The word "mining" comes from Bitcoin. In Bitcoin, mining serves a threefold purpose. But what is most well known is its rewards for miners. It is precisely because of this partial understanding and intentional or unintentional misleading that the concept of "mining" has been seriously abused and misused. This article attempts to list some specific cases, analyze them, and distinguish right from wrong.

PoW Mining: Bitcoin

“Mining” has three functions in Bitcoin:

1. Determine the direction of time.

2. Generate new blocks.

3. Allow miners to obtain block rewards.

The specific mathematical process of mining will not be discussed here. This is explained in the author's Bitcoin principles class. Here is a brief explanation of the three functions of mining:

1. Determine the direction of time. Mining is a physical and mathematical process in which miners consume huge amounts of electricity and take considerable real-world time to find a compliant solution. There are three essences of time, and this issue will not be discussed in detail here. Time itself is not a physical reality, and we can only prove the consumption of energy through mathematical evidence (specifically, cryptographic evidence) to indirectly prove the sequence of time. This issue is so critical that the second section after the introduction of Satoshi Nakamoto’s white paper is about time. Satoshi Nakamoto also called the blockchain a time chain. Blockchain is a one-way irreversible linked list in the time dimension. This is the biggest difference between blockchain and ordinary linked list structure. This level of function is also the most secretive and is almost unknown and unknown.

2. Generate new blocks. The mathematical process of mining is to find a compliant solution to the inverse hash operation from cryptography, and the only method is brute force cracking. Essentially, Bitcoin miners are using the most powerful computing power on the planet to attack Bitcoin itself 24 hours a day, but they can only break a much weaker problem in the allotted time. Whenever a miner successfully cracks this weak problem, his attack power is captured by the Bitcoin system, a new block is minted, the transaction data in the block is locked, and all blocks in history (that is, the entire Blockchain) protection against tampering has been strengthened once again. This level of function can be roughly understood if you know a little bit about the technology.

3. Allow miners to obtain block rewards. This is the most superficial effect, and it is also the most well-known and imitated. However, even at this level, Bitcoin’s approach is completely opposite to that of almost all its imitators. Bitcoin’s block rewards are actually written into the blocks by the miners themselves, and there is no authoritative center to evaluate and issue this reward. And almost all imitators, if you carefully analyze their so-called "mining" implementation methods, almost all are evaluated and issued rewards by an authoritative center. Therefore, even if it is just about rewards and incentives for plagiarism and imitation, it is completely copying a cat and imitating a tiger.

In the overall design of Bitcoin, these three functions of mining are perfectly combined, interdependent, working together, and inseparable.

PoW Mining: Dogecoin

Dogecoin mining is one of the systems closest to Bitcoin. Because Dogecoin is inherited from Litecoin, and Litecoin is forked from Bitcoin. Litecoin changed Bitcoin’s mining algorithm from SHA-256 to scrypt, and Dogecoin inherited this algorithm.

The main difference between Dogecoin and Bitcoin is not in mining, but in other aspects such as monetary policy. This is beyond the subject of this article and will not be discussed here.

PoS Mining: Ethereum

Since Ethereum has completed a major merger in 2022 and upgraded from PoW (Proof-of-Work, proof of work) to PoS (Proof-of-Stake, pledge proof), it is no longer related to Bitcoin mining. Similar, but closer to the deposit-yield (deposit-yield) model.

The advantages of PoS are its disadvantages. There is no need to waste electricity or work hard to mine, it is greener and more environmentally friendly, and it is easier to generate new blocks, but this block is no longer self-certifying - every PoS certification needs to rely on the data of the chain. So at the root, we will fall into a circular argument. Should we believe in the block first or the chain first? We will find that: to verify the block, you need to trust the chain first; and to verify the chain, you need to trust the block first.

Bitcoin mining and Ethereum staking are both capital-intensive businesses. The difference is that Bitcoin mining consumes a huge amount of capital to create Bitcoin; Ethereum staking has almost no wear and tear on the pledged capital, but adds Ethereum out of thin air to reward these capitals as interest.

