The economics behind STX miners’ motivation

As Stacks 2.0 is going mainnet on 14 January 2021, “The economics behind STX miners’ motivation” would be an interesting topic to deep dive into for the Stacks Protocol / Proof of Transfer. Miners are a distinct group within the blockchain ecosystem, their operation is fundamental to the integrity, decentralization of the blockchain infrastructure.

Mining in layman’s term is the very action where resources are consumed to produce a new resource(in blockchain context it would be to mint a new block). There are various form of mining in the blockchain ecosystem:

Name Acronym Miner action to mint new cryptocurrency
Proof-of-Work PoW Consume electricity towards computations to mint units of a new cryptocurrency.
Proof-of-Stake PoS Dedicate economic stake in a base cryptocurrency to mint units of the same cryptocurrency.
Proof-of-Burn PoB Destroy a base cryptocurrency to mint units of a new cryptocurrency.
Proof-of-Transfer PoX Transfer a base cryptocurrency to mint units of a new cryptocurrency.

Source: PoX Whitepaper

In the context of Stacks Protocol, which adopts the Proof of Transfer mechanism, here’s a summary of the key characteristics of STX mining and Stacking:

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A Beginner’s Guide to setting up a testnet STX miner

If you’re a complete beginner, with the intention of setting up a testnet STX miner for the first time using a Windows PC, you’re at the right place. Follow these easy step-by-step walkthroughs to get your STX miner set up and running!

Before you begin, check that you have the necessary software installed on your PC:

Rust, Microsoft C++ Build Tools 2019(C++ build tools), Git , node.js, curl and Python

Tutorials that I’ve relied upon while writing this walkthrough

Once you have all software installed, power up your command prompt and insert your first command:

git clone https://github.com/blockstack/stacks-blockchain.git

#This is to download stacks blockchain files on to your computer

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Clarity Language x Chainlink Oracle

Clarity x Chainlink Oracle integration

For non-technical folks like myself, the term smart contracts, oracles, data feeds and how they come together are like foreign languages, yet these are critical components for the developer communities.

The recent news release from Blockstack(soon to be known as Hiro Systems), highlighted the integration of Chainlink Oracle Technology with Stacks 2.0. In an attempt to learn more about Stacks Protocol, I’ll deep dive into the technical details, digest the information and roam the web for non-technical explanations. The write up below will be my attempt to have a concise explanation and break down of the technical terms and also explore what it means for Stacks ecosystem to have Chainlink oracles onboard.

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Blockchain Protocols

Blockstack   

Blockstack is an open-source and developer-friendly network for building decentralized apps and smart contracts. Blockstack introduces a new mining mechanism, Proof-of-Transfer(PoX) which allows for a Proof of Work chain (in Blockstack’s case, Bitcoin) to be leveraged and extended. This opens up a wide range of opportunities for developers to build ontop of Bitcoin Network.

Stx mining and Stacking illustration
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Freehold

The release of the Bitcoin white paper by Satoshi Nakamoto in 2008, gave rise to a new technology(Blockchain), and initiated a movement towards greater decentralization.

Bitcoin started off within a niche community of cryptographers and computer scientists, but gradually expanded across the globe to individuals from all walks of life. The beauty of decentralization is the inclusiveness that the community offers to everyone, where anyone who believes in the project is welcome to be part of it, through hodling(misspelling for hold) the token and/or contributing to the project in other ways.

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DeFi on the Bitcoin Network

What is DeFi?

Decentralized Finance (DeFi) has been in the spotlight in recent months, with several DeFi projects gaining traction and their tokens soaring in prices have attracted a lot more attention. But what exactly is decentralized finance and what can it do that traditional finance couldn’t?

DeFi represents an ecosystem of financial applications that are built ontop of blockchain networks. Financial applications ranging from borrowing/lending, to owning fractional assets through tokenization and peer-to-peer transactions.

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A beginners guide to Proof-of-Transfer, Stacks blockchain and Stacking.

