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Investor Public Mining (IPM).
IPM defines a fair way of balancing the interests of miners, investors, developers, and users.
UPDATE: A significant and far reaching modification to this proposal has been proposed on the discussion thread
It is reasonable to think of the IPM Pool as the opposite of most mining pools. Rather than miners minting currency to exchange for BTC, the IPM pool consists of investors turning BTC in to BTM by cooperatively hiring mining rigs to support the network. This has multiple benefits for all Bitmark parties, and allows Investors to acquire Bitmarks fairly at a price close to that of production.
- How many Bitmarks can the IPM pool mine per day?
- How does the investment system work?
- How is the IPM Pool maximum hashrate calculated?
- How much does 35% of the network hashrate cost the IPM Pool to produce?
- Information for Investors
- Does the Bitmark Foundation have a target donation amount?
- How does this benefit me as a miner?
- What happens to transaction fees?
- Additional Details
- Where can I find the Bitmark IPM Pool?
- Relatively fast and stable network: The hashrate contributed by the IPM pool keeps the Bitmark network relatively fast and relatively stable, even when large mining entities like multipools hop on and off the network, since 35% of the target network hashrate is provided by the IPM pool.
- Decreased effects from unfair actors: If any unfair miner with a lot of hashing power joins the network to drive up the difficulty and then leaves, the honest miners know that the IPM pool will contribute 35% of the required hashing power to keep the network moving reasonably quickly, as the IPM pool has a variable hashrate compared to the honest miners hashrate which is a fixed resource.
- Increased Network Security: The presence of the IPM pools ensures a portion of the network hashing power is always with an honest node, additionally honest miners are encouraged and rewarded fairly by being part of a network with an IPM pool. This helps mitigate against 51% attacks and creates a more secure network for all parties.
- Decreased Price Volatility: Investors can acquire a fair percentage of the available daily BTM at a cost near that of production, their actions encourage honest miners who believe in Bitmark and see some value in holding it. These two factors work together to reduce downward pressure on the markets, and keep the exchange price from drifting too far below the production cost.
- Stable Development: 5% of the BTM minted by the mining pool goes to the Bitmark Foundation to support long term development of Bitmark. This increases the stability of Bitmark as a project, encourages the earned value of Bitmark, and secures the investment made by all parties.
- Natural Growth: Natural growth in all areas of Bitmark is encouraged by the presence of the IPM Pool, as it unifies the efforts of miners, investors, and developers so that they all support each other fairly, with no single party able to acquire an unfair advantage.
- Encouraged Adoption: The combined benefits of the IPM Pool encourages adoption, users have the knowledge that investors believe in the currency they are using, that a fair percentage of the new Bitmarks generated daily are bought at near production cost which gives them faith that the exchange rate of the currency is reasonable and not manipulated, the network is kept relatively fast secure and stable making it particularly suited to a daily transaction network, user focussed development is always active and fairly funded.
How many Bitmarks can the IPM pool mine per day?
The target block time for the Bitmark network is 120 seconds, this equates to 720 Blocks per day. During the first block reward period 20 new coins are minted with each block. This totals 14,400 BTM per day.
The maximum IPM Pool hashrate is currently set at 35% of the required network hashrate.
The IPM Pool therefore can mint a maximum of roughly 5040 BTM per day, some variance is to be expected as total network hashrate may rise or fall during the day.
How does the investment system work?
Investments are defined as BTC transactions, each individual investor may have multiple active investments.
Each investment is associated with a Bitmark address specified by the investor, BTM payouts are automatically sent to the Bitmark address.
Investments are queued in chronological order based on time confirmed, where two investments confirm at the same time they are queued according to time sent.
Investments are activated in order until the amount required to purchase the maximum daily hash rate has been met.
Hashrate is always purchased each day while there are available investments in the queue, there is no minimum hashrate for the IPM Pool as investment is entirely optional.
If a single investment is larger than the amount required to purchase the maximum hashrate, it is consumed once per day until zero.
Block Rewards take 721 confirmations to mature, therefore each days earned BTM and it's distribution will be reported shortly after the difficulty changes, and BTM payments will be automatically issued the following day.
5% of the BTM minted each day is sent to the Bitmark Foundation to support consistent active development.
The remaining 95% is distributed proportionally between the currently active investments.
Running at the maximum allowed hashrate roughly 5040 BTM will be minted by the IPM Pool each day. This will generate 252 BTM for the Bitmark Foundation, and 4788 BTM to the active investments.
How is the IPM Pool maximum hashrate calculated?
Bitmark changes difficulty every 720 blocks (1 day). Difficulty defines the required hashrate for blocks to be generated on average at the target speed of 120 seconds.
The required hashrate for the Bitmark network can be calculated using the following formula:
difficulty*2^32/120 = required-hashrate
For a difficulty of 52.9028 we can calculate that the required hashrate as follows:
(52.9028*(2^32))/120 = 1,893,464,965.56 (1.893GH/s)
The maximum IPM Pool hashrate is currently set at 35% of the required network hashrate. In this example it would be 662MH/s (662,712,737.945).
How much does 35% of the network hashrate cost the IPM Pool to produce?
At the time of writing the average cost per megahash per day is $0.62 or 0.001 BTC. The maximum IPM Pool hashrate is 35% of the required network hashrate.
Production costs will vary over time, for the purpose of this question we will suppose they are fixed at the current price of $0.62 per MH/day.
