Alkimiya, launched by Anicca Research, a computing power research institution, restructures the cash flow rewards generated by computing power and splits it into two parts: computing power contracts and computing power structured products.
Written by: Alkimiya
“Since all companies involved in electronic money have failed since the 1990s, many people naturally regard electronic money as the cause of their failure. I hope that everyone realizes the obvious reasons. The characteristics of centralized control of these systems are destined to They lost their fate. I think this is our first attempt at a decentralized, trustless system.”
— Satoshi Nakamoto
The pain of the mining power market
After 10 years of exponential growth, the cryptocurrency mining industry has come to a crossroads.
With the industrialization of mining operations, the initial capital investment continues to rise. With the increasingly fierce global arms race in the mining machine industry, institutional miners with strong desires and strong capital continue to enter the game . At the same time, the block economy continues to develop and change. The percentage of fees in total block rewards is getting higher and higher. Ethernet Square miners can extract the value (MEV) herald a new, much more complex profit-driven behavior, destined to forever change the rules of the game.
The economic return of cryptocurrency mining is no longer a simple linear calculation result .
Unlike traditional commodity producers that can reduce their own risks through large-scale derivatives markets, cryptocurrency miners and their investors bear most of the risks. The only way to trade spot computing power is to buy and sell mining machines. However, due to the high difficulty of mobile hardware, the mining machine market is extremely inefficient.
As mining competition inevitably becomes more intense, a capital market is naturally needed to provide services for computing power producers in order to manage risks at different stages of the mining cycle.
Over the years, attempts to create hedging tools for miners have failed to attract meaningful trading volumes (cloud mining, machine tokens, over-the-counter OTC computing power exchange, FTX computing power index, and computing power issued by centralized entities. Power tokens, etc.).
However, there are problems on both the supply side and the demand side.
On the supply side, miners who wish to sell computing power through cloud mining platforms or computing power token issuers need to transport their machines to specific facilities. The mine work is the seller, and the workload involved is too heavy.
Most cloud mining/computing power token issuers will eventually have to purchase machines on their own to ensure that contracts/tokens are not fulfilled, and absorb most of the losses when the market turns. These products are only suitable for bull markets where people are willing to buy under any market trend.
On the demand side, it seems that no project can answer this multi-billion-dollar question: Who are the natural buyers of computing power tools?
The fundamental challenge of any increase in demand for computing power tools is the price discovery mechanism. The shipment volume of the machine is very susceptible to various physical attributes, and its theoretical pricing is affected by multi-variable options, among which the basic parameters of mutual correlation may change every second. Only BTC or ETH price futures/options hedging cannot achieve delta neutrality .
This means that thefair value of computing power is extremely difficult to price. Therefore, the existing computing power tools are too rough in design, and the pricing mechanism is too complicated.
In order to create a useful tool for miners, there needs to be a sustainable and consistent desire for speculation on the other end of the market.
Given that there are no natural buyers of computing power tools, and there is no large-scale demand to attract miners to sell computing power in a liquid market, such a market seems impossible.
Overview of the Alkimiya Agreement
solution? Transform computing power into another form.
Abstractly speaking, the reward generated by computing power over a period of time is just cash flow. These cash flows can be sequentially deconstructed and reorganized into other forms of cash flow generation assets that traders and investors are already familiar with.
We are building an agreement to facilitate this process. The Alkimiya agreement consists of two parts:
- The first part is a permissionless non-custodial agreement that enables miners to sell their computing power through bilateral contracts.
- The second part is the structured product engine. Users can restructure bilateral contracts into other forms of cash flow-backed assets that generate income (for example, fixed-income bonds, convertible bonds, perpetual contracts, DAO payments, etc.) .
Unlike most income-generating products that are secured by tokens, the cash flow of these assets is guaranteed by the underlying computing power, which represents the economic activities generated on the blockchain.
Hash rate contract
Miners can sell computing power in exchange to lock in advances for their computing power for a period of time, or they can sell call options to increase the rate of return on their rewards.
In a bear market, miners can hedge downside risks by locking in upfront profits to pay monthly operating expenses. In a bull market, the demand for spot computing power is ridiculously high. Miners can take advantage of high premiums.
Miners can interact with Alkimiya through the mining pools they are already mining. Contracts issued by miners are purely financial. Alkimiya only redirects the reward address instead of the physical computing power. Miners can join easily without installing additional software or migrating to a new platform.
Miners can join Alkimiya through the mining pool, just like traders use Uniswap through Metamask. In this framework, Alkimiya uses the mining pool as the Metamask of computing power.
Any miner can join and leave this market at will. Any miner should be able to easily switch between mining for themselves and selling computing power on the market.
Alkimiya achieves this goal by balancing the economic incentives of miners and buyers. The detailed issuance mechanism and calculation can be found in the document .
Computing power structured products
The ownership of the contract is represented by temporary tokens (Hash_Sands), which will be destroyed in the event of default or redemption. These tokens can be broken down into smaller parts and traded on the secondary market. Any coin holder can receive mining rewards related to the contract when the contract expires.
By using mining financial income as a cash flow module in the form of tokens, users can use these modules to create different styles of cash flow generating assets.
For example, a series of computing power swap contracts that provide different computing power rewards for different time periods can be bundled together and reissued as new derivatives: 5% fixed income bonds + a chain that continuously reinvests rewards into new contracts Go to DAO.
Alkimiya allows users to freely design and start these “structured product engines”-fixed-income bonds secured by computing power, convertible bonds with mining proceeds as underlying assets, computing power perpetual swaps (block subsidies and Structured products separated from MEV income and on-chain mining funds operated by DAO).
The possibilities are endless.
These assets can be traded on other decentralized exchanges and integrated with the broader DeFi ecosystem. Cash flow is not derived from tools that rely on volatile collateral or borrowing activities, but from the economic activities that maintain the blockchain itself.
It forms a closed loop and introduces a new category of more “enhanced” tools to the DeFi world.
When the demand for computing power-based assets continues to increase, the demand for underlying computing power contracts will also be indirectly stimulated.
Roadmap, future work and research
Alkimiya is currently conducting a closed beta for selected Ethereum miners. We start with Ethereum mining first, and will gradually support other PoW tokens with functional packaging ERC20. Our goal is to release the complete code base to the public on the second layer of Ethereum in the fourth quarter of 2021.
Future work & research:
- Decentralization of oracles: Alkimiya oracles is a federal node network that extracts computing power and reward data from mining pools. We are looking for possible ways to increase data granularity and reduce trust in mining pools.
- BTC native solution: Alkimiya protocol is undergoing proof-of-concept construction on Ethereum. Our main goal has always been to create something truly useful for Bitcoin miners. We are actively researching BTC native solutions so that we can transplant the system and directly provide services to Bitcoin miners.
- Beyond PoW: Structured product engines can deconstruct and reorganize anything that generates cash flow. The underlying contract does not necessarily have to be based on mining revenue. We are also looking for ways to incorporate staking derivatives.
We are actively looking for mining pools to cooperate with us to make the user experience smoother. If you are a mining pool operator who is interested in cooperating with us, or want to know more information, please contact us through the following ways:
We are also looking for like-minded people to join our work. If you find what we are doing is interesting. Please do not hesitate to contact us.
We are very grateful to the early supporters and investors :
Dragonfly Capital Partners, General Mining Research, Castle Island Ventures, Robot Ventures, and Derek Hsue.
Source link: www.aniccaresearch.tech
