Nervos Nation — Episode 3
The following is the transcript from episode 3 of Nervos Nation. In this episode we discussed the Nervos Network and mining CKbyte with Dylan Carter. Listen to the full episode here.
Dylan Carter is a miner from the UK. He go into mining only 6 months ago. Dylan was initially attracted to the project because of the profitably of mining CKB. As he learned more, however, Dylan began to believe in the long term vision of Nervos.
“You’re not going to make any money in the long run from (mining), unless, you got a vested interest within a blockchain.” — Dylan
Dylan’s actions speak louder than words since he holds on to most of the tokens that he mines.
Another factor that prompted Dylan to take the project more seriously, was the discovery of a ‘beast address.’ This beast address is not the Nervos Foundation or any of the large mining pools. This makes Dylan more excited about his choice to mine CKB because big players are banking on the token.
“At the point where you’re making marginal profits, when you see a beast address someone mined somewhere in the region of 60 million CKB, over time…” — Dylan
Dylan likens the project to “early days Bitcoin” and is hopeful for the future of the Nervos Network. If you want to get in touch with Dylan, you can find him on twitter @dreamracer_pro.
Other topics discuses in this episode:
Proof of Work vs Proof of Stake
Johnathan (00:01):
Hi, you’re listening to Nervous Nation, the best way to keep up to date on everything that’s happening in Nervous. You’re listening to Jonathan Caras and Gabriel Haines. Today we are interviewing Dylan Carter. So Dylan, tell us a little bit about yourself.
Dylan (00:21):
Yeah. So Dylan Carter, I got into mining only this year, actually, in March. I looked at some profitability stats initially, and sort of took the plunge. So I’m quite new to mine essentially, but I have managed to pick up quite a substantial amount of knowledge in that time.
Johnathan (00:43):
That’s great. Where are you calling from?
Dylan (00:46):
I’m in the UK, in Wales. I don’t know if you need to know a little bit of my background, maybe?
Johnathan (00:55):
Ya, little bit about your history in a cryptocurrency and what you do professionally.
Dylan (01:00):
Well, see, crypto is new to me really relatively, so i have only been into it for about six months. So I’m actually quite a new comer insofar as cryptocurrency. I am sort of quite mathematical by nature. So that’s kind of attracted me in that respect, but my background is engineering and manufacturing. So I spent years in the manufacturing industries really playing my trade. But yeah, it’s quite a new venture really, for me, crypto. I have quite a slow, slow start in that respect, I think Matt (Quinn) couldn’t believe that there were people like me still around.
Johnathan (01:45):
We’ve got on the call here, Gabriel, as I mentioned before. Gabriel is also new to the Nervous project.
Do you want to introduce yourself to our listeners?
Gabriel (01:56):
Yeah, sure. I’m Gabriel, I just started creating content for the Nervous Nation, the Nervous Ecosystem.
And so I’m really looking just to start learning what the advantages of CKB are and Nervous are in general. It’s kinda of my job to break down the jargon. So it’s non-dev friendly as well.
Johnathan (02:22):
That’s great. So Dylan, talk to us a little bit about what got your interest in becoming a miner. Like you said, we actually had Matt on our first, our kickoff episode about two weeks ago. Just how he would be surprised that someone in 2020 would just be entering into the, the mining scene, I’m a little surprised as well. So walk us through how you entered into this rabbit hole and what advice you might have for somebody else that’s interested in learning more about it.
Dylan (02:56):
Yeah. Well, I think if you’re going into mining this sort of time, generally you could probably avoid it and do yourself quite well. I think I was enticed initially by the sort of initial profitability element. You know, it is quite good at the early point of a new project. Once that hash rate comes up and the difficulty comes up, the profits are reduced quite a bit. But you know, the interesting thing was I sort of reached a point where it was kind of, well, what do you do at this stage? And obviously I learned a lot more about
the project and I’ve seen the potential of the project. And in reality, that all I do now is mine to hold, to a large degree, um, releasing equity where required really for running an operational cost.
