Key Points
- PayPal suggests an incentive scheme for Bitcoin miners using low-carbon energy sources.
- The proposal involves granting “green keys” to miners and prioritizing their transactions.
After the recent halving event of Bitcoin, the mining rewards have diminished by half, affecting miner revenues. Nonetheless, PayPal has suggested a novel reward scheme for Bitcoin miners who utilize low-carbon energy sources.
The aim is to make Bitcoin mining more economically appealing via this fresh reward mechanism. PayPal’s Blockchain Research Group, in partnership with Energy Web and DMG Blockchain Solutions, proposed these “cryptoeconomic incentives” to motivate Bitcoin miners to adopt low-carbon energy sources.
Encouraging Sustainable Bitcoin Mining
PayPal is of the belief that these experimental incentives could spur further dialogue and innovation around Bitcoin. The proposal involves granting “green keys” to environmentally friendly miners, all connected to their public keys. All Bitcoin transactions would then prioritize these miners by offering lower fees and an extra locked BTC reward sent to a multisig payout address accessible only to green miners.
The proposal explains that “Green miners will be incentivized to mine these transactions since they will be the only ones eligible for the additional ‘locked’ BTC reward.” Consequently, miners who are profit-driven and operate with low-carbon sources could receive incentives in the form of extra BTC rewards.
Utilizing Energy Web’s Platform
According to PayPal’s proposed paper, the solution will take advantage of Energy Web’s “Green Proofs for Bitcoin” platform, which certifies miners based on their grid impact and clean energy source. The green miners can register on this platform by providing their green keys, and thus participate in the incentive program.
Interestingly, PayPal BRG has effectively tested this proposed solution in collaboration with Bitcoin miner, DMG Blockchain Solutions Inc. Throughout the test, it sent out numerous low-fee transactions to evaluate their performance across various levels of on-chain transaction activity. It was observed that depending on the volume, these transactions could either face extended confirmation times or ultimately be discarded by the network. This situation would increase the chances of green miners processing these transactions.
Another strategy here could involve private channels such as smart contracts or Lightning Network. However, the trade-off in this case is a more complex implementation. PayPal BRG concluded by stating: “The solution outlined here aims to achieve a good degree of decentralization, ease of implementation and trust independence while distributing incentives.”
Recently, PayPal has been undertaking significant initiatives in the crypto space such as releasing its PYUSD stablecoin and updating its NFT policy.
