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Elon Musk announced that Tesla would suspend all BTC transfers due to environmental issues, with the company looking for more energy-efficient cryptocurrencies.
On May 13, Elon Musk sent shockwaves through the crypto markets when he announced that Tesla will no longer allow BTC payments for cars until Bitcoin mining becomes more environmentally friendly.
As Tesla waits for Bitcoin to transition to green energies, Musk says the company will look at “other cryptocurrencies” that consume less than 1% of Bitcoin’s energy per transaction.
The tweet sparked a frenzy of excitement in the crypto world about what other crypto assets Tesla could be looking at.
The Cryptic Poet, a social influencer with 45,000 Twitter followers, predicted that Tesla would “either use ETH or XRP,” but user “Massimo” found out that if Tesla uses ETH in its present state — and uses Proof-of-Work much like Bitcoin — 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 TRG data centres’ study, Bitcoin is expected to use about 700 kilowatt-hours, or KWh, per transaction. Although it consumes about the same amount of energy as the Netherlands, its annual carbon footprint is closer to Singapore’s, according to Digiconomist, owing to the use of cheap green energy for a significant portion of mining. (Note: calculations of power usage per transaction are contentious, so they are only used as a rough comparative measure here.)
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.
These problems, however, are expected to be overcome with the network’s upcoming upgrade to ETH 2.0, which will add Proof-of-Stake, or PoS. PoS consensus, according to Nimbus, is 99 percent more energy-efficient than PoW.
Joe Clapis, a Rocket Pool contributor, demonstrated the claim earlier this month by running 10 Eth2 validators for 10 hours on his front lawn using a power bank and a hard drive attached to a Raspberry Pi.
However, since all Proof-of-Stake chains are arguably 99 percent more powerful than Bitcoin, Tesla could pick any of them, from Solana to Cardano and all in between.
Ripple (XRP) may be Tesla’s first option in the short term (depending on the outcome of the SEC lawsuit), since all XRP tokens were pre-mined and XRP transactions use just 0.0079 KWh of electricity, according to TRG data centres. Ripple often publishes blog posts and press releases touting its energy efficiency in addition 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 may be a candidate. It not only runs on Pure Proof-of-Stake, but the project revealed on April 22 that its blockchain has been completely carbon-neutral. Algorand has also collaborated with ClimateTrade, a Spanish fintech company that is developing a CO2 marketplace that will enable businesses to monitor their emissions in search of strong sustainability goals. The companies will collaborate to put in place a green oracle that will turn the network carbon-negative.
Dogecoin, Elon Musk’s long-standing favourite, may be the dark horse (dark dog?) in this race. The meme coin really does a lot of its mining on the Litecoin network, which is based on Proof-of-Work. However, while Bitcoin mining uses the extremely complicated SHA-256 algorithm, Dogecoin and Litecoin are mined using Scrypt, which is more energy efficient and faster (though considerably less secure). Surprisingly, while TRG Data Centers estimates that LTC uses 18.522 KWh per transaction, Dogecoin is expected to use just 0.12 KWh per transaction.
Musk may have been thinking about those figures when he asked on Twitter this week if Tesla should start accepting Dogecoin payments.
Do you want Tesla to accept Doge?
— Elon Musk (@elonmusk) May 11, 2021