Towards an Evaluation Metric for Carbon-Emitting Energy Provenance of Bitcoin Transactions

We present an approach to evaluating the carbon-emitting energy provenance of Bitcoin transactions and transaction outputs. Our approach incorporates published global energy production data and existing state-of-the-art estimates of Bitcoin energy consumption into a scoring algorithm for individual mined blocks. We then present two proposals for deriving scores for transactions based on the coinbase origins of the Bitcoin currency values of the transactions' inputs. The first proposal is comparatively simple, and weights coinbase origin contributions to a transaction based on recency in transaction hops from its origin block. The second proposal adjusts the weights of coinbase contributions at each intermediary transaction based on the input and output values of those transactions. Using these methods we are able to associate individual transactions and unspent transaction outputs with specific quantities of atmospheric carbon. Finally, we offer an outline of an incentivization strategy in the form of a blockchain-based carbon-offsetting oracle that would track the creation and exchange of offsets based on the metrics proposed.