Recently the founder of Tesla (TSLA) announced some negative things related to bitcoin, specifically bitcoin mining and its energy consumption. Musk’s comments were tweeted alongside a statement from Tesla indicating that they would no longer be accepting bitcoin as a viable payment for their vehicles. Tesla tweeted:
“Tesla has suspended vehicle purchases using bitcoin. We are concerned about rapidly increasing use of fossil fuels for bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel. Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at great cost to the environment. Tesla will not be selling any bitcoin and we intend to use it for transactions as soon as mining transitions to more sustainable energy. We are also looking at other cryptocurrencies that use <1% of bitcoin’s energy/transaction.”
Tesla and Mr. Musk are conflating bitcoin’s energy consumption with a negative environmental impact. This is a sophomoric conclusion as it illustrates how little they understand bitcoin mining and how it impacts global energy production.
First, I’d like to mention my own perspective. I work for a company (Upstream Data Inc) that builds portable bitcoin mines and engines for oil & gas producers who are looking to leverage bitcoin mining in the oilfield to improve their hydrocarbon revenue. My position is relevant as I speak with individuals in the fossil fuel industry on a daily basis who are looking to mitigate their methane (CH4) emissions by mining bitcoin.
Let me explain further. There is a seemingly endless amount (over 1B cubic feet per day in North America) of natural gas that gets flared/vented into the atmosphere during oil & gas production. This is often due to geographical limitations and economic conditions. In other words, there are thousands of oil wells across North America (and the world) that produce associated/waste gas, but because of the location of these oil wells, there is no midstream/pipeline allowing the gas to be brought to market — so they burn/flare it. Combusting/flaring the natural gas is a cleaner strategy to mitigate these emissions compared to simply venting the gas into the air. However, flaring isn’t 100% effective (especially in windy conditions), so it is common for a percentage of the flared gas to escape into the atmosphere before combustion. The resulting methane (CH4) emissions released from flare stacks have an impact on air quality and are 40-60x worse for the environment than carbon dioxide (C02). However, if the oil & gas producers use their stranded/associated/waste gas to generate electricity onsite to mine bitcoin (instead of flaring) then 100% of the natural gas gets combusted and the CH4 emissions are entirely eliminated. This is a sustainable & scalable solution to flare/vent gas because it is economically sustainable, meaning it provides enough of a monetary incentive for o&g producers to mitigate their waste gas on their own without regulatory intervention.
Waste/vent/flare gas has been a source of waste in the o&g industry since the industry’s inception. By mining bitcoin, there is a solution to this waste. This can provide an immense environmental impact over time, and is completely scalable. Just one of Upstream Data’s 50kW natural gas gensets (the smallest engine & portable bitcoin mine they build) will eliminate over 6,000,000 cubic feet of CH4 emissions per year. Some producers are running engines 10x that size consuming 10x that volume of waste gas. Considering CH4 is 40-60x more impactful as a greenhouse gas than CO2, it’s safe to say that some bitcoin miners are doing an environmental service by risking capital in order to mitigate emissions.
Every day I’m building projects with oil & gas producers helping them mitigate their CH4 emissions in an economically sustainable way. Bitcoin is their answer and the environmental impact from their participation in mining bitcoin is very positive. Because of this, I have a lot of questions regarding Tesla’s statement -- questions that warrant answers. I am hoping the TechnoKing will read this blog and help me understand (my Twitter DM’s are open).
Did Elon Musk and Tesla account for all of Upstream Data’s customers? The other companies building similar infrastructure and mining in the oilfield? No they didn’t. Is this because they are unaware of where/how bitcoin miners are generating power? Are they unaware that bitcoin incentivizes miners to source the most economical/sustainable sources of energy? Like wasted and stranded hydroelectric/natgas/geothermal/solar/wind? Or are they acting willfully ignorant?
Considering the industry that Tesla operates in, as well as their resources — ignorance hardly seems like a viable excuse. So what is it then? Why would Tesla come out and say that “too much bitcoin mining is powered by coal so we’re not accepting bitcoin anymore,” and yet they have no problem holding billions of dollars worth of it? A lame and hollow reason to revert their policy of merely accepting bitcoin from their customers. Especially considering Tesla has never cared to raise issues regarding the fact that their solar panels are manufactured and assembled using electricity from fossil fuels, or that the ways their customers currently buy from them are powered through fossil fuels. So Tesla’s statement was at best a hypocritical excuse and, at worst, blatant propagandizing.
Another interesting piece of this saga is the fact that bitcoin mining greatly improves the viability and scalability of solar power. Intermittent power generation (like wind and solar) is not very efficient at delivering electricity to the market due to production volatility. For instance, solar energy doesn’t generate a lot of electricity at night. Thus, investing in wind/solar power isn’t very attractive because the ROI is difficult to predict/project years into the future. However, when bitcoin mining is incorporated into the solar/wind operation, the ROI becomes more predictable and much more attractive. In other words, bitcoin mining makes all electrical generation more attractive, but it especially benefits intermittent/wind/solar energy production.
What Tesla said in their statement wasn’t all that shocking (more idiotic than shocking). However, what they omitted from their statement was somewhat shocking. There was no mention of how bitcoin mining is helping the environment throughout the oilfield. There was no mention of how bitcoin mining improves the economics and scalability of wind/solar. There was no mention of how bitcoin mining is a driving incentive to provide everyone on earth with affordable and reliable electricity. There was also no mention of the electricity that Tesla uses in other areas of its business/manufacturing that is generated by fossil fuels (coal/natgas).
I find Tesla’s statement on bitcoin to be hollow, unbalanced, and ultimately a poor execution of public relations. The irony? This is good for bitcoin. The wealthiest man in the world, along with one of the most popular/discussed companies on earth, is forcing this conversation to take place. This is a good thing because the truth is on the side of the bitcoin network — Bitcoin is a net-positive for humanity and bitcoin mining is a net-positive for the environment.