Proof-of-Burn: Black-Hole >> White-Hole Tech

in LeoFinance14 days ago (edited)


If you are building on Hive (I am) and you trust Hive consensus (I do) then there is no reason to not employ proof-of-burn mechanics when designing a new token. Well, there is one really good reason actually: There is no code anyone can clone to create a proof-of-burn token. I'm working on it.

When it really comes down to it: if you are already trusting Hive witnesses and Hive full-nodes, making your own token out of thin air without giving anything back to Hive is just kind of wasteful. There is one really nice thing about HiveEngine: it piggybacks on top of the Hive upvoting system and GREATELY simplifies the process of creating a token that allows user to generate inflation at the click of a button. However, my interest right now is more focused on gaming, defi and algorithmic stable coins, so the social media aspect doesn't really need to come into play the way it does on Hive and these other communities.

Blackhole void: @null

When funds on Hive enter @null, they exit the network permanently, cast into the blackhole. However, most people don't burn their funds for no reason, and there is an expectation that value will be created from that sacrifice. So far there aren't a lot of options as to what can be done with such massive utility.

Three years ago we could burn coins to get listed on the "promoted" tab. This was sort of worthless because no one looked at the promoted tab. It was far more profitable to buy votes from bid bots and get on the actual trending tab. In the last three years, not much has changed. We got an upgrade that shuffles promoted posts into the trending tab so people actually see them: that's about it.


This is the value that gets created after sending funds to @null. The sky is the limit in terms of what can theoretically be created in this process, but we've yet to see any kind of revolutionary advancements. I hope to change that with Magitek but I still have a lot of work to do before I can even start alpha-testing (let alone beta-testing).

But I'm pretty committed at this point: to the effect of quitting my job and working here full time. I've never made a dime from any kind of dev work here but we'll see if I can turn that around. And again, none of this is competitive. I'm not trying to siphon value away from any other project/community. That's not how this works. In fact, I'll likely be creating a premine in the beginning that allows beta testers to mine a full daily share for $1 a day. After that's over mining will be competitive and based on number of HBD destroyed or liquidity provided to the farms.


Personally I've always been fascinated with the idea of sending money into the blackhole and extracting value via the whitehole. Honestly I expected that by now there'd be a lot more options revolving around this utility. Alas, no dice.

Thought experiment.

So imagine we can destroy $100 worth of Hive by sending it to @null, but in doing so we can create $100 or more worth of value on the other side. Why wouldn't we do that? What I'm getting at here is that proof-of-burn mechanics create value twice automatically, and that's pretty powerful stuff. Every coin that gets sent to @null will never appear on any exchange or drain our liquidity in any way ever again.

There's a reason Hive hasn't implemented SMTs yet. Any guesses? They're expensive. In my three years here I've already seem multiple node runners complain about server/bandwidth costs. How much more expensive would it be to upkeep a database that's tracking a thousand different tokens? This is why putting everything directly on the same chain isn't necessarily a good idea (just look at ETH). Second-layer strategy is imperative to scaling up flat-architecture properly.

But now imagine if every token on Hive was suddenly destroying thousands (or even millions) of dollars worth of Hive/HBD. All of a sudden that business model becomes highly attractive to the network and we can pay for everything. Everyone loves a good supply shock (except me). Obviously we don't have to worry about how expensive it is to run a Hive node if the income supersedes the cost. That's just capitalism 101.


Well, I think I'm going to get back to it. The grind continues. I just wanted to point out that I've been thinking about this whole strategy recently in terms of this blackhole/whitehole theory. We can create value twice with extreme deflationary and hyperinflationary mechanics that work in tandem to create stability and massive value. That's the idea anyway.


I don´t get it. If you destroy Hive and would get something else instead, from where comes the value of that something else? Out of thin air? It is like "give me your Hive, and I will give you that shitcoin instead", just that the Hive is permanently destroyed during the trade.
At the end of the day it is about how many people believe in this concept and would be willing to spend real money for such a whitehole coin. Like with all those defi tokens, like CAKE or CUB. Some have more believers, some less.

