, which is energy efficient and quicker (though considerably less secure). Interestingly enough, while TRG Data centers puts LTC’s power usage at 18.522 KWh per transaction, Dogecoin is estimated to use just 0.12 KWh per transaction.
Musk may have been looking at such estimates when he put up a poll on Twitter this week, asking if Tesla should start accepting Dogecoin payments.
Do you want Tesla to accept Doge?
— Elon Musk (@elonmusk) May 11, 2021