Dylan (03:54):
But, you know, from a general perspective, You kind of got to leave it to people who are already doing that kind of thing, really with regards to the mining. That’s not to say there’s no sustainable in the long term. Looking at the Eaglesong algorithm that nervous CKB utilizes it’s quite groundbreaking insofar as it is taking another novel approach with regards to how it is done. And of course, you know, as Matt mentioned, they’ve gone for proof of work, which is quite controversial, but at the same time, why would you change something that is essentially been secure and working well for 10 years?
Johnathan (04:43):
Some of our listeners might not be familiar with some what the difference between the different ways to secure crypto networks. Now you mentioned before that Nervos uses proof of work. So can you talk a little bit about what are some of the advantages or disadvantages of that system and what are some of the other systems that you might be familiar with that are live in blockchain ecosystem today?
Dylan (05:13):
Yeah, sure. I mean, proof of work is a very proven mechanism for providing security within blockchain system. Ultimately it is a hashing function to validate the next block, essentially by a guessing mechanisms, that is a way of sort of simplifying that. If you could compute it, it would actually be a bit
easier than, than throwing hashing or random values at it. That mechanism actually allows you quite a high degree of security from the basis. Well, what am I saying? From the basis that is an irreversible ledger reference with regards to how the transactions are actually locked within a block. So,
I mean, it’s quite a tricky thing, isn’t it mining in reality and, to actually understand it. Miners, such as myself, don’t actually understand the nth degree of what’s going on within the process a lot of the time.
Gabriel (06:28):
Can you talk generally just what the differences between proof of work as far as what the computer is doing or what is actually going on behind the scenes?
Dylan (06:47):
I believe proof of work is essentially — there is a unique solution that is arrived for the next block that communicated across the network and then give for validation and verification via a function, back to the network and confirmed as being a correct solution. Whereas I think proof of {stake} is ultimately
everybody, every miner or every sort of every sort of stakeholder within the scenario actually does a little bit of work towards the end goal solution rather than provide any unique solution and attain a block reward. That’s computationally substantially lighter.
Johnathan (07:42):
I think you are referring to proof of stake there. The most popular implementation of that is Tendermint which is popularized by things like the cosmos SDK. Ethereum is going through a transition now where it
hopes to within the next few years to switch over from proof of work over to proof of stake. Did you ever get involved with any proof of stake blockchains and participate in, getting any rewards through staking?
Dylan (08:18):
Not myself. No.
Johnathan (08:21):
So what really attracted you to becoming a miner and what attracted you specifically to Nervos?
Dylan (08:29):
Well, ultimately, it was the reward element of it. You get a passive income from setting up a set of miners. The money element really attracts most miners, but of course there has to be more to it than that. Otherwise, you’re not going to make any money in the long run from it, unless, you got a vested interest within a blockchain. Gone are the days of Bitcoin block rewards were where there was fantastic block rewards that will be given to hold for term. But I think this is quite exciting in that respect because of the way that Nervos design ultimately creates that rather fills that gap in the market between proof of stake and, and ultimately provide in an L1 engineering solution for the things that will be built on it. It feels a little bit like early days, Bitcoin today.
Johnathan (09:52):
Very interesting. Gabriel, you had a question?
Gabriel (09:56):
Yeah. What I would just ask, generally, what is the profitability you can expect from mining CKB? Is it based mostly on what you’re making today or is it kind of a projection into the future?
Dylan (10:10):
My profitably currently, it depends on how I run my miners because I’ve got full tunability. Iv’e managed to, via a very good resource of mine, he provided an unlocking mechanism to be able to unlock the frequency and the voltage. This means that you can actually modify based on how much throughput you
need, how much volume you need, the rate of hashing. So, that’s relative to your reward ultimately, and I can actually reach a unity a gigajewel per gigahash at the moment, which is quite strong compared to the stock value. So I think, the reality is you’re not going to make an absolute fortune. You’re going to make small margins at the current price. You know, that’s short term really. I think it seems to have a longer and more sustainable life to the actual mining function than most sort algorithms that I’ve come across, the mining seems to be and will be profitable for a couple of years. I would have thought at the current rates.
