Elon Musk Says Bitcoin's "Brilliant" Structure Has One Key Flaw

The CEO is positive about the future of money.

Elon Musk is pro-crypto. The tech entrepreneur revealed in a podcast this week that he foresees cryptocurrency as a much better method of transferring value than traditional currency, declaring that bitcoin’s design is “quite brilliant.” It’s the latest in a line of positive statements about the technology, which suggest Musk is warming to the idea.

“[Cryptocurrency] bypasses currency controls…paper money is going away,” Musk said during a podcast interview withinvestment firm ARK Invest this week. “And crypto is a far better way to transfer value than pieces of paper, that’s for sure.”

Before fans start rolling out the welcome banners, Musk did voice some concerns about cryptocurrency.

“I think the bitcoin structure is quite brilliant,” Musk said, adding Ethereum and others to that list. “But I’m not sure it would be a good use of Tesla’s resources to get involved in crypto. We’re really trying to accelerate the advance of sustainable energy, and I think actually one of the downsides of crypto is that, computationally, it’s quite energy intensive. There had to be some kind of constraints on the creation of crypto, but it’s very energy intensive to create the incremental bitcoin at this point.”

ASIC Bitcoin Miner at ATechRes in 2013.
ASIC Bitcoin Miner at ATechRes in 2013.

It’s a key concern, and one that has plagued bitcoin in particular. The world’s largest cryptocurrency, which accounts for 52 percent of the market as of Thursday, uses a method of updating the blockchain ledger called “proof of work.” Without a single centralized server to run global transactions, bitcoin instead incentivizes “miners” to dedicate computer resources to adding new entries to the digital ledger, receiving payment in bitcoin. The miner’s computer must complete a complex mathematical puzzle, verified by other miners, to prove they completed the work. The systems is designed to create a new block every 10 minutes, and the difficulty of making a new block varies to mitigate the fact that a more powerful network of machines would otherwise mean a faster solving time.

One widely-publicized analysis in December 2017 by PwC blockchain specialist Alex de Vries pegged bitcoin’s annual energy consumption in the region of 32.36 terawatt-hours, around the same used by the country of Serbia. His energy consumption index has been criticized by experts: Jonathan Koomey, a Stanford University lecturer, told CNBC that the model is flawed as it estimates miner revenue and expenses to reach its final figure, adding that it’s “a completely unreliable way to do the analysis, and no credible energy analyst would ever do that.”

A number of firms have worked to avoid environmental impact by building cryptocurrency mining centers with sustainability in mind. A blockchain wind farm in Morocco described itself last July as the world’s first vertically-integrated blockchain cloud computing company that owns and controls its renewable energy sources. Another firm in Iceland dubbed the Moonlite Project aimed to power its operations entirely from hydro, geothermal and wind sources. An Estonian startup, WePower, has been exploring ways to use the blockchain to help encourage others to use sustainable energy sources.

For Musk, bitcoin is likely to remain something of a curiosity than a serious investment. He said on the podcast that Tesla has no plans to sell bitcoin anytime soon, and on Twitter Thursday he stated that he only has a quarter of a bitcoin that a friend sent him several years ago, adding that he doesn’t have any crypto holdings. He did, however, make note of the rumors that he is secretly the anonymous bitcoin creator known only by the pseudonym “Satoshi Nakamoto”:

Although an A.I. showed in December 2017 that Musk’s writing bears little resemblance to Satoshi’s, some rumors never die.

The author of this story has a stake in bitcoin and Ethereum.

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