PayPal proposes crypto incentives for eco-friendly Bitcoin mining

PayPal's Blockchain Research Group plans to reward green miners with extra Bitcoin

Published: Apr 23, 2024 03:45:32 PM IST

Updated: Apr 23, 2024 03:48:18 PM IST

Image: Shutterstock

PayPal has proposed a new initiative to make sustainable Bitcoin mining more attractive by rewarding miners with cryptoeconomic incentives. The international payments giant's Blockchain Research Group (BRG) is collaborating with Energy Web and DMG Blockchain Solutions to incentivise Bitcoin miners to use low-carbon energy sources.

Energy Web informed on April 22, via X (formerly Twitter), “We’re thrilled to announce that @energywebx and Green Proofs for Bitcoin #GP4BTC are collaborating with @Paypal on the Green Mining Initiative—an innovative approach to supporting Bitcoin’s decarbonization by financially rewarding miners who use clean energy.”

The proposed solution involves using "cryptoeconomic incentives" to reward "green miners" who use sustainable energy sources with special "green keys" associated with their public keys.

Bitcoin transactions will be directed to green miners, who will receive lower fees and an extra locked BTC reward in a multisig payout address exclusive to them. This will incentivise profit-driven miners to operate using environmentally friendly methods and receive additional BTC rewards.

“Green miners will be incentivized to mine these transactions since they will be the only ones eligible for the additional “locked” BTC reward,” explained PYUSD’s (PayPal USD) blog post on April 22.

PayPal's BRG has successfully tested the proposed solution with Bitcoin miner DMG Blockchain Solutions Inc. The company hopes that the experimental incentive contributes to further discussion and innovation around Bitcoin and is seeking industry feedback on potential improvements.

The proposed solution will leverage Energy Web’s “Green Proofs for Bitcoin” platform for miners to get certified based on their clean energy and grid impact scores. Green miners can register and share their green keys on the platform as participants of the incentive program.

According to the research paper, the proposed solution aims to not only reward Bitcoin miners for operating with sustainable energy but also increase the likelihood of participating entities to route on-chain transactions to these specific miners.

PayPal's initiative responds to rising concerns over Bitcoin mining's environmental impact. Estimates suggest that it generates 85 million metric tons of carbon dioxide equivalent emissions yearly. This move signifies a step toward a more sustainable future for Bitcoin mining.

Shashank is the founder of yMedia. He ventured into crypto in 2013 and is an ETH maximalist.

Twitter: @bhardwajshash