Bitcoin and cryptocurrency investors were yesterday glued to one of the most hotly-anticipated events in the crypto calendar so far this year—a live discussion between Tesla and SpaceX billionaire Elon Musk, Twitter’s Jack Dorsey, and major Tesla and bitcoin investor Cathie Wood.
The bitcoin price jumped in anticipation of the virtual event, climbing back from under $30,000 per bitcoin to over $32,000, and finding fresh support after Musk revealed that his rocket company SpaceX has joined Tesla
While the bitcoin and crypto community cheered Musk’s support of bitcoin, the self-proclaimed technoking of Tesla also elaborated on ideas he’d previously floated to use dogecoin and ethereum to “max transaction rates and lower transaction costs.”
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“Bitcoin by itself simply cannot scale to become the monetary system for the world at base layer,” Musk said, arguing bitcoin will “struggle to become peer-to-peer cash” without the adoption of a second layer network.
“There may be some merit in combining something like ethereum and dogecoin,” Musk said, revealing he owns some ethereum tokens in addition to his bitcoin and dogecoin. The ethereum price leaped by almost 10% after Musk’s ethereum comments, climbing back over $2,000 per ether token after falling under the closely watched level this week.
“I might pump but I don’t dump,” Musk said. “I don’t believe in getting the price high then selling [and] I would like to see bitcoin succeed.”
The price of bitcoin, ethereum and dogecoin have led crypto markets higher over the last 24 hours but even with the revelations Tesla will “likely” restart bitcoin payment support and SpaceX bought bitcoin, major cryptocurrencies have failed to see the kind of rallies that Musk’s shock announcement Tesla had bought $1.5 billion worth of bitcoin caused earlier this year (subscribe now to Forbes’ CryptoAsset & Blockchain Advisor and discover crypto blockbusters poised for 1,000% gains).
“There’s some merit in considering something that has higher max transaction rate and lower transaction cost and seeing how far you can take a single-layer network with exchanges acting as a de facto second layer,” Musk said. “I think you could take that further than people realize and as bandwidth increases over time latency decreases.”
Musk said he expects internet connectivity to improve in coming years, giving people all around the world access to “low latency,” “high bandwidth” internet.
“SpaceX and Starlink are actually playing a role in this and long term people will have worldwide access to gigabit-level connectivity at low latency and low cost. So then your base layer could do a lot of transactions if you take that into account.”
Starlink, a SpaceX satellite internet network project that now has 70,000 users across 12 countries, is designed to fill geographic gaps between areas covered by ground-based internet connections and cell coverage.
“If someone else doesn’t do it then Starlink certainly will,” Musk said. “I have high confidence you will be able to maintain a decent finance system while still having a much bigger blockchain. You can make a hash ledger bigger without suffering from decentralization as average connectivity improves.”
Musk’s comments, many of which he has made previously over recent months in interviews and via Twitter, echo the so-called blocksize wars of 2016 and 2017 that caused a schism in the bitcoin communtiy and led to the creation of bitcoin cash, a fork of bitcoin that can support many more transactions per block.
Last month, Musk tweeted he “pretty much agree[s] with Vitalik,” replying to a wide-ranging YouTube interview with the ethereum cofounder Vitalik Buterin by AI researcher and podcaster Lex Fridman, who asked whether it would be possible to upgrade dogecoin to “beat bitcoin hands down,” as Musk has previously suggested—with Buterin saying: “If doge wants to somehow bridge to ethereum and then people can trade doge thousands of times a second … that would be amazing.”
Another ethereum cofounder who went onto create rival blockchain cardano, Charles Hoskinson, then told Fridman in a later interview he hopes Musk’s support will help some “real developers come in and start working on dogecoin.”
Speaking yesterday, Musk went onto suggest crypto mining—which involves the use of high-powered computers to secure blockchains in return for freshly-minted tokens—could be a way to achieve greater energy efficiency, if connectivity was good enough.
“What if your space heater was also a bitcoin, ethereum or doge mining node,” he said. Crypto mining computers generate heat as they use electricity. “You could be heated up, also mine your crypto and have connectivity in one.”
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Musk also reiterated why he’s attracted to dogecoin, a tongue-in-cheek, meme-based cryptocurrency that was originally created as a “joke,” over other cryptocurrencies like bitcoin and ethereum.
“The doge community is somewhat irreverent. It has great memes and doesn’t take itself too seriously,” Musk, said, repeating a phrase he’s used before: “The most entertaining outcome is the most likely one.”
“Bitcoin has a lot of clever ideas but [bitcoin’s blocksize] parameters were set in 2008, or something,” Musk said. “There have been some improvements since then but not a lot.”
Last month, bitcoin miners approved the most anticipated upgrade to the bitcoin protocol since segregated witness (SegWit) in 2017. Known as Taproot, it’s expected to improve bitcoin’s privacy and efficiency via a new signature scheme called Schnorr that will replace bitcoin’s current elliptic curve digital signature algorithm (ECDSA).
“It makes sense to support something that improves the quality of information on which we conduct the economy. Bitcoin is a candidate for [improving money from an information security standpoint]. It does some things well [and] it’s evolving,” Musk said, pointing to bitcoin’s second layer lightning network that has been used to conduct near-instant bitcoin transactions at low cost.
“But bitcoin per se is mostly solving for scarcity,” Musk added, naming bitcoin’s decentralized network, its open, anonymous ledger and its proven ability to resist interference as reasons he’s supportive of it.
“But transaction volume is low, transaction cost is high. Usability for the average person is not yet very good. [Though bitcoin] has a lot of potential.”