In today's digital currency field, flow mining, as an emerging mining method, has attracted much attention. How exactly is it achieved? What are its advantages and disadvantages? This article will deeply explore the operating principles, advantages and disadvantages of mobile mining, and look forward to its future development.

 How to implement flow mining

Liquid mining, as the name suggests, is a mining method that earns rewards by providing liquidity. Participants deposit digital assets into the liquidity pool, provide liquidity for trading pairs, and receive corresponding rewards through transaction fees. This mining method can not only promote the liquidity of trading pairs, but also allow participants to share the proceeds from transaction fees, achieving a win-win situation for mining and trading.

The key to realizing liquid mining lies in the application of smart contract technology. Through smart contracts, participants can safely deposit funds into the liquidity pool without worrying about fund security. Smart contracts will automatically calculate and distribute rewards based on the liquidity ratio provided by users to ensure fairness and justice.

 Advantages of Liquid Mining

Liquid mining has many advantages over traditional mining methods. First of all, the threshold for participation is low. Anyone only needs to own certain digital assets to participate, which lowers the threshold for participation and gives more people the opportunity to obtain mining rewards. Secondly, liquid mining provides a stable way of income. Participants can obtain continuous rewards by providing liquidity, which is more stable and reliable than traditional mining. In addition, liquid mining can improve the liquidity of trading pairs and promote the healthy development of the trading market, which has positive significance for the entire digital currency ecosystem.

 Disadvantages of Liquid Mining

However, flow mining also has some disadvantages. First of all, due to the low threshold for participation in mobile mining, some speculators and criminals may be attracted to participate, which increases security risks. Secondly, there is also a certain degree of uncertainty in the stability of liquid mining rewards, and market fluctuations may affect the income from mining rewards. In addition, the profit model of mobile mining is relatively complex and requires certain professional knowledge and skills. There may be a certain learning cost for ordinary users.

 The future of mobile mining

Although flow mining has some disadvantages, it still has broad development prospects as an innovative mining method. With the continuous development and improvement of blockchain technology, the security and stability of mobile mining will be further improved, attracting more users to participate. In the future, as the digital currency market continues to grow, mobile mining will become one of the important development directions in the digital currency field, bringing new vitality and opportunities to the entire industry.

 Conclusion

In general, mobile mining, as an emerging mining method, has many advantages, such as low threshold, stable income, etc., but it also faces some challenges and disadvantages. However, with the continuous advancement of technology and the continuous development of the market, the future of mobile mining will be full of hope. We look forward to liquid mining playing a greater role in the field of digital currency and bringing more benefits and value to users. May we witness the glorious future of mobile mining together!

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With the launch of the Compound and Balancer projects, the popularity of liquidity mining has exploded. In the past month, the liquidity mining project lock-up on Ethereum has continued to grow. As of now, the Compound project lock-up has exceeded 1.6 billion US dollars.

What is mining?

Since Satoshi Nakamoto published an article titled "Bitcoin: A Peer-to-Peer Electronic Cash" in 2008,
System" paper, the word "mining" has been given a new meaning.

Mining originally refers to the process by which miners mine minerals and obtain wealth. After Satoshi Nakamoto invented Bitcoin, the characteristics of non-tamperability and total conservation of Bitcoin introduced by Bitcoin made Bitcoin very similar to the characteristics of minerals such as "gold" and "diamonds". Therefore, people in the industry call the act of "providing computing power to compete for accounting rights" as "mining."

Let’s briefly analyze the process of Bitcoin mining, as shown in the figure below:

△Figure 1

1. Receive transactions broadcast on the chain

2. Verify the transaction and package it

3. Calculate a specific value through hashing

4. Broadcast block information to the chain

5. Blockchain nodes (miners) receive broadcast blocks

6. Obtain mining rewards and successfully mine.

Of course, this is just a hypothetical successful mining state. When many miners are mining at the same time, if one miner succeeds in "mining", it means that other miners have failed in the competition and have to start mining again. Therefore, the miner's computing power directly affects the final income. The greater the computing power of the miner, the greater the probability of successful "mining".

