How the world’s richest man disses Bitcoin and becomes Dogecoin’s boss

Some people are a force of nature on Twitter. Tesla CEO Elon Musk managed to stir up a storm on Twitter over the weekend with a couple of tweets. They are about Bitcoin’s power consumption, the scalability of cryptocurrencies – and, of course: Dogecoin.

There is often only a handful of tweets between John and Judas. This age-old rule also applies to the supposed richest man in the world – Elon Musk, co-founder of PayPal, boss of Tesla and, since his company’s massive investment in Bitcoin, also a hero in the crypto ecosystem.

A hero among Bitcoiners – until the end of last week. On Thursday, namely, a relationship dispute between Elon Musk and the scene began, and it followed the usual pattern of such disputes: it started harmlessly with one thing, then jumped to the next topic before anything had been clarified, rushed into a discussion of principles without need, and finally escalated so much that only shards remained.

As a prelude: Electricity, coal, climate

  1. Tesla was no longer accepting bitcoins to buy e-cars. He said they were concerned about the rapidly growing use of fossil fuels for mining. While crytocurrencies continue to be a terrific idea, this should not come at such a high cost to the environment.
  2. Tesla is not selling any of its Bitcoins, he said, and plans to use the cryptocurrency for transactions again – but not until mining has become greener. It also said it would open up to other cryptocurrencies that use less energy per transaction.
  3. Among Bitcoiners, this tweet caused confusion. After all, it’s not like this is particularly new info. That Bitcoin is harmful to the climate has been whistled for years from all media roofs. Has Elon Musk only heard this now? And why is there so much in the text that is simply wrong?
  4. Of course, it is sheer nonsense to calculate the energy demand per transaction; of course, Bitcoin’s share of global CO2 emissions is vanishingly small; and of course, Elon Musk also knows that Bitcoin mining can help complete the energy transition.

So why?

Elon Musk bitcoinOne might suspect that Elon Musk is responding to Tesla’s shareholders and appeasing outraged customers. It was clear from the outset that a green flagship company like Tesla would not have an easy time getting involved with Bitcoin in the public eye. The attack surface is too large and too obvious, the stigmatization as a “climate killer” too easy, and the counterargument too complex.

As a Bitcoiner, one could now register that Elon Musk must act in this way. One could accept his offer – and seriously think about how to reduce the CO2 emissions of bitcoin mining. Sufficient capital should be available and the support of Tesla should be given. The odds have never been better to solve the climate issue.

But of course, Bitcoiners didn’t react that way. They hurled at Elon Musk the usual mix of lectures, accusations, and insults that they have so abundantly on hand for critics. He is working with the developers of Dogecoin to improve the efficiency of transactions. Shortly thereafter, Musk explained that he had been supporting Dogecoin developers for months.

There’s dynamite in that, of course. Elon Musk is becoming a patron of Dogecoin. He prefers, loosely based on Caesar, to be first with Dogecoin than second with Bitcoin. He wants a currency that is under his control and that he can shape as he sees fit.

And with Dogecoin, he hasn’t made the worst choice: The coin has been stable since 2014, has little technical experimentation, has a strong meme and convinced users, and no stubbornly disruptive developers to get in the way of Elon Musk’s ambitions. If you want to trade Dogecoin on margin, get yourself a reliable broker.

The perfect coin for a takeover – and the perfect coin to realize big ambitions?

The Bitcoin scene once again reacted spectrally and sometimes mockingly to insultingly. Musk’s decision to go with Dogecopin, the coin that has seen the least development, can be seen as a punch in the gut for all techies. The Bitcoin scene once again reacted spectrally and partly mockingly to insulting. Musk’s decision in favor of Dogecopin, the coin with the least amount of development, can be seen as a punch in the stomach of all technicians.

Ideally, Dogecoin would speed up block production by a factor of ten, increase block size by a factor of ten, and lower fees by a factor of a hundred. After all, if the transaction volume increased a hundredfold and the fees decreased a hundredfold, the fees collected would remain the same. And that, a high volume and low fees – that’s what a currency needs for the whole world.

