The Comprehensive Guide to Gem Mining
On October 14th, 2020 Cargo — an all-in-one platform to create, manage, and sell NFTs — released Cargo Gems, the platform’s utility and governance token which enables a unique staking model turning ERC-721 NFTs into yield-bearing vaults. That last sentence contained a lot of words which — if you haven’t devoted yourself to the crypto space — probably confuse the hell out of you. This article is meant to explain to you, in a way that makes sense, what we are doing.
What is an ERC-721 NFT?
Let’s start with CryptoPunks, one of the first NFT projects and one that inspired the official Ethereum ERC-721 NFT standard. The CryptoPunks website gives you an idea of what an NFT is — “10,000 unique collectible characters with proof of ownership stored on the Ethereum blockchain.”. Each Punk is a unique digital collectible. Think Pokemon cards, Magic cards, or even Beanie Babies — except in the digital world. Each NFT is a unique digital asset on the blockchain in which ownership is tracked. Ownership of an NFT is tied to your Ethereum wallet and only you — as the owner of that wallet — has access to that digital asset.
Platform Interoperability
Along with CryptoPunks, another well known NFT project helped launch the popularity of NFTs — this project was CryptoKitties. The definition of their platform from the CK site: “CryptoKitties is a game centered around breedable, collectible, and oh-so-adorable creatures we call CryptoKitties! Each cat is one-of-a-kind and 100% owned by you; it cannot be replicated, taken away, or destroyed.” Going back to securing ownership via the blockchain — each cat you own is associated with your Ethereum wallet and only you have access to it.
So now we have two different products utilizing similar concepts and the same underlying technology. The underlying technology being the Ethereum blockchain — which provides a way to have interoperability between platforms. In software engineering we have the acronym DRY — “Do not Repeat Yourself”. In the case of CryptoPunks and CryptoKitties they had violated the DRY principle. By no means did they do this purposefully — they were pioneering a new technology and at the time there was no shared standard that creators building NFT projects could implement. But we were in a place where we already had a process set up to create a new Ethereum standard that could be shared between NFT projects and this is the process of creating an Ethereum Improvement Proposal, or EIP for short.
Welcome ERC-721
On January 23, 2018 a proposal was added to the Ethereum EIP GitHub repository — an ERC, or “Ethereum Request for Comment”. This proposal which was being discussed in the repo’s issue tracker, under the identifier of #721, was proposing a standard which would provide an interface to be used within smart contracts to track “deed ownership”. Deeds — also described as “non-fungible” tokens — “can represent ownership of physical property, like houses, or digital property, like unique pictures of kittens. In general, all houses are distinct and no two kittens are alike. Therefore you must track each deed separately; it is insufficient to simply count the deeds you own”. The term deed has died out since this initial commit, but the standard has continued strong and NFT has become the standard naming convention for these types of assets which is short for “non-fungible” token — a token that is distinct and can be owned and tracked individually.
With the ERC-721 standard finalized and becoming EIP-721, completely different platforms, built by completely different teams had a standard interface to support NFTs. This means that an NFT created on my platform could be displayed and sold on your platform. Game items created for one game could be used in a whole different way in a totally different game, but still be the same digital asset owned by the same person. Digital artists could create NFTs from their art — forever inscribing the provenance of said art to the blockchain. NFTs could be used as event tickets and access keys. NFTs have even been associated with real world assets — like the recent work of art which sold for $131,000 at a Christie’s auction.
What is Cargo?
Cargo is a platform that allows creators to create, manage, sell, and buy NFTs. It culminated from work that began in 2017 when I started building a marketplace for 3D models. Each 3D model would be fully interactive on the site and would be an NFT which people could buy and sell. At the time NFTs were still quite obscure. I had built a prototype of this platform, but my partner had dropped out and I didn’t have the time to continue on with the project. A couple months later I had begun work on my own NFT project — Dolli — which would be a digital collectible app in which users could collect grungy characters from the Pizzaverse — a comic book which is my brainchild that features a talking pizza that goes by the name of Pizza Rob and his breadstick sidekick Bobby Fabiano.
