Musk said Wednesday that Tesla had halted purchases of its vehicles with bitcoin due to concerns over the “rapidly increasing use of fossil fuels for bitcoin mining.”
He alluded to data from researchers at Cambridge University which shows bitcoin’s electricity usage spiking this year.
Tesla won’t sell its bitcoin — the automaker is sitting on $2.5 billion worth of the digital coin — and Musk said it intends to resume transactions with bitcoin once mining “transitions to more sustainable energy.”
“We are also looking at other cryptocurrencies that use <1% of Bitcoin’s energy/transaction,” he said.
Musk’s comments roiled cryptocurrency markets, which have shed as much as $365.85 billion in value since his tweet.
Why is Musk worried?
Critics of bitcoin have long been wary of its impact on the environment. The cryptocurrency uses more energy than entire countries such as Sweden and Malaysia, according to the Cambridge Bitcoin Electricity Consumption Index.
To understand why bitcoin is so energy-intensive, you have to look at its underlying technology, the blockchain.
Bitcoin’s public ledger is decentralized, meaning it isn’t controlled by any single authority. It’s constantly being updated by a network of computers around the world.
So-called miners run purpose-built computers to solve complex math puzzles in order to make a transaction go through. This is the only way to mint new bitcoins.