I don’t know what it is, but we’re missing something on the recent decision by Tesla and Elon Musk to walk back the company’s decision to accept Bitcoin as payment for Tesla vehicles. The series of events so far just don’t make sense, for many reasons. Let’s walk through it.
If you missed it, here’s the gist of yesterday’s news: Tesla, which just two months ago added the option to buy a Tesla with Bitcoin, walked back that decision. Why? Elon cites concerns about “rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.”
Immediately, the juxtaposition with tweets sent only days earlier was eyebrow-raising. Selections such as: “Do you want Tesla to accept Doge?” (to which 80% of Elon’s followers voted “Yes”) and “SpaceX launching satellite Doge-1 to the moon next year – 1st crypto in space!”.
And then there’s a slightly older tweet, where Elon responded “True” to another tweet from Twitter and Square CEO Jack Dorsey, where Dorsey said Bitcoin incentivizes investment in renewable energy. He linked a whitepaper from Square Crypto and Ark Invest that argued Bitcoin is a “key driver of renewable energy’s future”.
At the time, Elon seemed to be in total agreement with their general thesis, which, to be clear, is literally that Bitcoin is going to be critical to the green energy revolution and saving the planet from climate change.
It’s also worth noting that all Elon changed with his announcement yesterday was whether Tesla is accepting Bitcoin for payment for Teslas, pending some kind of radical overhaul in the kind of energy powering the Bitcoin network.
He expressly committed to Tesla not selling its multiple billions of US dollars held on the company’s balance sheet in the form of Bitcoin, which is a bit weird if he genuinely did believe that Bitcoin was a climate disaster, but that’s only the tip of the iceberg for why this whole thing makes no sense.
So a handful of questions strike me here:
- Did Elon not know that a good percentage of Bitcoin mining is done using coal-powered plants around the world? That seems unlikely, since estimates about the percentage of Bitcoin mining powered by different power sources are widely available and mining in some places like China has been a point of controversy for quite a while. Bitcoin mining is done wherever energy is cheapest and economical for profitable margins, period. That includes random coal plants, hydroelectric, and solar. The “Bitcoin is good for green energy adoption” argument hinges on sources like solar becoming the cheapest sources in the long run.
- Did Elon know it was a short-term problem in general, but was caught off guard by a very specific event? An event such as a fossil fuel power plant coming back online in the US specifically for the purpose of mining Bitcoin? That definitely happened, but it doesn’t really change anything about the argument of countless (admittedly self-interested) parties that the logical endgame is the proliferation of more, cleaner energy worldwide.
- Is it a simple matter of a Bitcoin branding problem? Did Elon change his mind on the Bitcoin brand appearing on the checkout page for Tesla vehicles when, clearly, the popular narrative in the media and perception of Bitcoin in general is that it’s going to boil the oceans despite many counterarguments of substance?
- Did Elon simply want to generate some headlines in favor of Tesla’s brand image standing in contrast whatever the common conception of Bitcoin’s energy usage is? If that’s the case, it would seem to be a vain superficial move, since Elon is clearly still holding and hoping to profit from his and Tesla’s Bitcoin holdings in the long run. It seems to have worked if that was the case, though, because no one is looking at what’s really happening here.
- Was there some kind of higher power that intervened? Some have cited Tesla’s seeking entry into U.S. renewable fuel credit market, making Tesla “one of at least eight companies with a pending application at the Environmental Protection Agency tied to power generation and renewable credits,” Reuters reported just yesterday. Did the EPA pressure Elon into walking back some of the Bitcoin initiatives?
- Perhaps the most hilarious questions, highlighted by the aforementioned juxtaposition of Dogecoin trolling, both on Twitter and on primetime television last weekend on Saturday Night Live: does Elon not know that Dogecoin is powered and mined as a proof-of-work cryptocurrency literally the exact same way that Bitcoin is? Why is he asking “should we accept Dogecoin?” in one tweet, and then one tweet later walking back a decision made two months ago to accept Bitcoin?
- Is he literally just trolling and trying to find a way to pump up his meme currency of choice and try to delegitimize Bitcoin in the process? In the wake of this, he said that he’s now working with the Dogecoin devs on to “improve transaction efficiency”.
We don’t have the answers to any of these questions, and hence we very much don’t have the full picture. It seems likely to me that something happened that we’re not seeing.
Elon reponded to a tweet from infamous Bitcoin proponent Michael Saylor with three random articles showing Bitcoin influencing the resurrection of coal power plants in recent months, but didn’t explain why these change anything about the fundamental counterargument which has been promoted by many crucial Bitcoin players (especially when far worse things have been happening in China for years).
After massive pushback from thousands of Bitcoin proponents, including Saylor, who if you remember, was one of the figures that influenced Tesla making its initial Bitcoin purchase, Elon is now trying to save face and saying “to be clear, I strongly believe in crypto”. And then he threw in a good “It is high time there was a carbon tax!” for good measure, as if to suggest the Bitcoin coal problem would be less a problem if there was more regulatory disincentive to mine Bitcoin with dirty energy.
I’m glad Elon stirred all this up, personally. I think the evidence is strong that Square and Jack Dorsey’s long term projections for how Bitcoin will influence clean energy are spot on, and I think Elon committing to hold Tesla’s Bitcoin suggests he does too. I think it’s a good thing that the argument is coming to the forefront, because I think the current media consensus is backwards, and this might help correct that, or at least bring more nuanced discussion to the table.
Quirky-as-ever Saylor summed it up well in his response to Elon’s last tweet pretty well: “I think we all share the vision of a better world, empowered by technology – powered by clean, renewable energy.” Bitcoiners think Bitcoin is how we’re going to get there. If Elon’s convinced of the same, are there internal or external pressures keeping him from fully committing to it publicly?