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Elon Musk has woken up to bitcoin’s fossil fuel problems

Elon Musk has woken up to bitcoin’s fossil fuel problems


Elon Musk, founder of Tesla, recently christened himself “technocracy”, Or the king of technology. A hobe moniker he may be the “Wizard of Oz.”

The entrepreneur has an amazing ability to pull the strings in the world of cryptography. In February, bitcoin prices jumped when Musk said he had the company He bought $ 1.5 million the value of the cryptocurrency. The price of dogecoin was also followed by similar Delphic tweets.

But last weekend dogecoin fell When Musk accepted it In an American comedy session that the asset can be a “bustle”. And now bitcoin has also fallen after that yet another tweet, this time Tesla has revealed that it will not accept bitcoin for electric car purchases. “We are concerned about the rapid increase in the use of fossil fuels for bitcoin mining and transactions, especially coal,” Musk said.

Activists and journalists Of course, I have been highlighting this issue for months. Both striking statistics cover the problem.

First of all, gives so far two-thirds of bitcoin has been extracted – using computer algorithms – in China, using it data centers dependent on the electricity generated by the coal. In particular, bitcoin’s connection to black things is very close, with cryptography expert Alex Lipton warning that bitcoin prices move every time accidents occur in China’s coal mines.

Second, the $ 2 billion cryptocurrency market has expanded so rapidly that it is taking in large amounts of energy. Bitcoin mining, which accounts for half of all cryptocurrencies, now uses the same amount of energy that the Netherlands used to do in 2019 every year. Scientists warn which threatens Paris’s climate goals.

Bitcoin fans like entrepreneur Scaramucci have pointed out that statistics need context and that traditional finance also uses a lot of energy.

There are other types of technology as well. As paper Made by a former researcher in Google’s artificial intelligence ethics unit, these are some of the AI ​​processes behind Google search “It simply came to our notice then as much energy as a trans-American flight ”.

Even with such warnings, the fact is that bitcoin’s carbon footprint is embarrassing, not only for Tesla, but also for thousands of years of crypto-investors concerned with green issues. This, in turn, highlights three major lessons for all investors.

First, no one can ignore environmental, social, and governance concerns today, even in stocks labeled as ESGs. The Tesla ESG fund is often featured because investors have focused on the point of the electric car and have sidelined other issues.

However, digital transparency enables activists to monitor business activities more effectively than ever before. This means that investors need a side-by-side approach when valuing companies, as ESG risks are rarely static or binary and often have constantly changing compensations.

Second, and from there, investors should see the debate about the carbon footprint of technology as an example of a changing landscape. A clash is underway to address Bitcoin’s carbon issues. Rocky Mountain Institute, a clean energy nonprofit, he recently joined forces To discuss solutions with UN officials and fintech leaders. Changes may be made in computing processes related to cryptography to reduce energy consumption; which last week used less processing power called a “green” cryptocurrency Share was launched.

Another option is to use green electricity, for example by switching Chinese coal to Icelandic hydroelectric power. Fans like Scaramucci believe it can solve the problem if there is a record that allows investors to track the origin of bitcoins.

It is unclear what idea might work. But the discussion will probably explain why Musk sent his tweet. And why veteran investor Stanley Druckenmiller he said this week it’s not clear which cryptocurrency will prevail in the end (if you assume, as Druckenmiller does and as I do, the crypto is here to stay). Few people announced 15 years ago that Facebook, not MySpace, would come to dominate social media.

The third point is about regulation. The reason Musk can act as the Wizard of Cryptography Oz, with impunity, is that the sector is opaque and largely unregulated. They are now in charge of financial policy threatening repression.

But report From the notes of the International Bank Settlements, “most jurisdictions in the world” have not established controls to stop money laundering, let alone market manipulation. Moreover, “there is a marked variation in the definition of the regulatory perimeter between jurisdictions.” In pure English, supervision is a mess.

Libertarians like it that way. Maybe Musk too. But if the crypto becomes more common – with any token – it needs more responsibility and transparency. Perhaps this will make it impossible to get the opposite of the origin of cryptography.

But the fight against green standards may perhaps trigger this process by giving young cryptocurrencies a reason. If so, this may be the most important impact of Musk’s tweet, and investors and regulators may be the variety of coal miners to conduct a late study of Chinese mines.

gillian.tett@ft.com





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