PayPal Wants to Offer Extra BTC Rewards to Green Bitcoin Miners – Decrypt

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PayPal Wants to Offer Extra BTC Rewards to Green Bitcoin Miners – Decrypt

Payments giant PayPal’s blockchain research division has proposed a fix aimed at “accelerating the clean energy transition for Bitcoin mining.”

PayPal’s Blockchain Research Group, in partnership with nonprofit Energy Web and Bitcoin miner DMG Blockchain Solutions, has published a research paper on the “Green Mining Initiative,” which proposes using incentives cryptoeconomics to encourage miners to use low-carbon energy sources.

The solution outlined in PayPal’s research paper involves identifying “green miners” using a validation platform such as Energy Web’s “Green Proofs for Bitcoin.” Miners then share their public keys with a multisig payment address.

Transactions are preferentially routed to these “green miners” by broadcasting on-chain transactions with low transaction fees; an additional UTXO is attached to these transactions, with Bitcoin locked in the multisig payment address.

Green miners can then identify and include the “green transaction” in the block, as well as a “redemption transaction” that allows them to receive the additional BTC reward set aside in the multisig payment address. According to the PayPal authors, “only the green miner who includes the green transaction, redeems the transaction, and successfully mines the next block” will receive the additional Bitcoin reward.

The idea is that while low transaction fees would deter the majority of miners from prioritizing these on-chain transactions, green miners would be incentivized to do so because of the additional Bitcoin reward, thus increasing the likelihood that on-chain transactions are routed. to green miners.

Bitcoin and the environment

The environmental impact of Bitcoin has been in the spotlight in recent years. Groups such as Greenpeace have argued that cryptocurrency’s proof-of-work consensus mechanism, in which miners solve energy-intensive cryptographic problems in order to validate blocks on the network, encourages the consumption of fossil fuels.

In 2022, environmental activists launched a “Change the Code” campaign aimed at encouraging the Bitcoin community to replace Bitcoin’s proof-of-work consensus mechanism with the less energy-intensive proof-of-stake model used by other cryptocurrencies as Ethereum.

Bitcoin proponents instead argue that mining could encourage the use of renewable energy and stabilize energy grids by increasing operations during off-peak hours.

For example, a 2023 study by researchers at Cornell University found that BTC mining could accelerate the transition to renewable energy by using energy to mine Bitcoin during the pre-commercial phase, before projects are connected to the network.

The debate is further complicated by the question of exactly how much energy the Bitcoin network uses, with different studies employing various methodologies to reach their conclusions.

In September 2023, for example, the Cambridge Center for Alternative Finance implemented a major update to its Bitcoin Energy Consumption Index, concluding that previous estimates of the network’s power consumption were exaggerated.

Edited by Stacy Elliott.

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