— Hasan Karahan, MSc ETH Zurich.
The Problem: Abject Inequality ¶
Most of the current block-chains today fail to deliver on their core promise: decentralization. Without proper decentralization the main goal, the entire ethos of a globally censorship resistant and anonymous liquidity market becomes just an illusion.
But why? It boils down to stake concentration: Due to a lack of a safe and anonymous technological base for a one-man and one-vote on-chain democracy, even modern chains have to rely on proxy identities underwritten by proof-of-work or proof-of-stake.
While proof-of-work has the advantage of allowing anyone with access to energy to bootstrap a proxy identity, which can then be used to vote on the validity of transactions, it suffers from a potential centralization of access to superior hashing technology and cheap energy.
With proof-of-stake the issue is much more pronounced, where you – by design – start from a centralized setting, and then try with marketing to distribute your tokens to hopefully enough stakeholders to have a viable network!
Few rich folks end up moving-in onto your block-chain and either become an oligopoly of stakeholders, which then together could censor any “undesirable” transaction or worse, could simply decide to collectively dump their entire (possibly pre-minted) stake to destroy the security of the block-chain at any moment of their choice – due to greed, intrigue or external political pressure.
The Solution: On-chain Democracy ¶
Hence, the goal becomes to design stake re-distribution into the heart of the token-economics, that empowers the block-chain, to approach the ideal case of a one-man and one-vote on-chain democracy. Any other model seems to degenerate into tyranny, where the many are at the mercy of the few.
XPower: Proof-of-Work on Proof-of-Stake ¶
Our XPower project delivers the best approximation possible to on-chain democracy: (1) We use proof-of-work to distribute tokens, (2) which can then be burned to mint stake-able NFTs of various levels. (3) If you burn more tokens, then you can mint higher level NFTs with higher reward rates, (4) but which get reduced if a particular level gets too “crowded” – i.e. if the total rewards for that level become higher compared to that of the other ones.
So, the protocol equalizes the total share on the rewards across all levels, while preserving proportionality within them. Further, since XPower NFTs are upgrade-able, if you have minted (or bought) enough NFTs of a particular lower level, then you can “escape the crowd” to a higher one with higher reward rates, by reminting many of your lower level NFTs as a single higher level one.
The result is democracy between the XPower NFT levels, but capitalism within them! By design, none of the levels can dominate any of the other ones.
Using these rewards, which are distributed as aged XPower tokens (APower), we will run our own Avalanche subnet. The APower tokens wrap 1-to-1 XPower, as long as the project treasury has enough of the latter – where the treasury gets funded by a co-minting process on each newly mined and minted XPower. If however, mining stops and the treasury becomes empty, then APower will be backed by XPower only fractionally, to ensure a steady supply of APower for the stakers.
Since each subnet validator requires a minimum amount of AVAX, our XPower subnet will initially be protected by that stake until enough APower liquidity has accrued to ensure the safety of the block-chain.
Mine and mint proof-of-work tokens on Avalanche at xpowermine.com! We’ve got stake-able NFTs, too.
