BTCD: from coin to dividend-paying cryptostock
Monday 08 June 2015
The line between first- and second-generation coins is blurring, thanks to new ideas and functionality aimed to boost network strength and reward users.
In a first for any cryptocurrency, BTCD has paid a ‘dividend’ to stakers for maintaining the network. The revenues were paid out from the MMBTCD fund, which aims to benefit assetholders, BTCD holders and stakers by increasing liquidity and buy support through a basket of revenue-generating assets and market-making and arbitrage bots. The fund has committed to paying 10 percent of weekly dividends to stakers to encourage people to run a node.
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What’s a ‘staker’?
In bitcoin and other proof-of-work coins, the network is maintained by miners who run mining rigs (ASICS). They may or may not own any coins, and many of the larger players sell them immediately to cover costs. As a proof-of-stake currency, BTCD’s holders maintain the network, verifying blocks in proportion to their stakeweight – a function of both the number of coins held and the time since their last staked block. This aligns interests between owners and miners, and is far more sustainable than mining. ‘Staker’ is preferred proof-of-stake equivalent of ‘miners’ (though other terms are also used).
No. Not that kind of stake.
To pay dividends, a piece of custom code was added to the BTCD protocol. This enables a list of stakers to be created for a given period of time. Another call can then be used to pay a sum of money to these stakers, with the funds being distributed in proportion to the number of blocks staked. Because BTCD has a fast block time of around one minute, a week’s worth of staking equals over 10,000 transactions. A separate Python script was used to access the calls, aggregate payments for users who had staked more than one block, and pay out to the list of stakers.
The development blurs the line between first- and second-generation cryptocurrencies, and arguably makes BTCD more like a revenue-generating asset than a straightforward crypto-coin. The MMBTCD dividend is only the first in a series of revenue streams that will be due for the coin in the coming months. As well as the built-in (inflationary) 5% stakers’ reward, BTCD will receive 5% of the revenues generated by InstantDEX, SuperNET’s near real-time distributed exchange, and 5% of SuperNET’s overall revenues. The first dividend from MMBTCD is an important proof-of-concept, and a ground-breaking change in the way that cryptocurrency is used. Future dividends will use the same technology.
Culture and business
The development will ultimately be built into the updated BTCD client so that anyone can use it to send funds to stakers quickly and easily as a reward for running a node. One of the aims of the feature is to create a culture in which developers will build applications on top of BTCD, paying stakers a proportion of revenues to strengthen the network, encouraging further innovation and investment – thereby protecting and enhancing their own investment.
It also raises new possibilities for business users, such as using a coin to pay out to holders and those running a client - essentially as a loyalty token. Such tokens would be based on their own blockchain, but could be traded externally and freely on third-party exchanges.
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