Understanding Crypto PART 3
BlockChain Reward Reduction.
Firstly i would like to Wish Each and every Single one of you a Very Merry Christmas and a Wonderful 2019.
In this PART, there will be a lot of Comparing against other Coins, mainly BitCoin. I chose BTC because we all know who he is, and as covered in PART 2, we now know he has a big part to play in ETN’s Future.
A Large proportion of Cryptocurrencys have a “Mine-able” BlockChain. There are some which are not (such as XRP, TRON) which are called POS (Proof of Stake.)
BlockChain’s which are Mine-able are called POW (Proof of Work) This means that the Network/BlockChain is Secured by many People around the World who have their Hardware (CPU/GPU Cards/ASIC Miners) mining the BlockChain. This Network of Miners are essentially the Fuel for the Engine, without them the BlockChain would grind to a Halt. No Transactions would be Authorised and everything would just STOP.
The Hardware required to Mine a CC is usually quite Expensive, and the Electricity Cost for Powering it can be quite Eye-Opening. This is especially True of the Higher end Equipment. Some People can Hobby Mine in their Bedroom’s, Basement’s, Attic’s using their Home PC, Laptop or Gaming Rig, although the rewards they are given are lower than the rewards given to the People who have higher end Equipment.
This is because the more Powerful the Equipment is the higher the “Hashrate” and the higher the Hashrate, the higher the Reward.
It is not just Individuals that Mine Crypto, in Fact the Majority of BTC Mining is done by Mining Farms. Factory’s FULL of ASIC Equipment Mining BTC 24/7. The Power Bill for these Places is HUUUUUUGE! so they Tend to have to Sell the BTC that they have been Awarded pretty much straight away to pay for the Electricity used in the Process.
The Electroneum “Mobile Miner” is a Simulated Miner, meaning it is not actually Mining, it is merely Simulating the Process. This isn’t a Secret, the Team make this Clear from the Beginning after they Tried to Actually Mine using a Mobile Phone. The Result was the Phone Overheated, and the Hardware inside the Phone was degrading fast and the Battery was loosing Power Rapidly. Actual Mining on a Phone simply isn’t feasible! So to get around this Electroneum came up with an app that makes it seem like it is Mining, giving Rewards (Free ETN) in the form of an Airdrop, while the person using it gets a Mining Experience.
When a Cryptocurrency is Born, with a Mineable BlockChain, the Rewards start off HIGH but Over Time the amount “emitted” gets Less and Less.
As a Comparison lets Use BitCoin
Bitcoin goes through a “Halving” Event every 4yrs (Approx) Meaning that the amount of BitCoin “emitted” to Miners who found the Block Halves. A chart of the Process can be Found here: https://www.google.com/search?q=bitcoin+halving+chart&tbm=isch&source=iu&ictx=1&fir=qVgV8uffL_t1jM%3A%2CsGi9TigcxyPjGM%2C_&usg=AI4_-kT0MUdak-389DwfGOdf2wJw2drIRA&sa=X&ved=2ahUKEwjjzsuzvrjfAhURUBUIHawuAyMQ9QEwA3oECAQQCg#imgrc=lAkueSu3cFbgkM:
The BitCoin blockChain has a 10 Minute BlockTime, this means that every 10 Minutes a new Block should be Found. The Mining Pool who found the Block gets the Block Reward and the Pool Divides the Newly Minted BitCoin between the Miners based on their % of Work Done, and based on the persons “Hashpower” they get their share of the BTC.
Curently BTC emits 12.5 BTC every 10 Minutes, which is 1800 BTC every 24hrs being minted and entering Circulation. In the Year 2020 this will Halve down to 6.25 BTC every 10 Minutes and 900 over 24hrs.
Using the Current number emmitted over 24hrs (1800) and the Information provided in PART 1 and PART 2, you should be able to Understand that the more Coins Available, the greater the Selling Pressure is on the Exchanges. If we Estimate that 75% of BitCoin gets sent to the Exchanges to cover Electric Costs and that 25% is Retained for HODLing then that would mean that each 24hrs there is 1450 Bitcoin Sold on the Exchanges. So each Day there has to be this amount Bought (over $6m) daily just to keep the price at a stable level. If there isn’t Enough Interest in people Buying BTC to cover the amount being sold/dumped daily, this will cause a Natural Drop in Price as the Sellers undercut Each other to sell their Coins.
The Natural thing that Happens through time is that the Coins become Harder to find, meaning less and less are Available on the Exchanges via the Miners Selling their hoard to cover their Bills.
