The importance of hashrate commoditization in a hyperbitcoinized economy
In a Bitcoin-based financial system, hashrate is a critical part of the infrastructure
The basics: What is a commodity?
A commodity is a basic economic good, usually a resource, that is fungible. That means that there’s no differentiation between different goods of the same type.
Unlike products, which have brands and particular characteristics that make them distinct, commodities — like mineral ores or lumber — are interchangeable.
Additionally, commodities are often used as inputs for the production of other goods. Most commodities are raw materials, basic resources, and agricultural or mining products.
As such, commodities are a critical component of the global economy. They’re required in most product or service production processes, which has led to the development of essential infrastructure to support a global market for the commercial trade and exchange of commodities.
Why we need hashrate commoditization
So what do we mean when we speak of hashrate commoditization?
Hashrate is a critical aspect for the security and performance of Bitcoin and other proof-of-work blockchains.
As these networks grow to become the financial system supporting thousands of people, stores, and industries; hashrate also becomes a fundamental piece of infrastructure of the global economy, just like commodities today.
Look at it this way: after the Second Industrial Revolution, oil and steel became essential commodities and a central part of the modern infrastructure on a global scale. They fueled and supported transportation and industries worldwide.
Hyperbitcoinization and crypto adoption worldwide will be no different, except that instead of oil and steel, the commodity powering the “financial revolution” — as we could call it — will be hashrate.
Many industries and companies need oil and steel, but don’t have the time, resources, or means to produce them themselves. Instead, they acquire them in the commodities market.
Whether it is for creating their own blocks, confirming their own transactions, or have a say in the network’s governance, we believe the same will happen with hashrate. And that’s why we want to lay the groundwork to enable massive, global hashrate trading.
Hashrate commoditization through the Lumerin Protocol
Hashrate is cumbersome to treat as a commodity for several aspects:
- It’s not physical but a data stream.
- It’s produced by privately-owned mining machines.
- There isn’t a proper infrastructure or protocol to support hashrate ownership transfers.
Now, despite there being many great tokenized hashrate projects, none of them actually aim for hashrate commoditization.
In other words, you’re not buying or owning the hashrate. Instead, you’re buying a token that entitles you to a fraction of the rewards that hashrate earns from mining.
Lumerin focuses on decoupling the hashrate’s control from its creation, thus enabling miners to put their hashrate up for sale and buyers to control and redirect it. With Lumerin, you actually own the hashrate produced by someone else’s miners.
How is that possible? The Lumerin Protocol architecture combines two different aspects:
- A messaging layer to allow transmission and routing of information between nodes
- An EVM compatible component to allow the implementation of smart contracts
With this protocol, we can now route any data streams based on immutable rules written on an open, public ledger.
Smart contracts ensure decentralization, security, and users’ good behavior, while the routing layer enforces hashrate ownership and control.
If Bitcoin is to become the global financial network that supports billions of people worldwide, hashrate will become a critical part of the global infrastructure.
As such, it’s crucial that we effectively commoditize it, ensuring widespread access for everyone who needs it.
Lumerin decouples hashrate control from the machines that produce it — and the individuals who own those machines. That decoupling is the groundwork for building a fair, decentralized hashrate marketplace, which is, in turn, necessary to achieve hashrate commoditization.
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Introduction to the Lumerin Protocol: FAQs
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