Liquidity mining: Sushiswap

In the 2020 DeFi Summer, Sushiswap relied on forking Uniswap, taking the lead in issuing coins, and launching liquidity mining (LP mining), and instantly seized a lot of Uniswap's market share.

From here on, the word mining is separated from the chain. It no longer has the function of generating a blockchain, leaving only the function of motivating expected behaviors, which means it rises to the incentive layer. The so-called liquidity mining allows users to lock the liquidity token (LP token) representing the currency pair into a mining contract, and then the smart contract rewards the user with the platform token SUSHI according to the agreed rules.

If this thing is completely realized through smart contracts on the chain, and is open and transparent, it can also be regarded as a good incentive method to achieve certain expected purposes (such as promoting the migration of liquidity).

Lock-up mining: Kraken SaaS, Lido, FIL, UST

A further step is that users do not need to do anything. They only need to pay money (coins) and hand over the coins to the platform for locking, and then they can continuously obtain income rewards as agreed. This is the quite popular lock-up mining.

We see this model in Kraken’s Staking-as-a-Service, Lido’s ETH staking service, and the FIL (Filecoin) staking plan launched by some manufacturers. , seen in the explosive UST, and seen in many exchange platform currency lock-ups for interest.

Deposit ETH and earn ETH interest. Deposit FIL and earn FIL interest. Deposit UST and get UST interest (this is the pinnacle of awesomeness, UST is a "stable currency"!!!).

Broadly speaking, bank time deposits, where interest is paid regularly, are also a type of lock-up mining.

Lock-up mining is almost the hardest hit area of Ponzi schemes. Many times, you simply can’t figure out whether the so-called platform that took the coins you locked up with it engaged in reasonable currency-making operations, or engaged in high-risk leverage business to earn interest differentials, or even split things to make up for things. Bring in the new and return the old.

Bandwidth Mining: Wanke Cloud

The model represented by Wanke Cloud, which attracts speculators to earn tokens and thereby boost the sales of hardware boxes, cannot but be admired. Moreover, everyone shares bandwidth and storage, forming a P2P content acceleration network. This beautiful scene is indeed exciting.

However, in this scenario, it is impossible to find a proof-of-work algorithm that is as easy to verify as the hash calculation used in Bitcoin to prove how much contribution each node has made. Wanke Cloud's approach can only regress to centralized evaluation and rewards, thus completely obliterating the meaning of distribution and turning the entire model into an illegal financial operation.

Selling boxes is centralized. Reward tokens are also centralized. This becomes illegal fundraising.

There are three elements for illegal fund-raising: first, illegality, second, inducement, and third, participation of non-specific groups of people. When a large number of players buy Wukeyun boxes at high prices out of a mentality of making money rather than consumption, the nature of things has fundamentally changed.

Mobile mining: π

There is a "non-mainstream" project that has been despised by the mainstream of the currency circle for many years but has cultivated a huge fan base - π (Pi). Many people say it is a Ponzi scheme, but it is not. Participants do not need to invest money, which is what the project has always advertised. Install an app, open it a little bit every day (show ads), and you can "mine" and earn tokens. Why not? If you can invite a few friends, you can also speed up mining.

The project has a decent issuance curve and the like, but its so-called mainnet has never been online, and there is no liquidity at all. At present, this thing can be regarded as a centralized "point" at best. But this "point" has no practical use yet. The project team has been telling stories, but they have never been implemented. Maybe the bubble will burst as soon as it hits the ground.

The beauty of the whole design is that it relies on stories and imagination to fool a group of stupid people into opening the app every day to click on ads. As for the price of mobile advertising revenue, you can go to Google to check it yourself, and then simply calculate the daily activity. These real advertising fees But it all goes into the pockets of the project team. If it really has as many users as the legend says, it is estimated that it has earned tens of millions of dollars over the years, haha.

In any case, compared with the classic web3 routine of issuing tokens to the secondary market, using the hot money from the secondary market to subsidize the primary market, and making intermediate project parties earn a friction fee, mobile mining Mine's π is just a legal and reasonable use of the dream of leeks to earn some advertising fees. So far, it has not directly cut leeks on the secondary market, which is considered relatively innocent.

Transaction mining: FCoin, x2y2, blur

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Post time：2021-01-22