Johnathan (11:35):
You mentioned that gone are the days where Bitcoin mining is a profitable let’s say from the perspective of a hobbyist or, just a regular Joe. What — is there anything special about Nervos CKB that makes you confident that in the long term it’s going to maintain profitability?
Dylan (11:59):
Yeah, I mean, if you look at the unit value versus what that will or could potentially represent in the future versus how — I mean, Nervos is quite clever in the way that the security of whatever will sit upon it is reinforced and increase it’s intrinsic value as the underlying asset. Therefore there is this cyclic scenario there, as that asset as that increases, you’re more incentivized to keep the security within the blockchain. And it’s kind of like a cyclic feedback in that respect, but certainly, I’m not selling an awful lot
at the moment because you can’t really, because it tends to be, there’s an Eastern market that has quite a subsidized electricity rate that has kind of superficially held the value down. So it’s become quite difficult, if you’ve not got subsidized electricity to be able to make ends meet with regards to profitability. But you know, in the UK that we’ve got a Smet, two systems coming out, smart metering. I don’t know if you’ve ever come across that?
Johnathan (13:20):
No, I’m not familiar. How does that work?
Dylan (13:22):
Well it’s quite clever, really because the meter — basically there’s a peak in the day between four and seven, o’clock where the electricity is actually a higher value commodity because of supply and demand. Then of course, two and three in the morning, they’re almost giving it away. So you can actually tune or time your systems so that you’re doing your bulk of your work away from peak rate, which changes the profitability substantially. At some point with certain contracts, you can actually get paid for every bit of load that you put on the grid between the hours of two and three in the morning, because there’s an excess in supply. So, essentially you could be paid to mine Nervos CKB at that point. If that happens frequently enough, you’re going to have to increase your supply capacity to take advantage of that.
Johnathan (14:22):
Wow, that’s amazing. One of the things that attracted me to Nervos is that there is a fear in the Bitcoin community that because every four years the block rewards, which are the subsidy of the network that
are rewarded to miners, because the block rewards every four years drops in half, we saw recently, the amount dropped from, I believe it was five per block to, or no from 12 and a half per block -
Dylan (14:56):
Yeah, 6.25
Johnathan (15:01):
What happens there is eventually it will go to zero. It might take a hundred years or a hundred and twenty years, but it will significantly drop down. And then that can create, assuming that transaction volume rather the fees per transaction could present a security issue that, that creates a skewed game
theory before the network, which diminishes security. I’m sure you’re familiar with this concept. What I like about Nervos is that the secondary issuance, which will kick in, I forget in how many years, but at some point will essentially keep the miners honest because there will always be a block reward for them to subsidize the network. And that will also act as a tax for anyone who is renting space on the network. I think that this is a very clever way to keep a relative fixed supply of tokens in the market, but at the
same time solve the block subsidy issue, which is something that hasn’t been solved in many networks, such as Bitcoin.
Gabriel (16:23):
Yeah. Can you explain about the secondary issuance? What does that actually mean? So at a certain point they just release another — they reset the rewards?
Johnathan (16:35):
So Dylan, I’m happy to have you answer that if you’re, if you’re comfortable speaking about it.
Dylan (16:42):
I only know of the secondary issuance as the miner reward, if I’ve understood that correctly, there is an element going to half within four years, but because of the fixed supply value, there has to be a certain amount of issuance within the epoch. Which leads to the fact of, if you haven’t mined enough blocks, to
be able to really see issuance within that epoch, the algorithm and system adjusts, so that you get paid more towards the backend of the epoch, regardless of the number of blocks that have actually been mined. So you could be facing, you know, how a high difficulty scenario and the block reward could go from sort of a thousand CKB up to, I’ve seen five thousand CKB towards the back end of an epoch, which means that you’ve match that secondary, I believe the secondary issuance element, so that you’ve got a
constant supply over, over the duration, which is your inflationary aspect. That’s how I’ve understood it.
