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Earlier this year, @_rrybarczyk and I spent some time researching the narrative of green and clean coins while learning more about taproot and schnorr. What was our take?
The fungibility of bitcoins is imperative to the success of the network as it pertains to all users. One bitcoin must equal to one bitcoin now and forever.
In keeping track of the industry, something that miner’s shouldn’t be cheering for are these two concepts that have come up in relation to fungibility: clean coins and green coins.
A myth in the mining is the idea of virgin or clean bitcoins— bitcoins that come specifically from the block subsidy that could potentially hold higher value than other Bitcoins on the network, because they possess no prior transaction history that could taint them.
As bitcoin has become more widely adopted, Environmental, Social, and Governance groups exploring bitcoin who are critical of the network’s energy usage have argued that some coins should be worth more or less depending on the green energy profile of miners who produced them.
The idea is to incentivize miners to use renewable energy sources and encourage people to use green bitcoins as they would have a higher value attributed to it than non-green coins.
This higher attributed value would come from pressure applied by the energy sector onto institutions and vendors to favor green coins.
These concepts are flawed for a couple reasons:
1. There is no distinction between the newly issued coins in a block and transaction fees in a block, which means that newly minted bitcoins are mixed with the coins paid by transactors in a block, which themselves may not be clean
1. There is no distinction between the newly issued coins in a block and transaction fees in a block, which means that newly minted bitcoins are mixed with the coins paid by transactors in a block, which themselves may not be clean
2. Pools currently assemble blocks, and the coin flow starts at the pools’ addresses. Depending on the pool, miners can see multiple hops of coin movement prior to the coins landing in their wallets — usually attributed to change addresses.
3. It also does not take into account the transaction fees, something that become increasingly significant as the block subsidy diminishes over time.
When a block is found by a pool, that block subsidy and all its transactions fees are paid to the pool’s address, not to the miner who found the valid block.
The miner is then paid from the pool’s address and, even if they were lucky enough to find a block, is in no way guaranteed payment of the exact bitcoin that was minted in that specific block.
So the bitcoin that is paid out to all miners includes block subsidies and transaction fees with a multitude of addresses with very different histories, all from different blocks
Here's where you can find the full blog. https://medium.com/galaxy-digital-bitcoin-mining/part-1-taproot-schnorr-and-its-impact-on-mining-a0509856307a
