Elon Musk in May 2021 created a cataclysm by announcing on Twitter that Tesla would no longer accept bitcoin payments for the purchase of its cars.
The killer tweet came just over three months after the electric vehicle maker announced it would accept bitcoin and invest in bitcoin.
"Tesla has suspended vehicle purchases using Bitcoin," the billionaire said on May 12, 2021. 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 (...) We are also looking at other cryptocurrencies that use
A Big Change
That day, bitcoin prices collapsed by more than 20%.
But the most worrying from the crypto sphere was that Musk's message would shine the spotlight on the environmental impact of cryptocurrencies. From that moment, the media began to investigate the energy consumption of the process of validating blocks of transactions on the Bitcoin blockchain and other blockchains. The process is called proof-of-work.
Researchers found that most blockchains consume much more energy than many countries. The timing was bad as all this came at a time when the young industry was trying to attract beyond its aficionados.
All this is not good for crypto which presents itself as a revolutionary technology of the future. How to belong to the future when one participates in polluting the planet? This is a question that has dogged the crypto space for several months now.
One of the consequences is that some institutional investors have preferred to stay on the sidelines for fear of being accused of violating ESG - environment, social and corporate governance - the trendy acronym in business circles.
The wait will soon be over as Ethereum, the No. 2 blockchain behind Bitcoin, has just successfully completed a software update that should reduce its energy consumption by 99.95%. This feat was achieved by changing the way things are done. Basically, transactions will now be validated by a new mechanism, proof-of-stake, which does not require the use of many computers at the same time as with proof-of-work.
To Feel Good
It's not as technical as it looks. What crypto fans want to tell us is that we can now invest in ether, the native token of Ethereum, buy and create the famous non-fungible tokens (NFTs) or acquire a loan via a crypto firm with a clear conscience since the platform's CO2 emissions have been greatly reduced.
Ethereum makes it possible to reconcile defense of climate change and crypto. Investing in projects run on Ethereum is to be a friend of the planet. Basically, a crypto investor is also socially conscious. There is no doubt that hesitant and cautious institutional investors now have a good excuse to get into crypto. It's chic and responsible in a diner in town to say that they are investing in an innovative, hype and eco-friendly asset.
If all this serves to makes us feel good, the problem is that Bitcoin, Ethereum's rival, will continue to run like nothing has ever happened. It is therefore hard to really believe that the crypto sphere will suddenly become eco-friendly while bitcoin (BTC), which represents 37.4% of the crypto market, according to data firm CoinGecko, continues to consume a lot of energy.