Johnathan (18:07):
From what I’ve read, and please correct me if I’m wrong here, cause I’m sure you’ve gone over this as well that the Nervos has within it, the Nervos DAO, and this now allows for token holders to put- to shield themselves from the secondary inflation of the network. So meaning there’s a, there’s a cap to
the amount of tokens which will ever be minted in the initial issuance and that’s still happening and will happen over the course of a number of years. I’ll have to check to see how many years that is exactly. And then after that, there will be, there will be more tokens which are minted, but you can protect
yourself from that inflation by putting your tokens into the DAO, which is almost like a form of staking.
Johnathan (18:59):
So what this means is let’s say for example, that you own 1% of the network, fully diluted by the first issuance. Now, after the secondary issuance kicks in, you can actually maintain your one percent holdings by placing your current one percent into the Nervos DAO. And then when new tokens are minted, you will receive your pro rata right. Meaning for every one CKB that is issued to the miners, you will be issued your relative to your holdings. So that at the end of the day, when you calculate, what percentage of CKB that you own, you will not have been diluted by the amount of CKB that was issued
to keep the miners honest.
Johnathan (19:50):
- and the people who are renting state from the blockchain itself. And this is a clever way to solve a tragedy of the commons, like what we see on a network like Ethereum, where everybody wants the data availability, and everybody wants to be able to access a full node, but nobody’s actually incentivized to
keep nodes or keep the blockchain to a reasonable size.
Johnathan (20:21):
So here (on Nervos), anyone who is renting space by staking, by embedding CK bytes into the blockchain, which is what you have to do in order to pay for state. They are faced with inflation because your subsequent holdings will represent a smaller and smaller amount of network. So it’s a clever way to
move tokens away from the people that are renting space on CKB on, on the nervous blockchain from people that are from the, the miners who want to be rewarded for protecting the network. And then the longterm holders who want to have to have resistance against this subsequent inflation. If I said that
clear enough or it feel free -
Dylan (21:16):
Yep.
Johnathan (21:18):
So can you tell us a little bit about your hardware setup?
Dylan (21:24):
Yeah, so I’ve got four ant miners k-5’s with the chipless modification on it, which means that I’ve got full range control on my voltage and my frequency. I’ve found a couple of sweet spots around those values which have been trialed at great lengths. I see where I need to work in so far as the hash rate in order to maximize my gaines really on that, because that’s what you’re looking to do is as a miner. You are, the generator of the secondary issuance as a miner in that respect.
Johnathan (22:06):
Are you part of a pool of some sort?
Dylan (22:12):
So yeah, I mine on two miner solo, I like to run on solo because if you’ve got enough hash rate, it’s nice to get that reward cleanly for the block.
Dylan (22:26):
I do kind of enjoy the various element of that to a large degree. Cause mining a block is actually luck based as opposed to prescript. So yeah, I do mine on two miners, which is quite a good pool, thats a European pool. I know obviously most of the volume mining is actually done on F2 to pool. And there’s this — I don’t know if you’ve seen that address, Jonathan, I call it a “beast”. There’s a “beast address”. I can’t identify basically within the network that isn’t the pool. I don’t know who it is. Nobody seems to know who that is -
Gabriel (23:09):
The Beast address! I want to know!
Dylan (23:13):
I need to know. That address actually struck — it changed the way I was thinking about the project at some point, because at the point where you’re making marginal profits, when you see a beast address someone mined somewhere in the region of 60 million CKB, over time, in sort of like 300… I don’t know, thousands of blocks basically. And it is, I think 40 odd percent of the total hash rate of the network and it’s not identified as a, it F2 pool, is not identified as any of the major pools, but, seems to be a, I don’t know if it’s a private tier. I’ve asked if it’s the Nervos foundation, it’s not Nervos foundation. It could be Ant Miner, the basis that they, they haven’t, shifted all of, all of their miners maybe, or some, you know, somebody that hasn’t moved the miners into the system, but it’s difficult to know.