The following chart projects an estimated production cost of the IPM Pool, and the estimated production cost of 1 BTM at each difficulty:
Network Required Maximum IPM IPM Pool Production Cost Difficulty Network HR Pool HR Day Cost of 1 BTM at RS1,2,3 16 572 200 $124 $0.0247 32 1,145 400 $249 $0.0493 64 2,290 801 $497 $0.0986 128 4,581 1,603 $994 $0.1973 256 9,162 3,206 $1,988 $0.3945 512 18,325 6,413 $3,977 $0.789, $1.57 1024 36,650 12,827 $7,953 $1.578, $3.15 2048 73,300 25,655 $15,906 $3.156, $6.31 4096 146,601 51,310 $31,813 $6.312, $12.62 8192 293,203 102,621 $63,625 $12.62, $25.24, $50.49 10000 357,913 125,269 $77,667 $15.41, $30.82, $61.64 15000 536,870 187,904 $116,501 $23.11, $46.23, $92.46 20000 715,827 250,539 $155,335 $30.82, $61.64, $123.28 25000 894,784 313,174 $194,168 $38.52, $77.05, $154.10 30000 1,073,741 375,809 $233,002 $46.23, $92.46, $184.92 40000 1,431,655 501,079 $310,669 $61.64, $123.28, $246.56 50000 1,789,569 626,349 $388,337 $77.05, $154.10, $308.20
HR = hashrate in MH/s.
RS = Block Reward Schedule 1,2,3 correlating to 20, 10 and 5 BTM respectively.
The current Litecoin network difficulty at the time of writing is around 20,000.
As difficulty rises we should see more distributed investments, with larger investors migrating towards mining themselves which further distributes network hashing power and aids to phase out the IPM Pool Naturally.
Information for Investors
The IPM Pool gives you a way to acquire an amount of BTM at a price close to the production cost.
You are investing in all aspects of Bitmark, there are a wide range of benefits for the network as a whole, to users, to miners, and to the ongoing development of Bitmark. Therefore you are securing your own investment.
The amount of BTM you receive per BTC/$ invested is determined entirely by the production cost and the size of your investment in relation to all active investments for that round. The previous section contains an indicative chart of the cost to produce 1 BTM based on network difficulty.
An estimated amount of BTM and the production cost will be displayed before each investment round of 720 blocks begins, with final accurate figures for the round being reported when the round concludes.
Some variance is to be expected as hashing power of the network varies from hour to hour.
You can be assured that the BTM you receive is close to the production cost for all miners on the network during the round. This may differ from market prices, during stale market periods it will be close to the average price, during up trends it will be cheaper, and during down trends it may be higher but this can be offset as the very presence of your investment in the IPM Pool encourages trust in Bitmark.
Does the Bitmark Foundation have a target donation amount?
The Bitmark Foundation aims to acquire 0.250% of the total currency supply in order to support long term development on the project, 70,000 BTM in total.
Operating at full capacity it would take 280 days of IPM mining to reach this target.
Once this target is reached the 5% fee will be reduced to that required to run the IPM Pool, which we expect to be under 0.1%. Voluntary donations will still be accepted.
Any excess funds will be used distributed between charitable causes.
No funds from the Bitmark Foundation will be used until after 2015-07-13.
As the purpose of Bitmark is to create a daily use currency, we expect that BTM will be used to pay for any costs incurred by the foundation.
We plan to create a bounty system for all Bitmark tasks, where BTM bounties are attached to units of works, and then released to whoever completes the work after it is approved. Turning the Bitmark Foundation in to autonomous non profit corporation.
If another currency is needed then BTM will either be offered to the community at the base production cost, or sold on open markets so long as no undue downward pressure would be created by doing so. We propose to cap the amount of BTM which can be sold at one time to a percentage of the total foundation holdings.
How does this benefit me as a miner?
We will answer this with a real world example.
Upon release Bitmark's network difficulty increased to 4, then 16, then 52.09. Once the difficulty had reached 52.9028 some mining power dissipated from the network, meaning it ran slower for all concerned. This is a well documented problem for PoW currencies, often caused by multi pools.
On this occasion the required network hashrate to achieve 2 minute blocks was 1.893GH/s, whilst the network of honest miners was running at around 1GH/s.
There was a shortfall of roughly 0.9GH/s.
If the IPM pool had been active at this stage it would have supplied 35% of the target hashrate, 662MH/s. The total network hashrate would then have been 1.66GH/s.
The presence of an IPM pool on the Bitmark network will cushion the effects of large difficulty changes, ensure the block time doesn't drift too far from the target, and still allow the difficulty to naturally change over time. In this example it would fall, but more gently.
An additional benefit of this cushioning is that it disincentives the actions of multipools and short term miners, as the difficulty does not drop to an amount that makes their hashing power as effective.
The IPM pool has a varied hashing power, whereas the hashrate of honest miners is a fixed resource.
What happens to transaction fees?
This has not been decided yet, some ideas include: Put aside for charity, Distributed to investors as a bonus, or used to reward third party open source projects which build on Bitmark. We will seek community guidance on this matter.
We look to mitigate the risk of holding a large number of investments by creating a maximum estimated queue length of 5 days. This figure may be adjusted once the pool is running, we can only estimate at this time as this has not been done before.
The IPM Pool is entirely voluntary, there is no expectation or requirement for anybody to use it.
The IPM system will run anonymously, users will enter a bitmark address, the IPM pool system will then associate and return a unique bitcoin address for the investment. All payouts and reports will be based on these paired addresses.
Investors can further automate their investments by setting the output address of traditional multipools or systems with automated withdraws to be their IPM Pool BTC address.
There is no limited time frame as to when the IPM pool is open, some days it may run at full capacity and others at zero. We hope that the percentage of network hashing power provided by the IPM pool reasonably increases to the maximum of 35% as the value proposition of Project Bitmark increases.
Where can I find the Bitmark IPM Pool?
This document is currently a proposal, once approved by the community a transparent and automated IPM Pool (the first) will be created. Fully automated hiring of mining rigs may not be possible, so some manual process may be involved at first.