SpreadCoin Incentivizes Full Nodes and Bitcoin Miners
SpreadCoin, a coin launched on July 29, 2014, has published a new whitepaper titled “Proof of Bitcoin Node: A Mechanism for a Bitcoin Full Node Incentivizes & Bitcoin Mining Rewards Program.” With contributions from Ahmed Zsales, Daniel Ames, Georgem, Chaositech, WoddenBush, and Coins101, all prominent SpreadCoin members, the paper highlights the importance of minting new coins in motivating Bitcoin miners.
“The continued success of Bitcoin is still underpinned by the emission of newly minted coins to reward and motivate people” the paper posits. “Financial rewards are an integral part of Bitcoin’s DNA. However, there are no rewards built into running full nodes.”
So even if Bitcoin has ample network security and hashing power, it can ill afford a decline in full nodes, which are just as essential to the security of the Bitcoin network as they are needed to relay and confirm transactions.
For example, looking at Bitnodes’ chart of the number of nodes over the course of the last 365 days, we have seen a 1619 drop in nodes from the average of 6287. This translates to the Bitcoin network losing almost a quarter of vital Bitcoin nodes. In the same time period, however, BitcoinWisdom shows an increase of hashing power from 250,557,526 GH/s (on October 9th, 2014) to a current hashrate of 440,340,281 GH/s (at time of writing), an increase of approximately 176%.
To put that in perspective, all of Bitcoin’s hashrate costs the equivalent to over 4000 SP50s, or around $120,000,000. That is assuming everyone is using SP50s,$30,000+, 110TH/s mining beasts, which obviously isn’t the case. Nor does it take into account other costs such as electricity or power supplies.
Regardless, the point to take away is that the prohibitively expensive mining aspect has managed almost to double in a year’s time. At the same time, however, full nodes, which can cost as little as $15 and at the most $100, have managed to decline by 25%.
The SpreadCoin developers plan to combat this node attrition by incentivizing Bitcoin nodes through what they call PoBN, or Proof of Bitcoin Node. Essentially, SpreadCoin is aiming to solve the incentivization problem by creating a second layer over Bitcoin’s blockchain; a “decentralized protocol, Bitcoin, being supported by another decentralized protocol.”
PoBN works by paying users to run Bitcoin nodes with SPR, and rewards are sourced from revenue “derived from the provision of services on the SPR network” as well as an “allocation of the mining rewards paid to SPR’s miners.” Miners can of course exchange to Bitcoin via the Bittrex exchange, but if PoBN becomes a widespread success, it may become a nice supplement to any Bitcoins mined as well.
Decentralization is a core principle for SpreadCoin. The coin itself was designed with the objective of being as decentralized as possible, in response to some people’s fear of centralization within Bitcoin.