Johnathan (24:20):
I’m curious. There are some proof of work systems, which are designed to be ASIC resistant to stop people from having these application specific- pieces of hardware that work for miners rather they use off the shelf components. I’m curious to hear your thoughts of the pros and cons of the different approaches.
Dylan (24:44):
Yeah. So, I mean, I’ve never been a GPU or graphical CPU miner myself. I know the VoskCoin YouTube channel. He’s well into his graphic graphic mining, but I bought these ultimately as an investment really, in order to elicit returns. And I think, there are two short of real schools of thought with regards to that, and I think sometimes the graphic graphic guys are getting a little annoyed that the ASICs coming along. And I think it was certainly a game changer for Nervos when that occurred with regards to the hash rate
and difficulty back in, I think it was March wasn’t it, but ultimately it’s secured at the network substantially. Well, not that it was insecure in the first place, but I mean, it certainly does make things more difficult for GPU miners to actually enter into that market thereafter. I think our GPU mine is ideal
for start up scenarios because they’re so adaptable and you can use multiple algorithms across them.
Johnathan (26:13):
I think that it is really challenging today for a new token or a new network to launch as a proof of work system and even more challenging to launch with a robust ASIC community. And I think that it’s one of the telling signs of the level of professionalism and the reach of of influence that Nervos has, that it can so quickly after launch have such a high hash rate and have dedicated hardware that’s designed to secure the network. So it is really exciting to see people like you come into the community and contribute to the network, not just buy the tokens, but actually helps secure the network. And I hope that you’re incredibly successful with this.
Dylan (27:05):
Yeah, I think, certainly, outlook’s are long on this, because obviously it’s early doors project at this stage with sort of a lot of the exciting stuff happening layers above where we are at the engineering level really. We are down in the engine room at the moment, creating the infrastructure for something that is
going to be very special, I believe, and that’s why I’m on the project and I’m not going anywhere.
Johnathan (27:35):
Great. Gabriel, do you have any questions that you want to ask before we wrap things up?
Gabriel (27:40):
No, that was awesome. I really enjoyed the part about the smart meter. That was really interesting how that can track the electricity and that really affects your profitability as well.
Dylan (27:53):
Yep.
Johnathan (27:54):
Yeah. So thanks for taking the time we’re going to publish this, and we’ll send you the link and good luck with your mining set up. Like I said before, I hope that this is the, this is just the beginning for you. And like, you will, like we had mentioned earlier, we all see this as a very early project. I think the way that you put it, that we’re in “the engine room right now”, just watching things — a great way to put it. And if you had any, what advice would you have to any listeners out there that might want to get started in mining Nervos?
Dylan (28:33):
Yeah. I think your best bet is to actually use something like Mining reground pools or, NiceHash just to get a general feel of it, you know, and actually point that miner at a pool, rent it, don’t take any risks. As equipment is concerned you don’t actually need to. So, and then if you’re happy with what you’re doing at that stage as a sort of try before you buy element, then you could move on into, into more serious mining. But definitely do the due diligence and the, and the leg work was regards to mining rig rentals. And, I don’t know if we can plug things here, but certainly mining rig rentals, NiceHash is a fantastic way to start that process and to gain, gain a greater understanding in what mining actually represents.
Johnathan (29:27):
All right. That’s That’s some great advice. Try before you buy, get your feet wet.
Dylan (00:21):
Definitely. If it seems to work out and make an investment.
Johnathan (29:37):
All right. So I think that that’s a wrap. So again, I’m Jonathan Caras. We have my Co-host here, Gabriel Haines, and we’ve been talking to Dylan Carter. Thank you for listening to Nervos Nation.
