Price of Bitcoin sinks 15% after Elon Musk says Tesla will no longer accept it as payment

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The price of Bitcoin tanked Wednesday after Elon Musk said Tesla will no longer accept the cryptocurrency, citing concerns about the use of fossil fuels for mining the coin.

CEO Musk tweeted Wednesday to say the electric car manufacturer ‘has suspended vehicle purchases using Bitcoin’. 

Creating Bitcoins and other cryptocurrencies requires a lot of electricity, releasing massive amounts of greenhouse gases. 

The cryptocurrency is ‘mined’ by high-powered computers that continuously solve computational math puzzles, the complexity of which means the processors require huge amounts of energy. With each solved problem, a certain amount of coin is produced.

While the machines use electricity, fossil fuel is a major category in electricity generation. 

Musk wrote: ‘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.’ 

Bitcoin, the world’s biggest digital currency, fell 15 per cent after the tweet. 

Elon Musk has said Tesla will no longer accept Bitcoin as a payment citing concerns about the amount of fossil fuels used to process the cryptocurrency

Elon Musk has said Tesla will no longer accept Bitcoin as a payment citing concerns about the amount of fossil fuels used to process the cryptocurrency

CEO Musk tweeted Wednesday to say the electric car manufacturer 'has suspended vehicle purchases using Bitcoin'

CEO Musk tweeted Wednesday to say the electric car manufacturer ‘has suspended vehicle purchases using Bitcoin’

Bitcoin, the world's biggest digital currency, fell nearly 15 per cent after Musk's tweet

Bitcoin, the world’s biggest digital currency, fell nearly 15 per cent after the tweet

‘We are also looking at other cryptocurrencies that use <1% of bitcoin’s energy/transaction,’ Musk said.

Musk said in March Tesla customers can buy its electric vehicles with bitcoin, jumping up the price of the currency.

But on Wednesday he tweeted: ‘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. 

‘Tesla will not be selling any Bitcoin and we intend to use it for transactions as soon as mining transitions to more sustainable energy.’ 

Tesla said in a February filing with the Securities and Exchange Commission (SEC) that it had bought $1.5 billion (£1.16 billion) worth of Bitcoin and would soon accept it as a form of payment for cars  

Pictured: A graph showing the amount of energy in terawatt hours (TWh) consumed by tech giants, electric vehicles and Bitcoin mining (lower, central and upper bounds). The bar second from right shows the current annual bitcoin consumption, that on March 3 was at a rate of 130.9 terawatt hours (TWh), roughly the same as New Zealand and Argentina

Pictured: A graph showing the amount of energy in terawatt hours (TWh) consumed by tech giants, electric vehicles and Bitcoin mining (lower, central and upper bounds). The bar second from right shows the current annual bitcoin consumption, that on March 3 was at a rate of 130.9 terawatt hours (TWh), roughly the same as New Zealand and Argentina 

Pictured: A graph showing data from the Cambridge Bitcoin Electricity Consumption Index (CBECI) that shows the energy consumed by Bitcoin. Consumption increased to its highest ever levels towards the end of last year, with the rates continuing to rise into 2021. The CBECI calculates Bitcoin's total energy consumption is currently between 40 and 445 annualised terawatt hours (TWh), with a central estimate (yellow line) of about 130 TWh

Pictured: A graph showing data from the Cambridge Bitcoin Electricity Consumption Index (CBECI) that shows the energy consumed by Bitcoin. Consumption increased to its highest ever levels towards the end of last year, with the rates continuing to rise into 2021. The CBECI calculates Bitcoin’s total energy consumption is currently between 40 and 445 annualised terawatt hours (TWh), with a central estimate (yellow line) of about 130 TWh

Pictured: The data centre of BitRiver company providing services for cryptocurrency mining in the city of Bratsk in Irkutsk Region, Russia March 2, 2021. The cryptocurrency is 'mined' by high-powered computers that solve computational maths puzzles, the complexity of which require huge amounts of energy

Pictured: The data centre of BitRiver company providing services for cryptocurrency mining in the city of Bratsk in Irkutsk Region, Russia March 2, 2021. The cryptocurrency is ‘mined’ by high-powered computers that solve computational maths puzzles, the complexity of which require huge amounts of energy

Microsoft co-founder Bill Gates has already highlighted the negative impact mining Bitcoin has on the environment. ‘Bitcoin uses more electricity per transaction than any other method known to mankind,’ Gates said, ‘It’s not a great climate thing.’ 

A 2018 study published in Nature found huge farms of computers used to mine Bitcoin could produce enough greenhouse gases to raise global temperatures 3.6°F (2°C) in less than three decades. 

Studies have also shown that the annual carbon emissions from the electricity generated to mine and process the cryptocurrency is equal to the amount emitted by whole countries, including New Zealand and Argentina.   

Bitcoin mining’s energy consumption also eclipses that of the world’s major tech companies that provide entertainment services, including the streaming giant Netflix as well as Apple, Facebook, Microsoft and Google combined – all of which also require huge amounts of energy to run their services.

