More than $300 million dollars were “earned” by mining empty blocks on major PoW blockchains.
Across the world, some crypto miners are earning money for doing nothing. An investigation by Diar.co has found that $42 million dollars were raised by miners only last year by mining empty blocks.
Considering the blockchain is built on noble values of trust, direct relationships, cost-effectiveness and democratising financial systems, it seems unfair that nodes are earning money without bringing any real benefit to society or the economy.
The environmental impact of non-transactional blocks also needs to be considered. From 2016–18, the biggest four cryptocurrencies — Bitcoin, Ethereum, Litecoin, and Monero — were responsible for pumping 15 million tonnes of CO2 into our atmosphere, according to CCN. Other experts have estimated this figure to be even higher.
A fairer way to earn rewards
Some might say that this ‘money for nothing’ approach is a reward for nodes for keeping the network alive. However, this isn’t necessarily the best working model, and a better way forward is needed to solve this type of teething problem.
To address this, Own is launching an infrastructure that is not driven by the mainstream rewards system.
Rather than trying just to please the nodes and reward them for nothing, we have implemented a fairer way to earn our utility token — CHX — that evolves around processing transactions and generating business value.
Our Sybil control mechanism (Delegated Proof of Stake) and consensus protocol (BFT) have been developed to prioritise business value generated, created in an environmentally-friendly way. This reduces the consumption of unnecessary resources and enables fast transaction processing.
Rewarding the transaction, not the block
With all public blockchains, it’s important to incentivise nodes to become part of the network and reward nodes for the work they are doing. However, just being part of the infrastructure should not be a good enough reason for a reward.
That is why we came up with the validator node concept, which rewards a validator for processing transactions and generating business value. We moved away from the master node approach to reward nodes for just being around to keep the network alive because we wanted a better and fairer model.
Own’s approach is fair, as nodes are rewarded for validating transactions, which in turn generates additional value.
In our blockchain, each transaction carries a CHX fee, which is rewarded to the validator that validated the transaction and created the block. In turn, the validator — if it is transparently agreed — can distribute their earnings to the validator stakers (addresses which delegated their CHX to the validator).
More about our Staking Mechanism you can read in one of our blogs here.
With this method, the reward is attached to the transaction being validated, not the block being produced.
A stable, profitable approach to innovation
Fundamentally, the financial services market needs fee stability, and this relies on blockchain transaction processing prices being reasonably stable. Our blockchain enables individual nodes to set the minimal transaction fee, stabilising transaction fees and enabling nodes to still get enough CHX for the service they provide.
If a transaction with a lower fee than the threshold is submitted to the node, the transaction will be rejected. However, there may be nodes that will accept lower transaction fees attracting more traffic to their nodes. This ‘free market’ approach will enable self-regulated transaction fees. The fees are then based on demand and supply, like ‘the invisible hand’ from Adam Smith.
The second and even more important reason for flexible fees is to provide protection against DoS attacks. To defend itself from a large volume of incoming transactions sent by attackers, a node can raise the transaction fee, making the DoS attack expensive to execute.
Focusing activity on raising value
It’s a common misconception that empty blocks serve no purpose, but this is not the case. The nodes in Own’s network are also creating empty blocks. In the words of our blockchain architect, Anil Mujagic, this is because “empty blocks are needed to keep the pace of the network in the time of low traffic, and enable predictable time-based reconfiguration (forming a new validator snapshot).”
In the case of low traffic, a new block will be created every 30 seconds. This gives us a predictable timeframe in which the network can reconfigure and select new validators even if there are no transactions.
The main difference between our method and other blockchains, however, is that there is no reward for the empty block being created. Some blockchains put the same effort into creating an empty block as in processing transactions; we focus our attention on processing transactions and delivering real business value.
By taking this approach, Own is able to ensure a consistent network pace, without consuming unnecessary resources. And most importantly, nodes do not receive a reward for not delivering value, because node rewards are allocated according to the value they are producing for the business.
Visit Own’s technology page to discover more about how our products and services work.
