Introducing GoMining v2: the Liquid Bitcoin Hashrate protocol

GoMining
7 min readJul 5, 2023

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We are thrilled to announce that we’re ready to release the biggest update since the GoMining launch.

Welcome GoMining v2 — the Liquid Bitcoin Hashrate protocol

Since its launch, GoMining’s mission has been to make mining accessible to everyone. Now, after months of stealth development, GoMining is ready to deliver something brand new — a Liquid BTC Hashrate product.

Bitcoin mining is often considered a complicated process available only to sophisticated users and, most importantly, mining companies. All previous attempts to make Bitcoin mining accessible were known as “cloud mining” with an extremely bad reputation due to a lack of transparency and a huge number of scams. It simply doesn’t work and is a dead end for the industry.

However, there is another approach that GoMining is pioneering: Liquid Bitcoin Hashrate tokens (LBH). What if users could buy transparent mining power as a digital asset representing the hashrate that will provide mined BTC yield and can be widely used in Defi?

Participating in bitcoin mining should be as easy as staking Ethereum in Ethereum’s liquid staking protocols. It should also provide numerous yield options, including using it as collateral to take out loans and unlocking Defi strategies with this new type of yield-bearing assets.

Introduction to the concept of Liquid Bitcoin Hashrate tokens

The idea of liquid bitcoin hashrate originated from the general Liquid Staking narrative (often being referred to the LSTs, Liquid Staking Tokens). Liquid Staking allows users to participate in consensus of PoS networks and at the same time freely use tokens representing ones locked in the network validator. Ethereum has the biggest liquid staking market with more than $14b TVL of Ether locked in Lido.finance. Staked Ether continuously earns yield and can be easily transferred, traded, used as a collateral for borrowing additional capital[1], or even used in structured products such as Pendle. Technically, holders of a staked Ether own the particular amount of ETH locked in Ethereum validator and staked ETH acts as an ownership right for locked Ethereum. Staked Ether can be redeemed for ETH under some conditions or traded on DEXes.

The Liquid Bitcoin Hashrate (LBH) works similarly — while physical mining equipment and corresponding hashrate operate in the data center, the user owns a token that represents the hashrate position. However, there is a difference in the economic structure of Liquid Bitcoin Hashrate vs. staked ETH — energy consumption. While the electricity cost for mining Ether in Ethereum Validator is negligible compared to the mined ETH yield and is not directly considered in the calculation of Ethereum mining revenue, the energy cost for Bitcoin mining accounts for a significant portion of mined BTCs.

According to this, the Bitcoin Liquid Hashrate owner should pay for the electricity, which can be deducted directly from the mining revenue in a transparent way and can be verified with any mining calculator. Another difference is that the underlying asset for LSTs is ether or any other native network token (such as BNB, Matic, SOL, etc. — since it is an elementary unit of participation in the PoS consensus), while for LBH tokens it is a TH/s, an elementary unit of computing power in the PoW consensus. Unlike the LSTs, which can be redeemed for the native network asset under some conditions, Liquid Hashrate tokens cannot be redeemed for BTCs (but can be sold on the open market). Also, LBH (at least in current implementation) are represented as an NFT positions, containing not only mining power (TH/s) but also energy efficiency (W/TH) as metadata.

The LBH tokens can be used in Defi in the same way that LSTs are used: they generate income on behalf of their owner, can be traded, and can be used in Defi protocols for borrowing/lending purposes. As an example, LBH tokens can be used as a collateral for borrowing stablecoins, that can be used in farming strategies and provide additional income to the LBH token owner. Liquid Staking Tokens of PoS blockchains, such as staked Ether can be considered as a closest analogy for LBH tokens.

GoMining protocol: the overview of the v2

GoMining v2 is a Liquid Bitcoin Hashrate protocol. The Bitcoin hashrate becomes liquid and tradable on the Ethereum/BNB chains represented as NFTs issued by Service Providers. Service Providers are mining companies that own data centers and mining equipment where tokenized hash rate is hosted and operated. They provide power and other services necessary to mine Bitcoin with hash rate represented as NFTs.

