Forbes staff writer Jonathan Ponciano wrote in a recent piece that discussed why Cardano (CCC:ADA-USD) jumped in price after Elon Musk caused Bitcoin (CCC:BTC-USD) to lose a chunk of its value after saying Tesla (NASDAQ:TSLA) would no longer accept Bitcoin because of its environmental impact.
“The only top-ten cryptocurrency rising Thursday, Cardano’s ada token hit its latest high of $1.96 around noon EDT, catapulting its market capitalization to roughly $61.5 billion,” Ponciano wrote on May 13.
What’s strange about the Tesla CEO’s actions around Bitcoin is that he’s not a dummy. He would have known that Bitcoin had environmental concerns attached to it before he plowed billions into the cryptocurrency. Something else is going on here, and I suspect it has to do with the Securities and Exchange Commission (SEC).
I sense that SEC Chair Gary Gensler is about to bring the hammer down on all cryptocurrencies. That would not be good for Cardano or Bitcoin. Notwithstanding this fact, I think that the SEC will be able to work out regulations that are amenable to all parties involved, including investors.
When that happens, Musk’s going to see less heat if his cryptocurrency of choice doesn’t destroy the planet. And while I’ll admit my characterization of Bitcoin is hyperbole, it’s a bad look for someone tethered to the electrification of transportation.
Hyperbole aside, I do believe that Cardano could be a better solution for Musk and Tesla. Here’s why.
Bitcoin’s Environmental Impact
InvestorPlace’s Assistant News Writer Brenden Rearick recently addressed current price predictions from various cryptocurrency experts. The prices ranged in value from a 2021 closing price above $2 to as high as $4.57 by Dec. 31.
Rearick points out that one of the big reasons for its momentum is that it has a proof-of-stake (PoS) mechanism for validating block transactions that use far less electricity to do so.
AMBCrypto discussed Bitcoin’s energy consumption in February. It pointed out that the Bitcoin network consumed as much energy as Chile consumes in a year. Now, I realize Chile only has 19.3 million people, but that’s still a hell of a lot of power sucked on to produce a so-called store-of-value.
The crypto publisher went on to say that Bitcoin miners create 37 megatons of CO2, equivalent to New Zealand’s annual greenhouse gas emissions.
Coindesk.com research associate George Kaloudis discussed Bitcoin’s environmental impact in April. His report, Does Bitcoin Have an Energy Problem, concluded that it’s not as bad for the environment as some would think.
“Bitcoin already uses a good amount of renewable energy and a majority of miners have access to renewable energy sources. As political and environmental pressures mount, miners may shift towards using even more renewable energy,” the report’s conclusion stated.
Kaloudis’s report points out that Bitcoin accounts for just 1.29% of China’s total energy consumption. Here in the U.S., it accounts for just 0.23% of America’s total energy consumption. For comparison, construction and commercial lighting account for 2.2% and 3.0% of America’s total energy consumption.
So, when you look at it from this perspective, Bitcoin isn’t nearly the worst energy drain on the planet.
Cardano’s Contribution to the Environment
In April, Cardano Founder Charles Hoskinson said that its PoS consensus protocol is 1.6 million times more efficient than Bitcoin. The Cardano Foundation estimates that the Cardano blockchain is four million times more energy-efficient than Bitcoin. The foundation discussed Cardano’s energy usage in an October 2020 article.
“By design, PoS blockchains require significantly lower computing power and therefore lower energy requirements than PoW blockchains. When the Ouroboros protocol was first introduced by researchers at IOHK in 2017, one of the key focuses was designing a consensus protocol that would offer similar security guarantees to PoW, but demand significantly less energy,” stated Elliot Hill of the Cardano Foundation.
Essentially, Cardano is designed to scale to the mass market without the energy-use challenges of proof-of-work. Some will suggest that the energy used to mine Bitcoin isn’t all that big a deal compared to other consumers of energy described earlier, such as construction and commercial lighting.
However, as I stated in my last article about Cardano, the environmental advantages of the Ouroboros protocol combined with its focus on smart contracts and utility and not just providing a store-of-value make Cardano an attractive alternative to Bitcoin.
If I were Elon Musk, I would definitely give Cardano a closer look.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.