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Hm let's put it this way:

I've been working on this project ten hours a day for a month and you just asked me where the value comes from.


It is like "give me your Hive, and I will give you that shitcoin instead", just that the Hive is permanently destroyed during the trade.

Yes, it is exactly like that, except the distinction between giving me the Hive vs sending it to @null is huge.

It will probably make more sense after I explain the NFT part better.

Don’t skimp on the FAQ when you release Magitek. 😅

I'm thinking about cloning the CUB/Goose React frontend and building out from there.
It should be pretty simple stuff for anyone familiar with BSC/ETH yield farming.

I have 100$ in crypto.
I create a nft and buy it with my 100$.
Now I have 200$ worth of assets :)

Ha sure if you assume that the NFT is liquid, which it isn't :D

So imagine we can destroy $100 worth of Hive by sending it to @null, but in doing so we can create $100 or more worth of value on the other side.

With the right incentives people would be willing to burn their hive permanently. I reckon I'll do it for those reasons - if it creates a supply glut and increases price; and if it gives me an equivalent or more of a reason to burn

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That's the idea, and with a liquidity connection to Hive itself it would be possible to turn those burned rewards back into even more Hive than you started with.

How difficult is it though...from a developer perspective, on a scale of very easy to very difficult?

So far it seems pretty easy.

All of the cryptographic security is derived from Hive itself.
I don't have to worry about any encryption stuff or account creation,
and I don't have to worry about the database being too big (RC costs).

Biggest concern is database integrity.
Especially when there is only one node running.

I was following everything until this statement... if you burned $100 worth of Hive (say it's 200 Hive) and you got $100 worth of whitehole tokens... you wouldn't be able to get more Hive would you? The supply of Hive went down by 200 tokens so you'd think the price would go up? Your whitehole tokens might be only able to purchase 198 Hive tokens for $100? (Assuming no fees, etc).

you wouldn't be able to get more Hive would you?

You would be able to get more Hive.
There are a couple of ways to do this.

The first is yield farming over time.
Magitek yield will be much higher than Hive (obviously).

The second way to make more money than you put in is with NFTs.
If you create an NFT that someone else wants you can easily sell it for more than the cost to create.

Both of these money making strats carry risk and aren't guaranteed, but it is quite possible to generate significantly more value.

Ahhhh... thanks for this... I guess it's tricky to get my head around whatever comes out of the whitehole - but I guess it could really probably be anything. Can't wait to see your alpha and beta releases to get a feel for how this all works.

While you're not making money as a dev now, I'm sure this will open up a whole stack of new applications... so really you're just front-loading at the moment.

Yeah the goal has always been to create a database for all the dapps I want to build here.
Magitek is the foundation.

Always struggled to understand the economics of burning.. It's something I find quite upsetting throwing away potential value.. to create more potential value? wut

Isn't that like the definition of investing?

Investing is placing a bet or backing something you think will yield a great return.. Burning is just creating artificial scarcity or something?

Investing is trading your value for potential value.
Burning is trading your value for potential value.
Ah, you'll see!

In this case burning creates a lot more value than investing.
If I just told everyone to send to give me money for the investment (like literally everyone else) it would undermine the economy.

As long as folks aren't victimizing eachother... I say it's all kosher. :D

Just wondering is the income of running a node right now greater than the cost? I don't think I have heard of any witnesses complaining about the witness node server/bandwidth yet but then again I don't actively look for those posts.

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Well, what you're talking about sounds very good, that would create a lot of people burning Hive like crazy.

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Everybody should burn all their crypto, to raise the price. The more we burn the higher the prices go!

But it is a symbiosis that many do not seem to understand.

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So imagine we can destroy $100 worth of Hive by sending it to @null, but in doing so we can create $100 or more worth of value on the other side.

it is like trading v2 :D

I believe we can reach moon through hive ❤️

Does proof of burn really work though? Economically speaking that is. Is it any different to no burn?

Hive is endless and it sits nicely. Makes you wonder how all these trillion tokens will be in a few years time.

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