My idea was to abstract all the blockchain stuff away so users could buy and sell with a credit card. At the time if your project even mentioned the word blockchain, payment processing companies wouldn’t go near you. Even high-risk payment processors were hesitant to process payments for a blockchain project. So, I ran into a road block — which I viewed as the problem blockchain technology set out to solve — centralization of power. I had an epiphany. I needed to rebuild Dolli using decentralized technology and I needed to accept payments in Ether — the cryptocurrency denomination used on the Ethereum blockchain. At the time the price of Ether had seen a meteoric rise from its initial price and was sitting around $80.
I had taken what I had learned from my previous projects and began to build an all-in-one platform which would enable creators to create and sell NFTs. If I wanted to do it then there had to be others like me.
The latest iteration of Cargo launched in early August of this year and has seen substantial growth. We have almost 3,000 users and the marketplace has seen individual sales in the thousands of dollars. We have a robust JavaScript library which allows platforms to integrate the Cargo NFT infrastructure within their own web app. We also just launched Cargo Gems which is Cargo’s native token on Ethereum.
What are Gems?
We have already discussed ERC-721, but there was a prior standard known as ERC-20 which allows for the implementation of a standard interface for tokens within smart contracts. ERC-20 provides a standard method for anyone to create a coin on Ethereum. Bob could create 1 Million BobCoins and Sally could create 1 Million SallyCoins. They could then start trading them. ERC-721 represents unique digital assets while ERC-20 represents tokens that could be used to purchase those digital assets.
Cargo Gems are an ERC-20 token that:
- Act as a governance token on the platform — which will enable Gem holders to vote on different proposals and curate the Cargo NFT marketplace.
- Will act as a payment method in the Cargo marketplace.
- Gem holders will receive discounts on the costs to deploy smart contracts and create NFTs on Cargo.
- Gems will be used to provide grants to exciting new projects in the NFT space.
- And Gems have spearheaded a brand new staking model known as Gem Mining.
What is Gem Mining?
Hopefully now you have an idea of what an ERC-721 NFT is and you have an idea of what Gems are. Gem Mining is a unique process by which you can lock Gems within an NFT to earn rewards in the form of more Gems as well as Cargo’s other token, Cargo credits, which are used to create NFTs on the Cargo platform. Once you lock Gems within the NFT that NFT becomes a yield-bearing vault. Think of a magic piggy bank that you put gold into and the next day you’d go back and there was a little more gold, along with some emeralds. Well the piggy bank is the NFT, Cargo Gems are the gold, and Cargo Credits are the emeralds.
When Gem Mining, you are guaranteed to earn rewards. Rewards are distributed per block mined on Ethereum and there’s about 6500 blocks mined per day. Using that as our starting point let’s look at some numbers. As of this writing there are 932,295.5945 Gems locked in NFTs. The average number of Gems locked within a single NFT is 1,339.5051. Given that, the average reward is 0.0014 Gems per block plus that same amount in Cargo credits. That means the average reward per day is 9.339 Gems and the average reward per year would be 3,408.7644 Gems. This brings us to a current APY of 254%.
How is Ownership Tracked?
Gem Mining utilizes the secure ownership tracking methods of NFTs to determine who can access the locked Gems and rewards. By locking Gems within an NFT you are, in essence, associating those Gems with that NFT. We can then check the owner of the NFT on the blockchain to determine who can withdraw the locked Gems. In traditional staking models, an Ethereum wallet address will lock an amount of tokens within a specified smart contract in exchange for earning yield on the amount they have locked. In our case we lock Gems to an NFT that can be freely transferred between wallets with the Gems inside. Whoever owns the NFT will have access to the Gems associated with that NFT and any available rewards.
How Do I Start Gem Mining?
You can start Gem Mining on Cargo’s Gem Mining Portal at https://gems.cargo.build. You will of course need a compatible NFT and Gems.
Where Can I Find an NFT?
You can find compatible NFTs in the Cargo Marketplace. NFTs purchased or received through other means will also be compatible as long as they adhere to the latest ERC-721 specification.
Where Can I Find Gems?
Gems are currently available from the community pool on Uniswap.
