PayPal Proposes Incentive Program for Bitcoin Miners Using Low-Carbon Energy Sources

International payments giant PayPal plans to reward Bitcoin (BTC) mining companies that make their operations more eco-friendly. According to an April 22 blog post, in collaboration with Energy Web and DMG Blockchain Solutions, PayPal’s Blockchain Research Group has proposed using “cryptoeconomic incentives” to encourage BTC miners to use low-carbon energy sources. 

PayPal believes these experimental incentives would contribute to further discussion and innovation around Bitcoin. Bitcoin mining is a process in which “miners” solve complex cryptographic puzzles to generate new transaction blocks on the blockchain. This process usually requires high-powered computers, which consume a lot of energy.

PayPal said its research partner, Energy Web, has created a “clean energy validation platform.” It will monitor and reward less energy-intensive Bitcoin mining operations. Miners using sustainable energy would receive special “green keys” associated with their public keys.

Bitcoin transactions would be preferentially routed to green miners by attaching lower fees, along with an extra Bitcoin reward locked in a multisig payout address that only these green miners can access. This encourages miners to use low-carbon sources to earn extra BTC rewards. Energy Web’s partnership is boosting attention, with its EWT token surging 17.21% in the last 24 hours, as per CoinMarketCap.

PayPal said:

“Green miners will be incentivized to mine these transactions since they will be the only ones eligible for the additional “locked” BTC reward.”

Bitcoin Mining and the Environment

According to the National Oceanic Atmospheric Administration, using low-carbon mining methods limits carbon emissions, reducing global warming. A report outlining PayPal’s Green Mining Initiative mentions that according to the Cambridge Bitcoin Electricity Consumption Index, BTC mining caused 85 million metric tons of carbon dioxide emissions each year as of April 2, 2024. Despite the heavy environmental impact associated with mining, PayPal expects Bitcoin to keep using its current Proof of Work system.

Moreover, critics have sought to limit BTC mining, arguing that it creates air, water, and noise pollution. The process uses an estimated 127 terawatt-hours (TWh) per year, or over the energy used in Argentina, as per the global energy non-profit Rocky Mountain Institute. Meanwhile, a New York Times analysis shows that BTC miners collectively consume approximately seven times the energy Google uses for its global operations annually.