By comparison, Google – the largest energy consumer of the tech giants – used 10 TWh in 2019. On March 13, Bitcoin was using 130.9 TWh (annualized). The UK’s electricity consumption is slightly more than 300 TWh a year.       

Bitcoin, the world’s most popular cryptocurrency, was launched back in 2009.

It hit the headlines in 2017 after soaring from less than $1,000 in January (£815 at the time) to almost $20,000 in December (£15,000 at the time) of that year.

The virtual bubble then burst in subsequent days, with bitcoin’s value fluctuating wildly before sinking below $5,000 (£3,800) by October 2018.

However the last year’s rise has been more steady, with investors and Wall Street finance giants wooed by dizzying growth, the opportunity for profit and asset diversification, and a safe store of value to guard against inflation.

Tesla said in a February filing with the Securities and Exchange Commission (SEC) that it had bought $1.5 billion (£1.16 billion) worth of Bitcoin and would soon accept it as a form of payment for cars

Tesla said in a February filing with the Securities and Exchange Commission (SEC) that it had bought $1.5 billion (£1.16 billion) worth of Bitcoin and would soon accept it as a form of payment for cars 

Bitcoin passed the $60,000 (£49,000) mark for the first time on March 13, reaching a record high of nearly $62,000 (£50,000).  

Major companies already accepting Bitcoin – like Microsoft, Wikipedia and AT&T – typically use specialist payment processors that convert the cryptocurrency into traditional currency and send the sum to the company. 

Bitcoins are traded via a decentralized registry system known as a blockchain, and found by so-called Bitcoin ‘miners’, who enable new Bitcoins to be created, but also to independently verify and record every transaction made with the currency.

More accurately, Bitcoins are the reward miners get for maintaining the transaction record accurately.

The mining works like a lottery that runs every ten minutes, with processing centers around the world racing to compile and submit this record of transactions in a way that is accepted by the system.

They also guess a random number, with the first to submit and record the correct number the winner of the prize, with this becoming the next block in the blockchain. 

WHAT IS A BITCOIN? A LOOK AT THE DIGITAL CURRENCY

What is a Bitcoin?   

Bitcoin is what is referred to  as a ‘crypto-currency.’ 

It is the internet’s version of money – a unique pieces of digital property that can be transferred from one person to another.

Bitcoins are generated by using an open-source computer program to solve complex math problems. This process is known as mining.  

Each Bitcoin has it’s own unique fingerprint and is defined by a public address and a private key – or strings of numbers and letters that give each a specific identity.

They are also characterized by their position in a public database of all Bitcoin transactions known as the blockchain. 

The blockchain is maintained by a distributed network of computers around the world.

Because Bitcoins allow people to trade money without a third party getting involved, they have become popular with libertarians as well as technophiles, speculators — and criminals.

Where do Bitcoins come from?

People create Bitcoins through mining.

Mining is the process of solving complex math problems using computers running Bitcoin software.

These mining puzzles get increasingly harder as more Bitcoins enter circulation.

The rewards are cut in half at regular intervals due to a deliberate slowdown in the rate at which new Bitcoins enter circulation. 

Who’s behind the currency?

Bitcoin was launched in 2009 by a person or group of people operating under the name Satoshi Nakamoto and then adopted by a small clutch of enthusiasts.

Nakamoto dropped off the map as Bitcoin began to attract widespread attention, but proponents say that doesn’t matter: the currency obeys its own, internal logic.

Dr Craig Wright was suspected as the creator following a report by Wired last year and he has now confirmed his identity as the cryptocurrency’s founder.  

What’s a bitcoin worth?

Like any other currency, Bitcoins are only worth as much as you and your counterpart want them to be. 

Bitcoins are lines of computer code that are digitally signed each time they travel from one owner to the next. Physical coin used as an illustration

Bitcoins are lines of computer code that are digitally signed each time they travel from one owner to the next. Physical coin used as an illustration

In its early days, boosters swapped Bitcoins back and forth for minor favours or just as a game. 

One website even gave them away for free. 

As the market matured, the value of each Bitcoin grew.

Is the currency widely used?

That’s debatable.

Businesses ranging from blogging platform WordPress to retailer Overstock have jumped on the Bitcoin bandwagon amid a flurry of media coverage, but it’s not clear whether the currency has really taken off. 

On the one hand, leading Bitcoin payment processor BitPay works with more than 20,000 businesses – roughly five times more than it did last year. 

On the other, the total number of Bitcoin transactions has stayed roughly constant at between 60,000 and 70,000 per day over the same period, according to Bitcoin wallet site blockchain.info.

Is Bitcoin particularly vulnerable to counterfeiting?

The Bitcoin network works by harnessing individuals’ greed for the collective good. 

A network of tech-savvy users called miners keep the system honest by pouring their computing power into a blockchain, a global running tally of every bitcoin transaction. 

The blockchain prevents rogues from spending the same bitcoin twice, and the miners are rewarded for their efforts by being gifted with the occasional Bitcoin. 

As long as miners keep the blockchain secure, counterfeiting shouldn’t be an issue.

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