What problem is Lumerin solving?
The first decentralized hashrate rerouting network
Proof-of-work and mining are critical in maintaining the security and performance of Bitcoin and many other blockchain networks. However, as the mining landscape evolves, we are finding new challenges along the way.
Crypto mining needs scaling
Since ASIC machines came out in 2012, we’ve been seeing new, more specialized mining hardware come out every year. This raised a concern: the more powerful hardware we have, the more we drift away from mining decentralization.
The security and decentralization of proof-of-work blockchain networks rely on having many different miners providing hashrate.
Advanced, specialized mining equipment is considerably expensive to acquire. As mining technology improves, it requires a larger budget to stay competitive as a miner.
Those who can’t afford to buy these machines and scale up their hashrate have to join mining pools for consistent payouts. Otherwise, they are left out of the mining process, reducing the total number of miners. That is a direct hit to decentralization.
The hashrate concentration issue has been a matter of concern over the years. Some networks — especially smaller, more vulnerable ones — even implemented ASIC-resistant algorithms to fight ASIC dominance.
In Bitcoin’s case, only a few large mining entities control the majority of the hashrate, and they point it to a reduced group of mining pools.
Understanding hashrate concentration
Cryptocurrency mining is a location-agnostic and profit-driven activity, which means that miners will transfer wherever their operation can gain better profits. That said, there are three major factors that make any place attractive to crypto miners:
- Cheap electricity.
- Favorable government regulations.
- Stable infrastructure.
Any location where these three factors coincide, miners will race to set up camp and mount their mining operations there.
A question then arises: How can we decentralize a network if we can’t keep the control devices that secure it distributed?
Lumerin Protocol: Decoupling hashrate creation from control
As we said, miners will always seek to locate where their operations are most profitable. We can’t physically decentralize hashrate. But what if we focused on decentralizing its control?
If there was a way to distribute the control of hashrate, regardless of where the physical hardware that produces it resides or who owns it, we could significantly reduce the risk of centralization.
To do that, we need a decentralized protocol that enables people to exchange, reroute, and redirect hashrate effectively. A protocol where users can transfer hashrate ownership and control like any other commodity. That is what the Lumerin Protocol can provide.
Lumerin’s simple architecture pairs a messaging layer that allows transmission and routing of information between nodes with an EVM smart contract engine. As a result, we can now route any data streams based on immutable rules written on an open, public ledger.
Decentralization is ensured by smart contracts, while the routing layer enforces hashrate ownership and control.
“Lumerin is tackling one of the biggest problems facing the Bitcoin ecosystem today, the problem of ever centralizing block creation. We are focused on building innovative products and protocols to bring greater decentralization to Bitcoin and eventually all proof-of-work networks.”
— Ryan Condron, CEO of Titan
What makes Lumerin unique?
What’s the difference between Lumerin and other projects? We know there are many great hashrate-tokenization projects out there, but they tend to be centralized: there’s always a third party you have to trust.
Another common aspect of other projects is that they do not grant control of the hashrate you purchase. They only entitle you to a piece of the reward that hashrate earns.
What makes Lumerin unique is that it enables the user complete control and ownership over the hashrate they acquire without any third parties.
They can point it to whatever mining pool they choose and mine whichever coin they prefer rather than just getting paid for holding the token.
Additional benefits of tokenized hashrate
Security and decentralization are the primary goals and motivations behind the Lumerin Protocol. However, users can take advantage of the commoditization of hashrate the network will provide.
As Bitcoin — and cryptocurrency in general — grows popular, the demand for hashrate surges. Mining entities are looking to increase their computing power output, but the current component shortage and supply chain delays add friction to the market.
The hashrate marketplace that the Lumerin Protocol will host will clear that friction, providing users with a smooth hashpower trading experience.
Additionally, the “little guy” can also benefit from the Lumerin Protocol: with a decentralized and fair commoditization of hashrate, several opportunities emerge to take advantage of different financialization options.
Miners with a low-risk tolerance can hedge against it by selling their hashrate in advance at a fixed price, for example. On the other hand, users can access a whole new market of hashrate by-products, like hashpower-based futures contracts or hashpower-collateralized loans.
However, it doesn’t end here. Lumerin will be a fully-decentralized, open-source, programmable protocol. We want to encourage the community to build on top of the network and develop new ways to harness the full potential of hashpower.
All in all, DeFi for hashrate is now much closer to becoming a reality. The possibilities are endless and only limited by the community’s creativity.
Do you want to learn more?
Lumerin is still in early stages. Make sure to follow us on Medium so you don’t miss any news and content. You can also subscribe to our blog and visit Lumerin.io for more information. We’ll be glad to have you!
