PayPal proposes ‘crypto-economic’ rewards for Bitcoin miners

PayPal’s Blockchain Research Group intends to identify “green miners” and reward them with additional Bitcoin. PayPal aims to increase the economic appeal of Bitcoin mining by offering rewards on top of the network.

PayPal’s Blockchain Research Group, in partnership with Energy Web and DMG Blockchain Solutions, has proposed utilizing “crypto-economic 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 conversation and innovation around Bitcoin and is soliciting industry feedback on future enhancements.

According to the plan, “green miners” who use sustainable energy sources would be granted unique “green keys,” linked to their public keys. Bitcoin transactions would be routed preferentially to these green miners, with cheaper costs but an additional locked BTC reward in a multi-sig payout address that only the green miners could access. “Green miners will be incentivized to mine these transactions since they will be the only ones eligible for the additional “locked” BTC reward,” it added. This incentivizes rational profit-driven miners to operate with low-carbon sources to obtain the extra BTC incentives.

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 register and distribute their green keys on the platform as part of the incentive program.

PayPal BRG announced that it had successfully tested the proposed method with Bitcoin miner DMG Blockchain Solutions Inc.During the test, it broadcasted a series of low-fee transactions to assess effectiveness at various levels of on-chain transaction volume.

Depending on transaction volume, “these transactions would either take a long time to confirm or eventually be dropped by the network,” it said, adding that “this would increase the chances for green miners to pick up these transactions.”

An alternate method would be to investigate private channels like the Lightning Network or smart contracts, but there would be trade-offs, such as more sophisticated implementation. “The solution outlined here aims to achieve a good degree of decentralization, ease of implementation, and trust independence while distributing incentives,” the company said. 
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