Introduce the "Trans-Fee Mining" mechanism to create a Bitcoin that lives up to what Satoshi Nakamoto had in mind
The Author: Zhang Jian， Founder of FCoin
The Translator: Kim Young Soo
The Proofreader: Jasper Liu
First of all, I want to thank Satoshi Nakamoto. Without him, there is no Bitcoin and Bitcoin has opened a new page in history.
The core intention of Bitcoin was to create a "peer-to-peer electronic payment system" (click here for Bitcoin White Paper [https://bitcoin.org/bitcoin.pdf]), but with the current development, Bitcoin has changed its course and turned into an "investment" rather than an "electronic payment system." The POW mechanism adopted by Bitcoin is not perfect. Plus, behind the increasingly high transfer costs, a prominent problem is that the interests of users and defenders (POW mining) are not consistent or even antagonistic. At the same time, due to the lack of checks and balances, miners have a centralized power thereby creating an imbalance in the system. Even after the birth of the POS mechanism, the problem of inconsistent interests between the users and the miners (POS mining) hasn’t improved. With the unfair distribution mechanism, it is now even worse.
Hence, I use the model of token economy with the aim to try to clarify the relationship between the payment tools and investment subjects in the digital currency system, and to achieve a Bitcoin that for me, is what Satoshi had in mind.
Before designing this model, I found out that many crypto investors intentionally or unintentionally mixed the attributes of payment tools with the attributes of investment subjects which consequently brought a series of problems. Therefore, we need to make a clear definition of the existing digital currency - an analysis between the payment tools and the investment tools: Coin or Token?
Coin, as defined in this article, plays the role of Cash in the real world as payment tool while Token, refers to a pass with economic incentive mechanism, which plays the role of Securities or Stock equity in the real society. There is obviously a difference between these two. Coin encourages circulation to generate usage value, while Token encourages holding to generate investment value.
After distinguishing the difference between these two, I tried to come up with a new model that better interprets what Satoshi Nakmoto had in mind as the “real Bitcoin”:
Firstly, we define Coin as cash flow for circulation in the community system, while Token represents the rights of all the community members in the system;
Secondly, we still use the POW mechanism to release Coin, which is similar to Bitcoin. Miners obtain Coin through mining;
Thirdly, we use the "Trans-Fee Mining" mechanism to release Token: Transaction fee (as in Coin) incurred from each transaction is converted into Token by a fixed rate or algorithm and will be rewarded to those who make the transaction (i.e. those who pay the transaction fee);
Through the combination of the POW mechanism and the mechanism of"Trans-Fee Mining”, we complete the distribution of Coin and Token and let users gradually become the owners of this community system. The POW mechanism brings the interest circulation model, while the “Trans-Fee Mining” mechanism complements the return of the interest model. The combination of these two mechanisms will make the entire community to grow in a more balanced and robust manner.
Someone might ask, what if all the Coins are mined out, who is going to maintain the network afterwards? I think there is absolutely no need to define that Coin will be mined out eventually. For example, we could set to release a fixed amount of Coin each year(similar to Ethereum)and to consider putting an upper limit on the total token supply. We hope that the “mining process” will be long enough to ensure that more users could join the community and become the owners of this community system.
There are still many details such as various parameters, proportions and etc. regarding the aforementioned model that need to be improved, explored and put into practice. Hence, as the founder of FCoin Fund, I am happy to sponsor a digital asset equivalent of US$10 million to teams that are willing to explore in this direction. If you are interested in this, please send the background of your team with a detailed plan to the email address email@example.com. I will get in touch with you as soon as possible after internal review. In the meantime, I am equally happy to see teams that do not need our financial support but still are willing explore in the same direction and consequently benefit the entire digital currency community.
Last but not least, I would like to remind everyone that if you want to make a real achievement in the public blockchain, everything you do should come from your “devotion to the public interest”.
June 28, 2018