Many critics responded to Tesla’s debut Bitcoin investment and payment support for Tesla sales on February 8, 2021, by arguing that the carmaker is supporting an asset that is probably primarily reliant on fossil fuels.
As a result, it wasn’t long before Tesla stopped accepting Bitcoin as a form of payment for its vehicles. Following that, there was a mining uprising in China, which resulted in a huge decline in hash rate, prompting those who were critical of BTC’s power use to assault the network once more.
In this post, we’ll examine some of the most common arguments about Bitcoin and how it’s used to separate the facts from the fiction.
The Bitcoin Carbon Footprint Conundrum – How much of the study is true?
Various studies have reported different aspects of BTC’s carbon footprint over the last few years, but the methodology has been a little shaky. Because the hash rate determines the network’s power, the type of equipment employed by different miners makes a big effect. As a result, most studies have assumed a data set that falls between the upper and lower bounds of efficiency.
The challenge now is whether to use renewable or non-renewable energy sources. The Cambridge Centre for Alternative Finance established one of the best research indexes in this regard, claiming that Xinjiang, China, contributes 30% of the overall BTC hash rate. Sichuan, Inner Mongolia, and Yunnan came in second, with 19%, 7.5 percent, and 7%, respectively.
Now, the disparity between renewable and non-renewable electricity output at the national level highlights the major problem with data generalization. For example, according to this analysis by the Economist Intelligence Unit, hydroelectricity generates more than 85 percent of the electricity needed in Yunnan and Sichuan.
When big institutions like the Bank of America cited in 2021, such themes were pushed under the radar.
“Coal-fired power plants account for about 60% of Chinese electrical generation, with natural gas and renewables accounting for less than 20%. To put it another way, the primary input into Bitcoin mining is coal, which isn’t exactly the cleanest kind of energy on the planet.”
Each entity’s data set reflects a different point of view, thus it’s best to look at consumption from a utility standpoint.
What is the true hook in Visa vs. BTC?
According to the Bitcoin Energy Consumption Index, each Bitcoin transaction now emits 545 kg of CO2, consumes 1,147 kg-watt of electricity, and generates 104 grams of electrical waste. A Visa transaction, on the other hand, uses a fraction of the electricity. While this is technically correct, there is a significant distinction.
Both Bitcoin and Visa are different types of payment systems. Bitcoin is totally self-contained and operates on its own network, with all peer-to-peer operations taking place on the blockchain. Nic Carter has outlined the many tiers involved with Visa. According to him,
“Visa transactions are non-final credit transactions that rely on underlying settlement rails that are external to the transaction. Visa enlists the help of ACH, Fedwire, SWIFT, the worldwide correspondent banking system, the Federal Reserve, and, of course, the military and diplomatic might of the United States to guarantee that everything runs smoothly.”
As a result, rather than comparing one visa user to a visa merchant, the results are more comparable when you compare a large wire transfer power consumption in context with Bitcoin.