The first Service Provider, participating in the GoMining protocol has already issued more than 1 million TH/s mining power of LBH tokens and successfully issues LBHs for more than one year, being the largest miner in the Binance mining pool and participating in Bitcoin Mining Council.

The user story can be simply represented as follows:

Note, that besides mining BTCs NFT owners can use their holdings in Defi strategies with an option to receive mined yield as Wrapped BTC rewards (this option is planned to be implemented in the future).

GOMINING token and the ecosystem for Liquid Bitcoin Hashrate

The design of GOMINING token combines a Discount token, modified version of the burn and mint equilibrium (BME) [2] [3], and a ve Token (voter escrowed) governance models [4].

Token provides the following utility to its holder:

  • an option to receive discounts on electricity fees paid from LBH holders to Service Providers
  • governance rights for protocol management (only for GOMINING locked in the ve token model)
  • receiving yield as a rewards for governance (only for GOMINING locked in the ve token model)

Some details explaining the implementation of the discount model coupled with the Burn & Mint model in GoMining ecosystem:

  • LBH owners can use GOMINING tokens pay Service Providers for the electricity charges in with the discount
  • All tokens used for payments are burned, and Service Providers receive electricity payments via the token minting process, which occurs automatically after burning
  • The number of tokens minted is algorithmically linked to the number of tokens burned
  • A share of newly minted tokens is also distributed to other ecosystem participants

The following diagram illustrates the value flows within the ecosystem:

All tokens received by the protocol for electricity payments are irreversibly burnt by transferring them to a Null address. The burn and mint contract mints new GOMINING tokens rightafter burning and distributes them to four key ecosystem participants:

1. Service Providers. It compensates expenses for the service provided (electricity and other maintenance costs);

2. veGOMINING Contract. GOMINING token holders use this contract for staking tokens and participating in governance. Users’ locked tokens in the contract earn governance rewards (staking yield);

3. GOMINING Incentives (rewards for LBH token holders). This allocation targets boosting user retention and loyalty.

4. GoMining Team. This allocation is as a protocol fee earned by the GoMining team used for protocol development.

The burn and mint process is defined by the burn/mint formula:

During the early epochs, the number of minted tokens is less than the number of burnt tokens. In the later stages of protocol operation, the burn/mint ratio will be close to equilibrium. This is done to avoid providing too many incentives and rewards in the early stages and to facilitate sustainable economic flows between Service Providers and LBH owners.

Ve (voter escrowed) token model[5] (Curve’s pioneering veCRV is a kind of reference) is the governance mechanism bonding the GMT token stake duration with the number of votes and share in rewards distribution.

The model aligns the motivation of token stakers and governance participants with the long-term success of the ecosystem based on a governance reward feedback loop.

veGOMINING holders receive 20% of GOMINING minted for the ecosystem but could also receive another types of rewards voted by the GoMining community.

How GOMINING holders can use tokens in the new version of GoMining protocol?

Liquid Bitcoin Hashare holders and GOMINING holders can use tokens for the following actions:

  • pay electricity expenses to Service Providers with a discount
  • stake them to veGOMINING, govern the protocol, and receive staking yield
  • get a synergy from owning Liquid Bitcoin Hashrate NFTs and GOMINING staked in veGOMINING, using staking yield proceeds for paying electricity with discount and therefore maximize mining returns.

Roadmap

The new token model and protocol structure will be implemented in stages according to the roadmap presented below:

Conclusion

GoMining protocol announced the new v2 version and the original Liquid Bitcoin Hashrate tokens (LBH) narrative. LBH tokens should become a new type of yield-bearing asset in Defi, representing participation in the Bitcoin PoW consensus and widely used in Defi. The new model of the GOMINING token aimed at the development of the LBH ecosystem was introduced.

Stay tuned for updates

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