PayPal Proposes Incentives for Bitcoin Miners to Use Clean Energy

According to Blockworks, a recent report by PayPal's internal research group suggests that economic incentives could encourage bitcoin miners to adopt cleaner energy sources. Bitcoin's proof-of-work (PoW) consensus mechanism has been criticized for its high computational intensity, which has raised environmental concerns. The report proposes a solution that involves offering additional bitcoin rewards to miners who use low-carbon energy sources. Under the PoW mechanism, bitcoin miners are compensated with bitcoin for their computational work. The report suggests that a small additional amount of bitcoin could be allocated to miners who prioritize environmentally friendly practices. The proposed program would begin by identifying 'green miners' who use clean energy or have a minimal impact on energy grids. These miners would be identified by their public keys, referred to as 'green keys'. To incentivize these green miners, certain bitcoin transactions would include a UTXO with a multisig wallet containing extra bitcoin. This wallet could only be accessed by green keys. These transactions would also feature lower-than-average fees, making them more attractive to green miners. The report likens this approach to providing an 'indirect grant' to bitcoin miners who use cleaner energy. However, the report acknowledges potential drawbacks. For instance, miners who do not prioritize green practices could still pick up transactions earmarked for green miners if the low fees are not a deterrent. The report also suggests measures to prevent 'malicious green miners' from driving up transaction fees on green transactions for personal gain. The report does not specify the amount of the 'subsidy', only stating that the green miner multisig would contain 'some bitcoins'. If the public mempool solution proposed by PayPal is not effective, the report suggests that smart contracts or the Lightning Network could be used to privately reward green miners. This would, however, require a level of trust. The report was produced by PayPal's Blockchain Research Group, which has been operational since around 2015. The group tested aspects of the incentivization program with blockchain company DMG.