Under this mining mechanism, "mining" is actually exchanging "electricity costs" and "computer hardware costs" for Bitcoin, that is, "consuming resources in the real world in exchange for virtual currency value"; and "liquidity" Sex mining is very different from this method.

Liquidity mining

Liquidity mining is also called "loan and mine". Compared with "computing power mining" under the POW consensus and "equity mining" under the POS consensus, liquidity mining is a model that provides liquidity for virtual currencies and obtains rewards.

As a pioneer of "liquidity mining", Compound has received explosive attention since its project token COMP was officially launched on June 16, with a 500% increase in price on the first day alone. This is undoubtedly a star project among DeFi projects. Let’s take a Compound on-chain transaction below.

(0x3d6dd94815fbcaeafc331da9183caac5f13a8ef5752fc76c075769373432f88a) to explore the implementation of Compound’s liquidity mining.

The external account "0xf91bf" returned 2.00576 WBTC to Compound Wrapped BTC and obtained the borrowed "mining" income of 3.35160429
COMP, as shown below:

By tracking the call log of the event, we can see the code implementation of the entire "mining" process.

The external account calls the repayBorrow function of Compound Wrapped BTC to repay, as shown in the figure below:

The repayBorrow function calls the internal repayBorrowInternal function, as shown in the following figure:

△Figure 4

The repayBorrowInternal function calls the internal repayBorrowFresh function, as shown in the following figure:

The repayBorrowFresh function calls the proxy contract Comptroller of the Compound:Comptroller contract.

The repayBorrowAllowed function in (0x9D0a0443FF4bB04391655B8cD205683d9fA75550) is shown in the figure below:

△Figure 6

The distributeBorrowerComp function in the repayBorrowAllowed function is the function of Comp obtained from dividend mining, as shown in the following figure:

Let’s draw a flow chart to understand this transaction more intuitively, as shown in the figure below:

In summary, it can be seen that: Liquidity mining actually refers to rewarding users who participate in lending (capital flow) at the smart contract level.

The “pros” and “disadvantages” of liquidity mining

In traditional finance, money carries value, and the circulation of money is the process of value transfer. Only when currency circulates can values be effectively exchanged and commodities can produce their corresponding values. If commodities cannot reach the hands of people who need them, then there may be a situation like the Great Depression of the 1930s. "I would rather pour out the milk than "Selling to the poor" phenomenon, so the liquidity of currency is crucial.

In the traditional financial field, currency liquidity is mostly controlled by centralized banking institutions regulating interest and reserves, thereby ensuring that the value of social commodities can be realized.

In the world of blockchain, digital currency has not yet been well and directly related to real-world commodities, which makes the currency on the blockchain more of a conceptual value, similar to investment assets such as stocks. Users who enter DeFi projects mostly start from arbitrage and investment. Therefore, the stability and liquidity of digital currencies on the blockchain have been greatly affected. Under this premise, it is obviously impossible to use it as a currency that can be used on a large scale.

"Liquidity mining" is actually a decentralized way to promote currency circulation. It is a landmark innovation in the development of blockchain. Different from "flash loan", a unique model on the blockchain, "liquidity mining" is a decentralized implementation of "centralized regulation of liquidity by authoritative institutions" in the traditional financial system.

However, "liquidity mining" also has some worrying factors. Currently, "liquidity mining" is different from "computing power mining". "Computing power mining" is backed by real-world resource consumption, while "liquidity mining" does not.

Take COMP as an example. The COMP coins generated by liquidity mining are officially issued tokens, and their value endorsement relies on official projects. Judging from the current form, the project has received widespread attention and remains high, and its monetary value has certainly been rising. However, most of the current sources of enthusiasm are entrants who "want a piece of the pie." Therefore, behind this superficial prosperity, there is not much real value generated through lending, and there will definitely be a bubble; coupled with the blockchain security situation It is very serious. It can also be seen from the recent incident about the Balancer vulnerability that there are still many security issues in DeFi projects. Therefore, we cannot be overly optimistic about "liquidity mining" and "DeFi" projects, and we need to be more vigilant and invest rationally.