Paypal, in collaboration with Energy Web and DMG Blockchain Solutions Inc., has introduced an approach to promote environmentally sustainable practices in bitcoin mining. This research-backed initiative encourages miners to utilize low-carbon energy sources by offering financial incentives.
Paypal Blockchain Research Team Advocates for Low-Carbon Mining With Financial Incentives
The rise of the Bitcoin network has brought with it concerns over the environmental impact of mining, especially the carbon emissions from the energy-intensive proof-of-work (PoW) process. Paypal‘s Blockchain Research Group, insisting there is an urgency with the issue, has partnered with Energy Web and DMG to develop a system that rewards miners who use green energy. This initiative aims to shift the industry towards more sustainable energy sources by making green mining financially attractive.
“We present a solution to this issue by incentivizing miners that use low carbon energy sources,” the paper’s authors detail. “The proposal rewards miners with bitcoins in a trust- independent manner (i.e., without having to trust a third party to earn the reward) when they verifiably use a significant portion of low carbon energy sources in their mining operations.”
Bitcoin miners using verified low-carbon energy sources are identified as “green miners” and are rewarded with bitcoin (BTC). These rewards are structured through a novel crypto-economic model involving a multi-sig (multi-signature) payout address. Transactions are preferentially routed to green miners, who can then claim their rewards by mining these transactions. The researchers believe the approach not only incentivizes cleaner mining practices, but also increases the flow of transactions towards these environmentally friendly miners.
The green mining protocol involves several technical components, including the identification of green miners through Energy Web’s validation platform and the use of public keys associated with green energy usage. These keys help in managing and distributing incentives, ensuring that only eligible miners can access the rewards. The system also involves broadcasting transactions with low fees to discourage non-green miners from processing them, further ensuring that incentives go specifically to green miners.
“When a green miner receives the transaction in the mempool, they identify it as being a green transaction based on the multi-sig payout address,” the paper details. “The miner will need to include the transaction while assembling a block and include an additional redeem transaction within the same block to consume UTXO that locked bitcoins in the payout address.”
Paypal’s Blockchain Research Group adds:
This additional transaction will have a recipient address belonging to the green miner. As a result, only the green miner who includes the green transaction, redeem transaction and successfully mines the next block is assured of earning the bitcoin reward.
By utilizing blockchain technology and crypto-economic rewards, the backers of the research paper aspire to foster a transition to renewable energy within the mining sector. Whether this will be achieved remains to be seen, as this paper from the payments giant presents only a hypothetical scenario that has yet to be tested in real-world conditions among industry miners.
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