Bitcoin protocol, the world’s most secured blockchain network and the highest profile cryptocurrency(bitcoin) is where most people first learnt about blockchain technology. I’m certainly one of them, having stumbled upon bitcoin in 2016 and went down the rabbit hold to learn more about the mechanism powering the Bitcoin protocol. Blockchain technology which powers the Bitcoin protocol stretches across multiple domains such as cryptography, computer science, economics, finance and more. What makes the Bitcon protocol the most secured blockchain network is the underlying Proof-of-Work(PoW) consensus algorithm, which have the most nodes(miners) running the network in the industry. Miners compete against each other(by solving mathematical puzzles through computing power) to complete transactions on the Bitcoin network and be rewarded with bitcoin. The complexity of the puzzle increases as 1) users on the network increases, 2) increase in computing power as more miners decides to run the network, 3) and the increase in network load. The hash of each block contains the hash of the previous block, which increases security and prevents any block violation, thus the term blockchain. A quick look at Bitcoin protocol’s 2 main security metrics  1) Total Hashrate and 2) Network Difficulty, shows that they are at an all time high.

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How can we navigate a low-interest environment?

The Federal Reserve recently indicated that they will be keeping rates near zero at least until 2022 to help the US economy recover from the Coronavirus economic shock. Along with maintaining the pace of quantitative easing the Fed is doing through the increase in Treasury and mortgage-backed securities. The Federal Reserve balance sheet is at US$7.1 trillion for the week 8th June 2020, increased by US$3 trillion in the last 3 months.

While this situation isn’t unique only to the US, government across the globe have adopted aggressive stimulus plan to cushion the economic shock caused by the Coronavirus. So how would such actions affect the general population?

At a basic economic level, the interest rate set on savings account deposits is determined by the relationship between how much banks value receiving extra deposits and how much savers value the services of a savings account. Those valuations are manipulated by how governments and central banks target interest rates in the economy.

So for the average citizens whose, a large portion of their financial assets are kept with the banks, earning minimal interests over a long period of time will put themselves in a precarious position whereby their asset value will decrease over time due to inflation.

So what shall we do in a low-interest rate environment?

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Politics or No Politics?

As the world moves into unprecedented times, government around the world struggle to cope with the crisis and through the crisis it exposes a lot more cracks within the community where underlying unhappiness were amplified during these challenging times.

In most countries, the democratic way of governing and introducing of policies are through the election of politicians by the members of the public. Inorder for politicians to win the trusts of the public, they need to show their competency in addressing issues that the public are concern about as well as safeguarding the nation’s interest. They do so through proposing policies and engaging with the public on the grounds to understand issues that they face. In theory, these are all fine where politicians work for the interests of the public and in turn the public entrusts the politicians to act in their best interests and vote them into the government. However, as competition to gain the vote of the voters, politicians may deviate from long term thinking and engage in short term actions to win voters through policies that benefits them in the immediate future at the expense of long term sustainability.  Albeit the limitations of democracy, it works fine in times of peace, where the overall sentiment of the public is optimistic about the future, and feel that they have a chance to improve their lives through hard work and are treated fairly in the society.

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Remote work is the future, but are we accepting it?

Remote working has been around for decades, as companies explore better ways to manage employees’ productivity level and output. However, it hasn’t become mainstream yet due to various challenges and concerns, and rightly so as remote work has its pros & cons that on a larger scale will be harder to manage.

We often look at the advantages of implementing remote work, where technologists, employees and unions have been advocating for it. It’s undeniable that there are some advantages to remote work if the right culture and guidance are in place. 1)Time saved on commuting can definitely contribute towards higher productivity level or better quality of life, 2) access to global talent with geographical/logistical restriction, 3) fewer office expenses required and the list could go on. However, the challenges remain for remote work, as working culture is so accustomed to onsite work, long leases of office rentals, team bonding over projects, and many more.

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