Paypal plans to reward Bitcoin mining firms who take steps to reduce the environmental effects of their operations.
PayPal’s Blockchain Research Group, in partnership with Energy Web and DMG Blockchain Solutions, has proposed utilizing “cryptoeconomic incentives” to encourage Bitcoin miners to use low-carbon energy sources, according to a blog post from April 22.
The company expects that the experimental incentive will spark greater discussion and innovation around Bitcoin, and it is soliciting industry feedback on potential improvements.
Bitcoin mining is the process by which individuals known as “miners” solve cryptographic puzzles to generate new blocks of transactions on a cryptocurrency’s blockchain, with the fastest miners earning bitcoins for their efforts. Miners utilize big, energy-hungry computers to break through such puzzles fast.
According to the plan, “green miners” who use sustainable energy sources would be granted unique “green keys,” which are linked to their public keys.
Bitcoin transactions would be preferentially directed to environmentally friendly miners by attaching lower fees, along with an additional BTC reward locked in a multisig payout address that only these green miners can access.
“Green miners will be incentivized to mine these transactions since they will be the only ones eligible for the additional “locked” BTC reward,” the proposal explained.
This incentivizes sensible, profit-driven miners to use low-carbon energy sources in order to earn more Bitcoin. According to the National Oceanic and Atmospheric Administration, utilizing low-carbon mining technologies reduces carbon emissions and slows global warming.
According to the paper, the proposed solution will use Energy Web’s “Green Proofs for Bitcoin” platform to help miners obtain certification based on their clean energy and grid impact scores. Green miners can participate in the incentive scheme by registering and sharing their green keys on the platform.
“The solution outlined here aims to achieve a good degree of decentralization, ease of implementation and trust independence while distributing incentives,” the company said.
According to critics, the solution is being developed at a time when Bitcoin creation places an enormous burden on local power systems and taxpayers in the US.
Critics have attempted to prohibit Bitcoin mining, claiming that it causes air, water, and noise pollution, among other environmental hazards. According to the Rocky Mountain Institute, the process requires an estimated 127 terawatt-hours (TWh) of energy every year, which is more than Argentina’s total energy consumption.
Meanwhile, a New York Times article revealed that Bitcoin miners utilize about seven times the energy Google uses for its global operations each year.
