Lumerin Hashpower Marketplace
What are Lumerin hashrate contracts?
All you need to know about this new form of peer-to-peer Bitcoin mining
Before we start…
Let’s first do a brief recap of the Lumerin Protocol. When we talk about Lumerin, we’re referring to a decentralized, peer-to-peer blockchain protocol that allows for the exchange, rerouting, and redirection of data streams using smart contracts.
Bitcoin mining hashrate is a data stream. As such, through Lumerin, miners can essentially transfer the control over their hashrate to someone else. This opens the door to the first decentralized, peer-to-peer Bitcoin hashrate marketplace: the Lumerin Hashpower Marketplace. This is where hashrate contracts come in.
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Hashrate contracts explained
Hashrate contracts are agreements between hashrate sellers (miners) and buyers to exchange Bitcoin mining compute power for LMR tokens. These agreements are transparent, immutable, enforced by smart contracts, and verified by Lumerin nodes.
In layman’s terms, each hashrate contract represents an offer from a miner selling their Bitcoin mining capacity on the Lumerin Hashpower Marketplace.
These offers include a set of conditions and information, namely:
- The speed of the hashrate buyers can acquire, measured in TH/s.
- The duration of the contract, indicating for how long miners will supply that hashrate, measured in hours.
- The asking price for the hashrate, determined by the miner and settled in LMR.
- The contract address, which is a unique identifier recorded on the chain.
But what exactly are hashrate contracts? On a more technical level, they are a complex set of functions executed automatically once a user calls them from their web3 wallet — MetaMask, for example.
Let’s see how they work in detail, and how they make remote, peer-to-peer mining possible.
Important note: Currently, hashrate contracts only support SHA-256. As a result, the purchased hashrate can only be used to mine proof-of-work coins that use this algorithm.
How hashrate contracts work
Here’s the entire process from the creation of a hashrate contract to its finalization.
First, a miner sets up a local Lumerin Node — a specific software that will enable them to connect their Bitcoin mining computers to the Lumerin Protocol.
After they’ve set up a Lumerin Node, they can create a hashrate contract from their Lumerin Wallet or through the marketplace. There, they set the hashrate speed, duration of the contract, and asking price in LMR, along with an ERC20 address to receive payments.
Once they confirm the contract, the Lumerin Hashpower Marketplace displays it on the web app, where buyers can navigate through the offers and buy whichever they want.
It’s worth mentioning that users can acquire as many hashrate contracts as they want simultaneously, provided they have the necessary LMR to pay for them and ETH to cover the transaction fees.
When buyers acquire a contract, they’re asked to enter their pool account credentials. This is a crucial step in the process, as the seller’s Lumerin Node will reroute the miner’s hashrate to the destination pool provided by the buyer.
That way, the Lumerin node “talks” both to the marketplace and to the miner’s hardware, acting as a switchboard that commands each mining computer to point the hashrate to a specific pool account — in this case, the buyer’s.
This process is automated and self-executes once the buyer confirms the purchasing transaction on the hashrate contract. All transactions are recorded on the blockchain and require users to pay gas fees in ETH to confirm them.
Hashrate contract use cases for buyers and sellers
To finalize, let’s dive into the potential hashrate contracts bring to the mining ecosystem, and how it helps both parties of the agreement.
Advantages for hashrate sellers (miners)
Miners can leverage hashrate contracts as an efficient hedging instrument against the inherent risks of Bitcoin mining.
On one hand, this technology enables them to set the exact amount of LMR they’ll receive for their hashrate, which provides greater predictability to miners in the long term. For example, they can set an LMR-denominated price premium, securing their revenue instead of assuming lower profitability risks due to difficulty changes.
On the other hand, it gives them complete control over their product — hashrate. As a result, instead of pointing all machines to a single mining pool, miners can break their hashrate into different offerings with variable terms according to their preferences.
Finally, powered by smart contracts and blockchain technology, hashrate contracts grant a grade of transparency and fairness to the mining ecosystem that hasn’t been achieved before. Both hashrate and funds are verified and provable, and the smart contracts act as an escrow service that securely locks funds until the terms of the deal are fulfilled.
Advantages for hashrate buyers
Hashrate contracts eliminate the high entry barriers of Bitcoin mining — no expensive hardware, technical knowledge, nor large budgets are required.
Instead, aspiring miners can start mining Bitcoin from their web3 wallet — all they need is some LMR tokens and a pool account. In other words, hashrate contracts make it the easiest it has ever been to mine Bitcoin, especially for beginners.
Furthermore, the Lumerin Hashpower Marketplace is more transparent and decentralized than other remote mining methods like cloud mining or tokenized hashrate projects. This is mainly because purchasers can actually control their hashrate rather than purchasing a representation of hashrate in cloud mining or tokenized hashrate projects.
With no middleman and with smart contracts as the only intermediary, hashrate contracts aren’t subject to any counterparty risks.
Another key difference with other remote mining options is the control aspect. In tokenized hashrate projects, for example, users never actually “acquire” control over the hashrate: they merely receive mining rewards from that hashrate.
Some cloud mining services, on the other hand, allow you to choose the location of your machine and where to point the hashrate. However, you have to trust the company to implement your preferences.
With Lumerin hashrate contracts, everything happens through open-source software and impartial computer code. The smart contracts grant the buyer complete control as soon as they acquire the contract, being able to point the hashrate wherever they please and readjust per contract.
Hashrate contracts are a new way to mine Bitcoin born from the combination of smart contracts and Lumerin technology. The combination of smart contracts and the Lumerin Hashpower Marketplace will unlock many new opportunities for Bitcoin miners.
Whether it is allowing aspiring miners to earn their first sats or providing experienced miners with hedging possibilities, we think that the Lumerin Hashpower Marketplace brings innovative tools much needed by the mining community.
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