On Wednesday, Elon Musk sent shockwaves across cryptocurrency markets after announcing that Tesla will no longer accept Bitcoin as payments for its vehicles citing its environmental impact. Musk said in his statement that Tesla is "concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel."
The SpaceX CEO also added that the company will star using Bitcoin again "as soon as mining transitions to more sustainable energy" and in the meanwhile, will be looking at "other cryptocurrencies that use less than 1% of Bitcoin's energy per transaction."
The price of the world's largest cryptocurrency plunged 17% from $54,819 to $45,700, its lowest since March 1 in just under two hours following Musk's tweet.
How Much Energy Does Bitcoin Consume Per Transaction?
The Bitcoin industry is environmentally unsound because the process of mining for Bitcoin, or the complex mathematical calculations that are computed for every new Bitcoin that is generated, is highly energy-intensive and a majority of of Bitcoin is mined in China and is largely fuelled by cheap coal power in the Xinjiang region as opposed to renewable energy.
According to the Cambridge Center for Alternative Finance (CCAF), Bitcoin currently consumes around 110 Terawatt Hours per year — which is about 0.55% of global electricity production, or roughly equivalent to the annual energy usage of small countries like Malaysia or Sweden.
A single bitcoin transaction uses roughly 707.6 kilowatt-hours of electrical energy–equivalent to the power consumed by an average U.S. household over 24 days, according to Digiconomist.
Musk's tweet sent the crypto community into a frenzy of speculation as to which other energy-efficient digital currencies Tesla could be considering to add as a payment option. Here's a list of how much energy other cryptocurrency alternatives consumer
Ethereum consumes an estimated 62.56 KWh per transaction. The Ethereum network is currently secured using the same Proof-of-Work (PoW) method as Bitcoin and has the annual carbon footprint ofcomparable to that of the African country Sudan.
However, these issues are expected to be resolved with the network's forthcoming transition to ETH 2.0, which will employ the Proof-of-Stake (PoS) method, which is estimated to be 99% more energy-efficient than PoW.
Ripple (XRP) could be Tesla's choice in the immediate term as all XRP tokens were pre-mined and XRP's transactions incur a tiny amount of energy of just 0.0079 KWh, according to TRG data centers, making it the least-power hungrey cryptocurrency. Ripple regularly puts out blog posts and releases touting how energy efficient it is in comparison to Proof-of-Work blockchains.
However, XRP has been under a cloud since December after the U.S. Securities and Exchange Commission announced a lawsuit against Ripple for conducting an unregistered $1.3 billion securities offering. The cryptocurrency has managed to score some legal points against the SEC as of last month.
Dogecoin (DOGE) or Litecoin
Musk's long-standing favorite meme cryptocurrency consumes 0.12 Kilowatt-hour or KWh per transaction while Litecoin consumes 18.522 KWh per transaction.
Doge coin actually piggybacks much of its mining on the Litecoin network, which uses Proof-of-Work. But unlike Bitcoin, which uses the ultra complex SHA-256 algorithm, Dogecoin and Litecoin are mined using Scryptm which is more energy-efficient.
Musk even put up a poll on a couple of days ago, asking if Tesla should start accepting Dogecoin payments. 78.2% voted in favor, while 21.8% voted against.
With a power consumption of 0.5479 Kwh per transaction, ADA is placed at the third spot in terms of being least power-hungry by TRG Datacenters. Cardano claims to be the first blockchain platform built through peer-reviewed research and has the stated aim to bring about "positive global change." It was founded by the entrepreneur-mathematician Charles Hoskinson, who also co-founded Ethereum.