What is “Energy Efficient” Mining vs. “Energy Efficient” Driving (by Sigmund Freud and beyond)

The latest episode, the whole comical story with "Musk's crime and punishment", starting with the fact that Musk allegedly did not know before that Bitcoin mining consumes a lot of different energy – looks like another play-written performance. Although Musk said Tesla had no plans to sell any more of its Bitcoin, he confirmed that the company is looking at other cryptocurrencies that are much less reliant on energy. 

The environmental excuse given was already widely known well before Tesla even started accepting Bitcoin. There’s been some widespread quoting of a study stating 76% of cryptomining “use renewable energy sources.” However, to qualify as “using renewable sources” just takes some renewable energy being present in the electricity generation mix. Of course, nearly all electricity pools have some renewable sources, so nearly everyone can claim to use some renewable energy.Hence, no-one knows for sure, but Ellon Musk may have sold Bitcoin himself, despite his firm assurances that he did not. But he could have sold it with only one purpose: to take advantage of a panic and get back into it lower, but more meaningfully.

More precisely, Tesla sold US$272 million of bitcoin during the quarter, making a US$128 million profit from the trade, according to its 10-Q regulatory filings in New York and its Q1 2021 cash flow statement. While it suffered a US$27 million impairment in digital assets, Tesla was sitting on unrealised gain as the US$2.48 billion fair market value exceeded its cost of US$1.331 billion on March 31.

Even though the environmental problem may be something to consider from Musk’s point of view to abandon Bitcoin, yet majority of investors are not buying his story as the recent report from Galaxy Digital showed that the traditional banking system consumes much more energy than the Bitcoin network.

In fact, all-electric vehicles produced by Tesla, with an average mileage of 20 thousand km/year, consume a mind boggling 15 terawatt/hours of electricity per year, which corresponds to the annual consumption of the entire Sri Lanka. Moreover, more than 13% of consumption reportedly represents transmission losses en route to the conversion of electricity from cable networks into stored electricity in a car battery. Due to imperfect battery charging technology, Tesla vehicles waste 1.95 teratwatts of electricity per year, which equates to Malta's annual consumption.

The average Tesla car emits more CO2 than the Toyota Prius, the diesel VW Golf and even more than the diesel Audi A7. The environmental performance of Musk's electric vehicles is slightly better than the 40 year old Volvo cars. When someone tells you about ecology or green energy, in 99% of cases it is a lie.

In contrast, in some areas, there is an abundance of hydroelectric power, and Bitcoin mining is an attractive way to extract value from the surplus renewable energy source. But in other areas, for example, coal energy is also widely used – particularly, in China due to the specifics of the country’s generation mix. It can be used for other energy consuming activities though. But a huge amount of renewable energy would be lost without Bitcoin because it's impossible to store the excess capacity already in place.