Within the blockchain world, the term ‘mining’ is synonymous with the production of blocks and the harvesting of cryptocurrencies. In June this year Newpool unveiled their latest mining platform. A competition was launched to mark the occasion. Any EOS account that mined tokens worth more than 1 EOS per day was entered into a lucky draw. With this sweetened deal, Newpool invited users to come ‘mine now!’ I accepted this invitation, and in doing so I became familiar with terms such as staking, voting and BP-rewards. I also learnt of the recent controversies surrounding voting proxies and vote-buying. A heated debate concerning governance and the topics aforementioned has been growing for months within the blockchain world.
In the ‘good old days’, mining was first conducted with a single standard multi-core CPU. This practice advanced onto using GPU’s to mine. Then came FPGA’s, which were soon out-muscled by ASIC systems. Staking is the scion of these mining endeavours.
Newpool has described its mining operation as the next generation of staking pool. This is a way of mining that is particular to blockchains that use the Proof of Stake (POS) or the Delegated Proof of Stake (DPOS) consensus mechanisms. For those who are unfamiliar; staking is the act of validating or ‘mining’ block transactions according to how many tokens an account owns. The more tokens owned by an account, the greater their ability to process transactions onto the blockchain. This can be translated as, the more tokens owned, the more mining power that person has. In order to stake your tokens, you first have to become a stakeholder. This means you have to lock away a certain number of tokens onto a smart contract that has been engineered for this purpose. You still retain full ownership of those tokens, but you are unable to spend them until a specified length of time has passed. A ‘staking pool’ means that the tokens you have temporarily locked into the system, now joins a pool of other staked tokens. An added feature of DPOS is that every token also grants the holder automatic voting rights.
To start mining on Newpool one must log in with their wallet. You can then stake your EOS tokens to an EOS pool, or your TRX tokens to a tron pool. Newpool also offers staking for BOS and has plans to include other blockchains.
By staking on the EOS pool, each account holder can earn income from buying REX. These tokens will also be used to vote for a block-producer. The EOS account holder can vote for up to 30 Bps, or these votes can be entrusted to a proxy service that will vote on behalf of that EOS account. These votes go towards electing the top 21 EOS block producers on the mainnet. These elected BP’s will obtain block producing payments and voting rewards that are relative to the percentage of blocks produced and votes accrued. Some of the block producers automatically pay daily block production rewards and voting rewards to all users that took part in mining. It is important to do your own research and find out what a proxy service does with your votes. A user’s income is calculated in real-time and users receive daily payments. Their REX income is paid to them when the REX reaches maturity.
Staking on the TRON pool works in a very similar way. Staking your TRX token effectively ‘freezes’ them. This means they are locked up for a number of days and they cannot be traded or sold. In exchange, your wallet is rewarded with resources. These resources could be bandwidth that allows one to perform transactions, or energy, which is a resource that allows one to process smart contracts on the TRON network. The same tokens that are frozen for bandwidth and energy are also used to obtain votes. 1 TRX is equivalent to 1 vote and a TRON account can vote for multiple bp’s at the same time. The top 27 block producers (super representatives in TRON parlance) with the most votes will automatically become producers of blocks for the TRON network. These super representatives will receive block rewards and voting rewards. Users will receive these payments daily.
Despite their slight differences, both staking pools benefit equally from being included in Newpool’s mining operation. Staking is done ‘on-chain’. This means that no tokens are transferred from wallet to wallet during this process. Newpool is a fully decentralised staking pool service. This is made possible because the staking of tokens is manifested through the staking contract coded into the underlying architecture of each blockchain. The custody of any tokens staked remains with your own account. The withdrawing of tokens is also easily done. Newpool follows the staking and unstaking rules of each blockchain, and does not add additional restrictions. Newpool’s goal is to become launched on more than 10 public chains within 2019, reaching out to users on different chains.
This system of staking, voting and earning an income from your tokens involves very sophisticated software programming. It is a certain risk-free opportunity for all to use. However it has been marred with controversy and it is the cause of heated debate within the blockchain community. Some people have gone as far as claiming that the very legitimacy of the blockchains that operate such mechanisms are now under threat. The main topics of debate deal with the regional clustering of block producers. There are also fears that this has become just another money-grabbing opportunity for centralised exchanges which already hold large amounts of tokens that investors leave in their custody. Many investors are apathetic towards voting, and are ignorant of what is being done with their votes. Also the incentive to continue innovating and building tools that aid the blockchain’s infrastructure, can be overshadowed by greed. Some mining services also operate behind a wall of silence. Details of whom their collected votes are awarded to, are deliberately hidden from the public.. It is important to do your own research in order to find out what is being done with your votes.
IK Nwoke is a smart contract and software developer and technology writer of issues concerning the blockchain and other cryptocurrencies
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