So that’s it then. You can criticize Bitcoin’s energy consumption. Gladly! One can stop accepting Bitcoins on sale. One can even become a patron of an alternative currency with Dogecoin. That’s all fine and dandy! But to claim that you can scale a cryptocurrency by allowing larger blocks: that’s not possible at all!

We had the issue from 2015 to 2018 in the block size wars over scalability. These ended with Bitcoin sticking to small blocks, that scaling must (eventually) be done via Lightning or other offchain methods – PayPal’s sidechain, for example – that Bitcoin is first and foremost a decentralized digital gold and suitability as a means of payment is secondary; and that all this must be taken as a truth that is not subjective but scientific-objective, more law of nature than belief, so anyone who doesn’t share it is either stupid or harboring malicious intent.

Podcaster Peter McCormack finally thought of nothing better than to call Elon Musk the “perfect troll” – someone you wouldn’t know if he was trolling or not.

Maybe Elon is trolling when he criticizes poorly informed Bitcoin and supports Dogecoin – but maybe he’s not trolling and is actually serious. In that case, Peter lectures: Doge is a meme, a joke with no developer or real use, and the block size debate that Elon Musk is reopening: it is long over, clearly and crystal clear decided. Bitcoin, he said, is the only decentralized cryptocurrency that serves real purposes.

At some point, in this barrage of lectures and insults, Elon Musk must have had enough. “Disgusting threads like this make me want to bet everything on Doge,” he replies to Peter McCormack. Bitcoin, the Tesla boss says, is “highly centralized,” with a handful of miners controlling the hashrate. Just recently, he said, a single coal mine that flooded in Xinjian caused the hashrate to plummet by 35 percent. “Does that sound ‘decentralized’ to you?”

Controversy is not a zero-sum game!

Right, what else: There were more lectures, more accusations, more insults. Elon should learn that miners and pools are not the same thing; he should read up on the Lightning network; he, the egomaniac, wants to control everything and doesn’t understand Bitcoin; he’s even becoming the Roger Ver of Dogecoin, demonstrating how little he knows about the subject, or, simply and directly: “Fuck you Elon, you suck!”

And as is so often the case – shards from one side plus shards from the other add up to more than the sum of the shards. Arguing is not a zero-sum game! When someone said they would understand after all the hate if Elon sold all of Tesla’s Bitcoins just to get back at the scene, Elon responded with, “Indeed.” But he also clarified that Tesla has not sold a single Bitcoin (yet).

Elon should sell his Bitcoins after all, and Tesla’s as well. Bitcoin does not need him, but laughs at his inflated ego. He will learn that one day. But now, now he should get the hell out and sell all his Coins. He is not worth them at all. Others would collect them gratefully. And so on.

We could of course wade through this swamp of accusations and counter-accusations for a long time, and we could of course mention all those highly embarrassing attempts by altcoiners to sell Elon Musk their favorite coin: IOTA, Ripple, Bitcoin SV (BSV), Bitcoin Cash, Nano, Stellar – hardly any community could resist offering itself to the Tesla boss, even though he had obviously made up his mind long ago. We could, as I said, harp on about this Twitter drama for a long time. But instead, let’s try to draw a few lessons from it. What does all this say now?

Three lessons

First, Bitcoin’s energy consumption is a problem for the public, despite all the excellent arguments about why mining is not a problem for the climate. The connection is so compellingly simple that someone like Elon Musk cannot escape it. If you want Bitcoin to be publicly accepted, action is needed – regardless of what the truth is.

Second, Dogecoin is now the coin of Elon Musk, who is not only probably the richest man in the world, but also knows a lot about payments as the co-founder of PayPal. Thus, Dogecoin should not disappear into oblivion as quickly as it emerged from it, but has a good chance of remaining one of the top coins permanently.

So it’s safe to say: The Lightning paywall works. But unfortunately we also have to state that it is still quite bulky for both publishers and readers. Nevertheless, I think that at least German-language Bitcoin media that use WordPress should at least give the paywall a try. Someone has to start, even if it still pinches and scratches a bit at the beginning.