An Investment Guide for Blockchain Project
Prologue
The 2020 global economic battle has been more than a trade war. Uncertainty, risk, that’s all still true. People are fighting against the sweeping of pandemic, regardless of class, social status or backgrounds. The outbreak of virus not only makes our body sick, but gradually stops our daily interactions, and destroys our confidence in future income and public security. The fiscal and monetary policies employed seems less effective this time than in 2008, and interest rate cuts could aggravate price inflation instead of stimulating growth. That, in turn, would probably reduce consumer spending, and triggers the potential depression. Therefore, to protect ourselves from being drowned during the economic decline, we should better equip ourselves with practical investment survival guidance.
“Skepticism is more necessary and valuable than any blind belief anybody has about anything”
-Carolyn Kim
As a passive receiver of massive information on daily basis, we can hardly find out the truth from fragmented and biased pieces of words and data, but we can still try to build our own perceptions from the implemented policies and analysis based on different political angles and social factors.
Therefore, as a blockchain industry practitioner, I would like to present you with a series of practical guide to hope you judge the inherent investment value of a decentralized project from perspectives such as infrastructure, social structure, economic model, products and applications, with Hyperion MapChain as an example. It might help you to choose which project is worthy investing in. After all, the decision is yours.
Chapter I
Intro to consensus mechanism
A solid foundation and concrete core are key to construct a skyscraper that can withstand the incredible force such as an earthquake. Consensus mechanism is the underlying basis for a decentralized project. It abandons the third-party trust and relies on independent individuals and institutions to build and run the ecosystem, a code that must be complied by every player. The door for a decentralized ecosystem is open for everyone to step in, and whether the system will work out totally depends on if network participants can reach a common agreement on the game rule. The mechanism clearly tells who will be the main contributor, how to divide the tasks, and what are the rewards. Instead of managing the labour resources by HR department, consensus mechanism will implement it automatically by computers. In other words, the consensus mechanism will coordinate the collaboration among players to ensure the network stability and security, and find out key contributors to encourage them to stay within the ecosystem.
We have seen various new forms of consensus algorithms evolved from PoW and PoS to DPoS, PBFT, RAFT, etc. Developers adopts one or a combination of consensus algorithms according to the project aim. Let’s take a look at the example.
What is project vision
Hyperion MapChain is a blockchain project that provides one-stop blockchain services based on decentralized location data (Location Blockchain Service). To simply put, it’s a Google Map without “Alphabet”. Both individual and business users can request map services directly from the decentralized network, while they can participate to contribute to the network and get token rewards.
The value of traditional Internet originates from the protocol layer, but was later deprived by the players at application layer — such as the business institutions such as FAANG. By contrast, the value of blockchain seems to remain at the infrastructure layer, where contains decentralized protocol and data, which is open for all to use and maintain. Bitcoin and Ethereum are both protocols, which set rules of how to manage node interactions, block producing, transaction verification, etc. Bitcoin’s market cap, for example, is currently at around 140 billion USD while the largest Bitcoin-based companies are valued at around one billion USD.
A well-designed consensus mechanism is vital for a crypto project to fabricate a comprehensive community structure and economic model that meets with the project vision.
For a blockchain service ecosystem built based on location data, Hyperion need to attract participants to provide the location data service in the first hand, and encourage contributors to stake HYN (Hyperion token) within the network to generate value for location data services and keep the system running. When transactions of location services occur on-chain, miners will be able to verify and record the transactions on the distributed ledger. Therefore, Hyperion team adopts PoW and PoS consensus algorithms on different layers of the ecosystem and generated a new consensus mechanism of Proof of Hybrid (PoH).
In accordance with the project vision of One Map, PoH consensus mechanism aims to secure the network services with proof of workload off-chain, and maximize network efficiency with proof of stakes on-chain.
Hyperion community members can be divided into roles below: investors, also known as token holders; map users (individuals or businesses), also known as service providers and requesters; and developers, who use decentralized map data and APIs to develop Apps on the application level. You may regard the roles as the essential components of a business — capital/commodity/consumers, just without agencies.
Hyperion’s Titan App lies at the application layer, which is the entrance to location services, where users can stake tokens and obtain blockchain services. Map3 is the service layer that posits below the application layer, a powerful decentralized location database and service network, which acts as a bridge to connect traditional Internet map users with blockchain services. Atlas chain is the protocol layer of the MapChain, which underpins the mining of consensus nodes.
Whether you are a small investor or a high net-worth individual with big stakes, the mechanism enables you to obtain continuous benefits for your contribution.
As we mentioned before, the system needs to find out who are the major contributors, and who will work as their supporters. The selection process starts from the pool of token holders in application layer. Service nodes are chosen from the token holders based on the amount of collaterals they stake in the Map3 network; then high-quality of service nodes (with higher work proof) will be selected to re-stake HYN tokens to consensus nodes for a higher reward; finally, nodes with better token credit/more staking assets will become consensus nodes to serve on-chain.
This is the whole logic behind the PoH consensus mechanism. You might have figured out that, the community structure is like a career ladder, for a new comer to get into a higher level step by step. However, what if I am not interested in higher position, but only in money itself. Next, we’ll analyze how small investors can earn more money by supporting the big players?
Although PoW algorithm best reflects the original idea of the Bitcoin designed by Satoshi Nakamoto, the fact is that a “majority” of participants still tend to follow the a centralized system to earn more profits, who join large public mining pools or trust large miners and exchanges by contributing hashrate and stakes to these “decentralized monopolies.” However, Hyperion team believes that, with a mechanism that can coordinate individual investors and institutional investors to support each other, both can benefit while maintaining the system decentralized.
We’ll look at the logic behind together. Let’s take Facebook as an example. Firstly, Facebook has a large pool of service users who chat on Facebook page, share personal updates and locations. Secondly, if Facebook deploys a service node in Map3 network, small investors are allowed to commit any amount of staking to support Facebook to become a consensus node. Here, small investors are just delegating the rights and not the ownership of their tokens (HYN). Crowdfunding opens the opportunities for collaboration efforts between token holders, service providers and consensus nodes, which builds bridges between each role within the ecosystem to get higher rewards through each layer. In this case, user participation will also prevent Facebook becoming the “centre” of the network. If fraudulent behavior found, PoH will punish the node both by the energy and staking it invests into the network.
But problems may occur when it comes to the outlier situation. For instance, a fraudulent staking token holder may frequently switch between various staking targets (individuals or projects) to attack the network, or buy-in large amount of tokens to make the price to continue going up, then suddenly throw out the currency to plummet the price , while being able to escape from PoS penalties. Hence, PoS in protocol layer values both the amount and time-length of a staking token holder during the process of on-chain staking, as to prevent misbehaviors by limiting the liquidity of staking, and triggers penalties before a malevolent account balance change.
The team also proposed to have a small committee size (88) for efficient block producing. The validator membership is fluid. Before the beginning of the next block producing epoch (1 day), candidates can challenge the existing committee members with a smart contract.
In general, a consensus mechanism aims to breed the growth of a decentralized ecosystem with a comprehensive rule to integrate the collaboration within map community. PoH mechanism is designed to best fit the goal of Hyperion’s vision, which aims to provide the high-level of quality blockchain service based on location data. The hybrid consensus integrates the advantages of PoW * PoS on different layers of the network to secure the off-chain services and on-chain transactions. A well-structured community underpinned by consensus mechanism will reward all participants and encourage sustainable efforts to contribute to the ecosystem.
In the next chapter, I will introduce you the importance of application layer to help you understand how decentralized map products will shape the future of a blockchain project.
