Tesla chief Elon Musk has agreed with Twitter boss Jack Dorsey, who has said that bitcoin “incentivizes” renewable energy, despite experts warning otherwise.
The cryptocurrency’s carbon footprint is as large as some of the world’s biggest cities, studies suggest.
But Mr. Dorsey claims that could change if bitcoin miners worked hand-in-hand with renewable energy firms.
One expert said it was a “cynical attempt to greenwash” bitcoin. China, where more than two-thirds of the power is from coal, accounts for more than 75% of bitcoin mining around the world.
The mining process to generate new bitcoin involves solving complex mathematical equations, which requires large amounts of computing power. New sets of transactions are added to bitcoin’s blockchain (the ledger that records the cryptocurrency’s transactions) every 10 minutes by miners from around the world.
In a tweet on Wednesday, Mr. Dorsey said that “bitcoin incentivizes renewable energy”, to which Mr. Musk replied “True”. The tweet comes soon after the release of a White Paper from Mr. Dorsey’s digital payment services firm Square, and global asset management business ARK Invest.
Entitled “Bitcoin as key to an abundant, clean energy future”, the paper argues that “bitcoin miners are unique energy buyers”, because they offer flexibility, pay in a cryptocurrency, and can be based anywhere with an internet connection.
“By combining miners with renewables and storage projects, we believe it could improve the returns for project investors and developers, moving more solar and wind projects into profitable territory,” it said.
Author and bitcoin critic David Gerard described the paper as a “cynical exercise in bitcoin greenwashing”.
“The reality is: bitcoin runs on coal,” he told the BBC.
He gave the example of how an accident at a coal mine in Xinjiang meant it had to temporarily close, causing power cuts across the area and crippling the ability to mine new bitcoins.
“This slowed the blockchain down considerably… and coincided with the recent bitcoin price drop,” he said.
“Bitcoin mining is so ghastly and egregious that the number one job of bitcoin promoters is to make excuses for it – any excuse at all.” One bitcoin is currently worth $53,000 (£38,000) and the price hike has led to a surge in demand for new coins.
A recent study suggested that the amount of bitcoin mining happening in China could threaten the country’s emission reduction targets.
Meanwhile, analysis by the University of Cambridge suggests the bitcoin network uses more than 121 terawatt-hours (TWh) annually, which would rank it in the top 30 electricity consumers worldwide if it was a country.
But there are some cryptocurrency miners based in countries such as Iceland and Norway, where most energy production is almost 100% renewable, via hydroelectricity and geothermal energy.
Writing in Medium, bitcoin expert Phil Geiger pointed out that “bitcoin mining rewards the most energy-efficient miners with the most profit”.
“Mining is about maximizing the number of hashes (computations) per kW of electricity,” he wrote.
“Currently, the most efficient way to generate the highest hashes/k is through the use of solar energy and hydro-electric, because those are the cheapest ways to produce electricity.”