Is Tesla a hypocrite by embracing bitcoin?

Today Tesla disclosed that it made a $1.5 billion investment in Bitcoin. It also announced that it plans to begin accepting the cryptocurrency as payment. This news sent bitcoin prices soaring.

Accord to Tesla, their “mission is to accelerate the world’s transition to sustainable energy.”^[1] No one questions that building electric cars is part of creating a sustainable world. Currently, the company is not profitable by only selling cars. The company would have negative cash flow if it could not sell carbon offset credits to other car manufacturers. Tesla’s current position is reminiscent of how Amazon’s on-demand cloud computing platform, AWS, enabled Amazon.com to sustain large losses while becoming the e-commerce juggernaut that it is in 2021.

Given Tesla’s mission and how it is currently sustaining the company, it is hypocritical for the company to embrace bitcoin. Bitcoin has a heavy carbon footprint and even if you aren’t mining bitcoin, a significant amount of energy is used when updating transactions on its blockchain ledger. Because of the way bitcoin was created, there is no way to improve power consumption. If quantum computers ever become practical, they could significantly reduce the processing and energy consumption of updating the ledger; however, they would also undermine the security of the cryptography used in bitcoins.

Because of the carbon footprint, bitcoin may struggle with long-term staying power. Other companies are working on making eco-friendly cryptocurrencies. Cardano is one such company with an intriguing take on the blockchain.

As large corporations decide which cryptocurrencies to accept, they need to focus not only on popularity but also sustainability. It is disappointing that Tesla, a company relying on carbon offset sales, is adopting a currency that hurts the environment.