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Author Topic: Can POW rewards be interest rate + tx fee based?  (Read 158 times)
Electra01
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February 11, 2017, 12:10:45 PM
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Imagine a scenario where:

An altcoin is launched fairly as 100% POW, and after a set number of coins are mined, switches to a system where there is no block reward for POW mining. Instead, you get interest for mining for a certain period of time (e.g. 20 days). If you don’t mine, you don’t get the interest. This is similar to the concept in POS where you can stake for a period of time and get rewarded with an interest of say 5% a year.

In this POW mining with interest system, the probability of a block being found would still depend on hash rate. I imagine though that there would be less of an ASIC arms race since whoever mines a block would get only the transaction fees within it. There is less of an incentive to invest in ASICs. The interest (e.g. 5% a year) is gained by all people who are mining for a set period of time no matter the hash rate. The reason people would mine for a fixed interest rate is to protect themselves from inflation within the coin.

Due to the design of this system, people may attempt to discover ways to mine the coin by prioritizing low energy usage as it may be more profitable to cost effectively mine minimally for just the %5 interest than to maximize hash rates in order to mine subsidized blocks as well as get the 5% everyone else is getting. As people may focus on mining with low energy devices, the network hash rate may be lower and open it up to 51% attacks. But if a large portion of users mine in order to protect themselves from interest, then the attack would be a costly one.

Do you think a system where you can mine for a certain period of time and gain interest is possible to create?

Has anyone tried it?

In your opinion, what are the advantages and drawbacks?
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bathrobehero
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February 11, 2017, 12:24:17 PM
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As far as I know you can't really measure how long someone have been mining. You either find a block or don't, the effort is not documented. And if you make it so it's super easy to find blocks so many people can find them and use that to track their mining period (e.g eveyrone have to mine at least 1 block in X days) then you'll get a huge blockchain fast and likely many forks.


People won't waste electricity (money) mining just to fight inflation. And if hashrate doesn't matter people can just mine with 1% of their CPU so the interest rate is essentially free and it's just a gimmick that you have to mine for it.

And 5% in crypto is laughable if you think about it. The price of most coins move way more than 5% in a single day so holding money solely for the 5% interest in such volatility is kind of stupid.

There's no incentive to mine a coin like this so it will have a poor network open to attacks.


What you could probably do is to have a small block reward plus a certain percentage of the coins in the wallet (address) which mined it. So for example if the blockreward is 5 coins +1% of the address miend it, then a new wallet would earn 5 coins and someone who has 1000 coins would earn 5+10 coins. But that would end up with everyone mining on one pool which has a lot of coins so everyone would earn the most. And rich gets richer system are counterproductive in crypto.

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Electra01
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February 11, 2017, 01:47:23 PM
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As far as I know you can't really measure how long someone have been mining. You either find a block or don't, the effort is not documented. And if you make it so it's super easy to find blocks so many people can find them and use that to track their mining period (e.g eveyrone have to mine at least 1 block in X days) then you'll get a huge blockchain fast and likely many forks.


People won't waste electricity (money) mining just to fight inflation. And if hashrate doesn't matter people can just mine with 1% of their CPU so the interest rate is essentially free and it's just a gimmick that you have to mine for it.

And 5% in crypto is laughable if you think about it. The price of most coins move way more than 5% in a single day so holding money solely for the 5% interest in such volatility is kind of stupid.

There's no incentive to mine a coin like this so it will have a poor network open to attacks.


What you could probably do is to have a small block reward plus a certain percentage of the coins in the wallet (address) which mined it. So for example if the blockreward is 5 coins +1% of the address miend it, then a new wallet would earn 5 coins and someone who has 1000 coins would earn 5+10 coins. But that would end up with everyone mining on one pool which has a lot of coins so everyone would earn the most. And rich gets richer system are counterproductive in crypto.


You make good points. I threw out 5% as an example. Maybe if it starts at a higher value like 100% a year and halves every four years until the network matures it may give miners a higher incentive to mine.

Hash rate DOES matter in this hypothetical altcoin but you only get the rewards from transaction fees in the blocks. In a new cryptocurrency these rewards would be minimal but in a mature high volume transaction system with full blocks there will be an incentive to use higher hash rates to mine those blocks. Bitcoin’s mining rewards will eventually solely be based on transaction fees. If miners are predicted to mine that, then surely they would mine a block that gives them transaction fees coupled with an interest rate just for trying.

Anyways, if, as you say, there is no way to track how long someone has been mining, then this kind of altcoin cannot exist at the moment. People who have no coins in their wallet would also probably not mine as %100 interest of 0 won’t give you anything.
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