Use-case Diary: NFTs in consensus mechanisms : revolutionizing the mining landscape

A couple of minutes ago I came across a story of a fresh lawsuit reported on CNN, Sotheby’s is being sued following the crash of Bored Apes NFTs, and I immediately asked myself: what do these people really expect from a project based on hype and speculations?

NFTs are taking a hit and this is because majority of them lack any viable utility structures. Frankly, asides blockchain games NFTs, most NFTs in circulation do not have any value outside the bubble of hype and speculation.

Is that a problem?

In itself it isn't a problem, obviously, but the problem comes in how people view NFTs. When a lad buys an NFT art, he probably expects to make a profit in a couple of days, which is not supposed to be the case.

Buying an art piece should come from a position of passion not profit because it almost never comes instantly and we know that NFTs are essentially digital arts and these are by what populates the markets currently.

But people seemingly expect to profit from these purchases and get disappointed when they don't because asides not realizing that the NFT market is based on hype and baseless speculations, the technology behind NFTs weren't really meant to be taken up as an asset market, at least not in the form it currently is.

Following this, my next line of thoughts was how can value be built into NFTs to make it a viable investment in current times? and the first thing that came to mind was "mining".

Mining within the crypto and blockchain ecosystem involves the running of blockchain softwares for the purpose of agreeing with other network participants on the state of the blockchain network.

This process is often incentivized as miners typically spend on servers to get the job done, so by following protocol consensus mechanisms, network participants stand to earn what is famously called "block rewards" on blockchains like Bitcoin.

But what if? Instead of earning a "known" sum, miners would earn NFTs that when burned will have a varying number of tokens as rewards?

Gamifying mining to increase fairness and sustainability

Let's face it, having a defined value to be earned from mining as rewards is cool, but what's the fun in that? And given how competitive the mining landscape is, it might not really be cool for all, so why not build on a system that doesn't entirely neglect high mining powers but also does not neglect lower mining powers.

In theory, instead of rewarding miners a defined number of tokens for each block mined, miners could be rewarded with NFTs.

Now the value of each NFT would be different obviously and the only way to know what is inside would be to burn it, so imagine a daily inflation of 100,000 Hive for example being unequally spread across different NFTs at the time of block verification(mint), so a small witness in this case stands a chance of earning something high even whilst being small but you know, the number of blocks it gets to verify will still be affected by its position in the chain of witnesses.

Further incentives could be built into these NFTs by having a lockup pool that earns these witnesses rewards from a defined pot of assets depending on the number of NFTs they have staked.

In this scenario, despite these NFTs having different token values within, they are outwardly valued the same by the protocol, thus treated the same in this pool. By incentivizing lock ups, the protocol is adding a layer of security and preventing the newly mined tokens from instantly hitting the markets.

In addition, to further encourage locking up these NFTs which would essentially mean locking up Hive, these NFTs could be designed to increase one's mining rate and potentially the value of incoming NFTs but doing all these without giving even the slightest signal on the value of each NFT.

These NFTs could also be sold on secondary markets, giving the non-witness a chance to take part in the provably fair reward distribution process. By doing so, miners can get a good deal for their mining rewards, investors gain tickets to NFT pool rewards whilst also speculatively expecting the tokens contained in the NFTs to be worth more than the price they paid for it.

Posted Using LeoFinance Alpha