If you mined BTC in 2010 with your CPU on your Home Computer, You might have been Awarded 1-2 BTC every few Days. This sounds Crazy Considering that you now know each BTC reached $20,000 in Dec 2017. But it is True! *But Back in 2010 when you could have been given 1-2 BTC every Few days… BTC was worth a few Cents! so at that Time you probably wouldn’t have given a damn. Fast-Forward to 2017… yeah you get it!
To further Examine how rare BTC is set to become, in the last 10yrs there has been 17.5 million BTC been emitted from the BTC BlockChain, and there is only EVER going to be a MAXIMUM of 21 million Coins. Yet the Remaining 3.5 million Coins will take no less than 130 yrs to be mined/found. Yes, the Vast majority are already “out there” and now the remaining Coins are becoming harder and harder and harder to acquire. Draw your own Conclusions what the likely scenario is under these Circumstances.
Now you know how “Big Daddy BitCoin” works in regards to Mining Rewards and Reduction, lets pull in Electroneum and Compare how our BlockChain works in regards to Mining Reward and Reduction.
Let’s be clear about one thing Electroneum’s BlockChain is comparatively at the Infancy stage that BitCoin was in 2010-2011. There is Large Mining Rewards which means there is an abundance of Coins being Emitted to the ASIC Miners, a large chunk of which it would be fair to assume make it to the Exchanges putting a relatively large amount of Selling pressure on us. <— Personal Opinion
I would be Confident to say this was definately true if we Compare the Current levels emitted compared to what the future levels emitted will be in the Years, Going Forward. (Personal Opinion) Might i also add, that, as referenced in PART 2: Remember we get dragged UP (or down) with the Price of BitCoin.
Electroneum has a MAX total Supply of 21 Billion Coins. Exactly 1000 times that of BitCoin.
Electroneum has a Block Time of Approximately 2 Minutes, meaning a block is Found/Mines every 2 Minutes. This 2 Minute Time-frame should remain Constant(ish) throughout the BlockChains Lifespan. Even if More people start Mining the Blockchain, increasing the Computing Power, the Algorithm will increase the Difficulty to keep a steady Block Time of 2 Minutes.
Unlike BitCoin, Electroneum does NOT go through any “Halving” Events. Instead the amount of ELectroneum Coins Emitted is Constantly being Reduced. In fact if you keep a close eye on the Electroneum Block Explorer https://blockexplorer.electroneum.com/ you will see that every 20 minutes or so the Reward per Block has retracted slightly.
Currently, every 2 Minutes there is 9154 ETN being Given/Found to the Mining Pool that Found/Mined the Block. At the Current Rate there is approx 6.6million ETN per 24 hrs being emitted to Actual Miners (Not Mobile Miners.)
In April 2018, there was 12,000 ETN being emitted per Block, this added up to 8.64 million ETN over a 24 hr Period. This means that in only 8 Months, the Rewards emitted per block has Fallen by 2846 ETN every 2 Minutes. This Constant Reduction will Continue to happen every Minute of every Day. The Amount Daily it has Reduced from April 2018 till now is over 2 million.
As the Block Reward Reduces, the Coins become somewhat rarer, or harder to come by, this releases some of the Selling Pressure on the Exchanges, and again, I will let you draw your own Conclusions to what the Natural Effect can be.
Assuming that 75% of the Coins get Sold on the Exchanges, and 25% get HODL’ed (keeping the numbers the same as we used in the BTC example), it is Fair to Assume that we are at a point in our BlockChain where there is more ETN being Sold via the Miners than there will be in the Future.
A little piece regarding “MarketCap” of Coins.
When you look at coinmarketcap.com or similar, you will notice that each coin has a “Marketcap” and as such most Websites list Coins in the Order of highest to Lowest Marketcap.
The Calculation on what Determines a Coins Marketcap is: Current Price, Multiplied by Current Circulating Supply = Current Marketcap.
Now Since ETN’s Blockchain is kind of “New” we don’t have a Large Circulating Supply yet, this will change through Time as more and more Coins are Emitted through Actual Mining, and also Mobile Mining/Airdropping. So a Natural Effect should be that we also Move up the MarketCap Rankings. Even if our Price stays exactly the same as it is now.
This isn’t really an Important metric, but just throwing it out there that we are listed on MarketCap based on Price X Circulating Supply and we have literally just begun! Many of the Coins above us have been around for a long Time and are well into being 60/70/80% of the way through their BlockChain Circulating Supply.
Once again, if any of this requires further Explanation, or if you have any Questions…ASK! I don’t mind PM’s or Simply posting them here.
Have a Great Christmas to those who Celebrate it. Have a Great Holiday Season to those who Don’t.