last week Paypal releases white paper In partnership with Energy Web and DMG Blockchain Solutions, it describes a “Green Mining Initiative” that aims to direct fees from participating users specifically to certified miners operating on renewable energy. I can’t honestly say I’m surprised by this, but mining is so normalized at this point in terms of being used to further renewable energy and climate change goals. In fact, mining is very suitable for this task given its nature, and miners are mercenaries looking for the cheapest energy that can be spent solving the next block. If you have power outage or surplus power, they will take it away.
However, the overall architecture of this system is beyond the realm of Rube Goldberg. In some ways, I was surprised that a large company like Paypal, especially a blockchain research group dedicated to this field, had this level of technical understanding and sophistication. It’s all inefficient and irrational, and some of the end goals and possibilities they discuss aren’t built on sound economic incentives.
core design
The whole point of the design is to ensure that when a compliant user broadcasts a transaction to the network, only certified green miners can collect the associated transaction fees. The problem with this is that mining fees from transactions can be collected from the miners included in the block, not just the accredited miners. We need a mechanism to ensure that only certain miners can collect a small number.
The first thing you need to do is identify the miner you want to be able to charge a limited fee. They suggest using a system called “Green Proofs for Bitcoin” provided by Energy Web. Evidence is an organization demonstrating that a miner’s energy mix or grid impact meets certain thresholds for renewable energy use or positive grid impact. The certification process allows each miner to register their public keys and creates a list of each certified miner’s public keys.
This important authentication is fundamental to ensuring that only the right miners can charge fees. A compliant user’s wallet can query or be provided with a list of Bitcoin addresses of all authorized miners, from which they can create special transactions that only the user can charge. Get the information you need. The secret is multisig output. There is no hard limit on the number of keys that need to sign a multisig address, so compliant users can include charges to certified miners in a special output using a 1-of-n multisig script that certified miners can use. I can. A minimum fee at the lower end of the mempool fee range is also traditionally included just to ensure propagation throughout the network.
The final piece of the puzzle is actually charging. If an accredited miner mines a block that contains green his transaction and does not also contain the transaction that consumes the fees outputted to himself, Any Certified miners can claim fees that are output on the next block they mine. There, for each green transaction that an authorized miner includes in a block, he or she must include a corresponding transaction that sends the fee output only to the address that holds the key.
Special wallets can create transactions with fee outputs that can only be charged by certified miners, and these users certify that they are using renewable energy or creating other positive impacts on the grid. You can preferentially allocate fees to miners who have been approved.
Thoughts full of holes and incomplete
First, the general idea of requiring miners to include their own second transaction is an incredibly inefficient design, and we acknowledge that in our paper. What they don’t acknowledge is the economic reality of what this means for transaction fees.
Bitcoin transactions pay fees based on the amount of space they take up as data. By introducing the need for miners to create secondary transactions that occupy block space and collect this “green fee”, economically speaking, the size of the green transaction itself increases. This is actually very similar to parents paying for their children from an economic perspective.
In CPFP, transactions that consume output from unconfirmed transactions pay unusually high fees. This increases the commission rate for the first transaction as it must be confirmed before making the second transaction by averaging the fees paid on both the second transaction itself and the first transaction. The mechanism for collecting this green fee is the same movement, but in reverse.
By requiring miners to create a second transaction to charge a fee, the net fee that a miner collects per byte of data is actually lowered, assuming the fee output pays an average fee rate. The block space required to collect it could have been used to contain another toll payment transaction. Therefore, in practice, the fees that a compliant user includes for a certified miner must also be paid for the miner’s billing transactions, effectively allowing a compliant user to pay more absolute fees in order to achieve a certain commission rate. means you have to pay. Why do users do this?
In a vacuum, this dynamic ensures that either compliant users have to pay excessive fees or, all things being equal, the actual revenue of certified miners is reduced. The former is irrational from a consumer point of view, and the latter completely fails to achieve the goal of rewarding miners with the additional revenue of renewable energy.
The second obvious problem, and one that comes as a surprise, is the idea of how to configure a 1-of-n multisig script. Traditional pre-Taproot multisig requires each individual key within the multisig to be present within the script. This poses a problem. The size of the greenfee output increases linearly for each minor keyed in the multisig.
The plan outlined in the paper describes splitting miners into subgroups and rotating which group pays a fee for each transaction. In other words, if there are 21 miners, he will divide the miners into 3 groups of 7 miners each, and each time he trades, he will move to the next group and send a fee. This creates a highly irregular distribution of fees among all authorized miners, as compliant inter-user transaction rates and inter-user rotation rates cannot be prescribed or regularized. Not to mention, there seems to be a complete lack of awareness of Schnorr-based multisig schemes like FROST.
Schnorr-based multisig scripts use aggregate keys. This means that the script only requires one public key and only one signature, regardless of the number of member keys involved. This completely solves the problem of multisig script size and eliminates the need to split certified miners into subgroups.
There is also no mention of a more efficient mechanism for actually collecting fees. Executing one secondary transaction for every green transaction is incredibly inefficient.Ann very An obvious mechanism to make block space usage more efficient is to sweep all green transaction fee outputs in a single transaction. This way, aggregating all fees into one UTXO requires only a single transaction output, rather than a separate output for each individual fee, which can later be combined with further transactions. There will also be a need to do so.
They finally go on to discuss the possibility of a centralized out-of-band mechanism directly to certified miners, but they also discuss the reasons for designing the decentralized protocol described above: centralization, introducing trust, direct access to individual miners. It brings up the complexity of implementing communications.
the market does this well
In the end, the lack of grasp of technical inefficiencies and blatantly obvious solutions to them (at least in part) is not the most perplexing part of this to me. To address concerns about renewable energy in the first place, they are trying to insert incentive-distorting dynamics into the application layer of the protocol. why? The market literally takes care of this incentive all by itself.
Renewable energy is the cheapest form of energy, even when considering the cost of building and operating energy production capacity. Miners’ primary concern is finding the lowest-priced energy possible. Why is Paypal trying to intervene in a strange system that gives users a distorted mechanism that limits fees to only certain miners, and introduces an overall distorted market mechanism into this situation? The market is already delivering what you want. Renewable energy is cheap, and if you build more, miners will come and buy it, providing revenue to fund your operations (especially if you are initially off-grid and have no other consumers) ).
The overall behavior of Bitcoin fees is that Bitcoin is a completely open market. Any Miners can compete and collect fees Any Perform transactions by including them in their own blocks. This whole mechanism is built to encourage maximum competition among miners in order to provide security and finality to users of the network. Attempting to introduce bizarre distortions into the system, such as this proposal, destabilizes the balance between competition and network security. Completely redundant considering the market realities of the mining ecosystem.
Do you want Bitcoin mining to become a positive factor in encouraging and expanding renewable energy production? Great! It’s already done, so there’s no need to change it. You don’t need a Rube Goldberg-style conspiracy to achieve that goal. Inherent market-based competitive mechanisms among miners already make this possible.
I really don’t understand what Paypal, DMG, and Energy Web are thinking here.
