Transaction Bitcoin Emissions Certificates (tBECs)
Introduction
The purpose of this methodology is to outline the process for issuing Transaction Bitcoin Emissions Certificates (tBECs). These certificates represent the verified carbon emissions associated with Bitcoin transactions processed by a specific miner. By adhering to the Greenhouse Gas (GHG) Protocol, the tBEC system provides a supplier-specific emissions factor, allowing businesses to replace the industry-average emissions factor with more accurate data for their Scope 3 reporting.
tBECs enable businesses to account for and reduce their carbon footprint by purchasing low-carbon Bitcoin transaction certificates. This methodology describes the process from the auditing of mining operations to the issuance and retirement of certificates.
Key Definitions
Transaction Bitcoin Emissions Certificate (tBEC): A digital certificate that represents the carbon emissions per Bitcoin transaction processed by a certified miner. One tBEC is equivalent to the CO₂ emissions from one Bitcoin transaction.
Supplier-Specific Emissions Factor: The emissions factor (tons of CO₂ per Bitcoin transaction) calculated for a specific miner based on their operational data, as opposed to industry averages.
Greenhouse Gas (GHG) Protocol: A widely recognized framework for measuring and managing greenhouse gas emissions.
Mining Pool: A group of Bitcoin miners who share their processing power over a network and split the reward equally, according to the amount of work they contributed to finding a block.
Overview of the tBEC Issuance Process
Audit Bitcoin Data Center (in line with GHG Protocol)
Collect Daily Average Hashrate Submitted to Mining Pool
Calculate Miner’s Proportion of Network Activity
Allocate Green Transactions to the Miner
Determine Supplier-Specific Emissions Factor
Issue and Retire tBECs
Reporting of Emissions Reductions by Businesses
Step-by-Step Process
Step 1: Audit Bitcoin Data Center According to GHG Protocol
The first step in the issuance of tBECs is a comprehensive audit of the Bitcoin data center where the mining operations take place. This audit ensures that the miner’s carbon emissions are accurately captured in accordance with the GHG Protocol.
Audit Requirements:
Scope 1: Direct emissions from the mining operations, such as fuel combustion from backup generators.
Scope 2: Indirect emissions from purchased electricity used to power mining equipment.
Scope 3: Optional, covering upstream and downstream emissions, such as those associated with the manufacturing of mining equipment.
The audit must provide verifiable data on energy consumption, including the proportion of renewable and non-renewable energy sources used during the audit period.
Step 2: Collect Daily Average Hashrate Submitted to the Mining Pool
The miner’s contribution to the Bitcoin network is determined by their daily average hashrate submitted to their mining pool. The hashrate is a key performance metric that measures the computational power the miner contributes to solving Bitcoin blocks.
Data Collection:
Daily hashrate submitted by the miner is collected from the mining pool.
The mining pool must provide reliable data that reflects the individual miner’s contribution, ensuring transparency and accuracy.
Step 3: Calculate Miner’s Proportion of Network Activity
To determine the miner’s contribution to network activity, the miner’s daily average hashrate is compared to the total network hashrate during the audit period.
Formula:
This proportion represents the percentage of total Bitcoin mining activity that can be attributed to the specific miner.
Step 4: Allocate Green Transactions to the Miner
Using the miner’s proportion of network activity, the total number of Bitcoin transactions processed by the network during the audit period is multiplied by the miner’s share of network activity to calculate the number of transactions the miner processed.
Formula:
This calculation provides the number of green transactions that can be allocated to the miner during the audit period.
Step 5: Determine Supplier-Specific Emissions Factor
The miner’s total emissions during the audit period are divided by the number of green transactions they processed to calculate the supplier-specific emissions factor.
Formula:
This emissions factor provides the amount of CO₂ emissions associated with each Bitcoin transaction processed by the specific miner.
Step 6: Issue and Retire tBECs
Once the supplier-specific emissions factor is calculated, tBECs are issued to represent the carbon emissions associated with the miner’s Bitcoin transactions.
Issuance:
One tBEC is issued for each verified Bitcoin transaction processed by the miner during the audit period.
The miner or third-party entities can purchase these tBECs to offset their Bitcoin-related emissions.
Retirement:
tBECs are retired once purchased and used for reporting, ensuring that each certificate can only be used once in carbon accounting.
Certificates are retired in a designated registry account, providing transparency and auditability.
Registry and Verification
tBECs are stored and retired in a publicly verifiable registry. Each certificate is traceable to a specific audit period, miner, and transaction batch, ensuring full transparency for end-users. Third-party verification services can audit the registry to ensure that certificates are issued and retired properly.
Conclusion
The tBEC issuance process provides a verifiable, supplier-specific method for accounting for the carbon emissions associated with Bitcoin transactions. By adhering to the GHG Protocol and offering transparency through a certificate registry, this methodology allows businesses to more accurately report their emissions and meet sustainability targets.
The tBECs offer an innovative way for businesses like PayPal to replace industry-average emissions factors with miner-specific data, leading to more precise carbon accounting and greater confidence in sustainability claims.
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