Proof of Work and Proof of Stake are blockchain consensus mechanisms with critical differences. Bitcoin's PoW requires significant energy to establish a physical world connection, ensuring superior security and fairness over PoS, which is less energy-intensive. While shifting Bitcoin from PoW to PoS is technically infeasible, SBP also sees PoW not as a hurdle but as a catalyst for the clean energy transition.

Bitcoin mining is a flexible, location-agnostic, and interruptible buyer of electricity that is highly sensitive to price. This is what gives Bitcoin mining the ability to support grid resilience through demand response, tackle methane emissions, and bring otherwise stranded clean energy to communities. Rather than move to PoS, investors, miners, and environmentalists should harness this technology to accelerate the energy transition.

The Sustainable Bitcoin Certificate (SBC) is an environmentally friendly commodity tailored for Bitcoin. It is designed to incentivize Bitcoin miners to use verified clean energy while allowing investors to possess BTC in a manner that is verifiably beneficial for the climate, without compromising Bitcoin's fungibility.

SBCs are created only when one of two measured positive environmental impacts occur:

1. Bitcoin mining with verified clean energy: For every Bitcoin or Satoshi mined with verified clean energy, one SBC or Kyoto is issued, down to 8 decimal places.
2. Capital is mobilized into renewable energy markets through the purchase and retirement of high-quality EACs or RECs on behalf of the historical energy consumption of the Bitcoin network. The quantity of clean energy purchased is determined by the average energy consumption of the network on a per-bitcoin basis, and this benchmark is developed in collaboration with leading institutions. This approach ensures that we over-invest to address the historical energy consumption of the Bitcoin network, thereby driving it to climate positivity as more miners and investors adopt the protocol.

Whereas carbon credits can be issued without proof of a reduction in emissions and whose value is written down to zero once retired, the SBC is a store of value that represents the production of 1 sustainably-mined BTC and is fully data-backed.

The rationale for aligning SBC issuance with the current hash rate is multifaceted. It aligns well with our mission to maintain a transparent, fair, and economically viable market for SBCs.

Connecting Bitcoin Mining to the Clean Energy Markets

By pegging SBC creation to the current hash rate’s energy consumption, we ensure that the price of the SBC matches with the economics of clean energy Bitcoin mining today, creating the first direct point of connection between the Renewable Energy Markets and Bitcoin Mining.

Scarcity and Natural Price Discovery

Our approach contributes to the scarcity of SBCs or ensures they are produced with the exact energy requirements that miners face. This is crucial for organic price discovery, as the cost of generating an SBC will reflect real-time market dynamics. This feature not only adds a layer of economic robustness to the SBC market but also keeps it tightly linked with the ever-evolving Bitcoin network.

By synchronizing the SBC issuance with the current hash rate, we balance fairness for new market participants and establish a stable yet responsive pricing mechanism. This design choice enhances both the market integrity and the long-term viability of the SBC ecosystem.

Energy markets use energy attribute certificates (EACs), which are globally-accepted contractual instruments that enable the substantiation and verification of energy generated, delivered, and consumed on a shared energy grid. EACs identify the source and other characteristics of a MWh of electricity that are otherwise indistinguishable once those electrons enter the grid. These MWh are measured with a meter as the electrons leave the point of generation. EACs help to prevent double counting because they allow only one account holder in a tracking system to trade or retire EACs, and when the EAC is retired it can no longer be transferred.

SBP follows Greenhouse Gas Protocol Scope 2 Guidelines and its use of EACs because this ensures that bitcoin miners are able to make unique and exclusive claims about their clean energy usage. Without the use of EACs, bitcoin miners run the risk of making claims about clean energy use that have been paid for by others, thereby replicating the double-spend problem that Bitcoin sets out to solve.

Bitcoin miners can make clean energy claims without EACs under certain conditions as explained in the SBP Whitepaper.

The SBC is designed to unlock Bitcoin’s clean energy potential without making any changes to Bitcoin itself, and does not “replace” Bitcoin in any way. The SBC is simply a market-based instrument intended to align two incentives: sustainable bitcoin mining and institutional investments in clean energy.