Mined.fi: Mining Made Liquid
Whitepaper
1. Summary
Mined.fi enables users to participate in ASIC mining-backed reward opportunities through a sophisticated system of vaults and Liquid Mining Tokens, while empowering professional mining operators to manage mining operations efficiently with access to renewable energy and carbon offsetting solutions.
At its core, mined.fi leverages the principles of DePIN by creating a decentralized network of physical mining infrastructure, transforming traditional mining operations into a more accessible and distributed model. This approach not only enhances the resilience of the mining ecosystem but also aligns with the growing trend of decentralizing critical infrastructure in the blockchain space.
The protocol introduces a novel way to tokenize Real-World Assets in the form of mining equipment and infrastructure represented in Vaults as NFTs. By issuing Liquid Mining Tokens (LMTs), backed by RWA's rewards, such as sALPH, sBTC, sDOGE, sKAS, sLTC, sCKB, Mined.fi effectively bridges the gap between physical mining assets and the digital DeFi landscape. This tokenization allows for unprecedented liquidity and accessibility in the typically illiquid world of large mining operations.
Mined.fi's unique value proposition lies in its ability to:
Democratize access to mining block rewards through a user-friendly vault system
Support the transition to renewable energy in the mining sector
Tokenize physical mining infrastructure, creating a new class of RWAs in the crypto ecosystem
Implement DePIN principles to create a more resilient and distributed mining network
Provide liquidity to traditionally illiquid mining investments
Offer advanced strategies for vault operators to optimize their operations
By addressing key challenges in the cryptocurrency mining industry such as high barriers to entry, lack of liquidity, and centralization risks, Mined.fi positions itself at the forefront of the evolving DeFi and DePIN landscapes. The protocol's innovative approach to combining mining, DeFi, RWAs, and DePIN principles creates a unique ecosystem that has the potential to revolutionize how mining investments are made and managed in the blockchain era.
2. Introduction
The cryptocurrency mining industry has long been plagued by several significant challenges:
High barriers to entry, requiring substantial capital investment in specialized hardware and infrastructure
Lack of liquidity in mining investments, tying up capital for extended periods, especially for mid-size installations in capacity to use their renewable stranded energy.
Centralization risks, as large-scale operations dominate the mining landscape
Impact of large-scale mining on energy infrastructures and the environment
Mined.fi addresses these issues by creating a decentralized platform that allows for flexible participation in mining operations through a system of vaults, liquid mining tokens, RWAs, renewable energy and carbon offsetting solutions.
3. Protocol Overview
At the heart of Mined.fi's innovation lies its decentralized vault system. This system allows independent operators to manage mining operations while enabling users to easily contribute by depositing ALPH, BTC, DOGE or KAS tokens into vaults. The protocol's key functions include:
Issuing Liquid Mining Tokens (LMTs) in the form of sALPH, sBTC, sKAS, sDOGE and others, representing a user's stake in a vault
Facilitate the conduct of comprehensive mining equipment, infrastructure and company audits
Enforcing protocol rules for all operating vaults
Facilitating the weekly distribution of mining block rewards to LMTs holders
Providing a flexible framework for vault creation and management, enabling operators to fine-tune their vaults with parameters allowing for a wide-range of positive externalities. These parameters, defined in 8.4, include allocating funds for renewable energy infrastructure, carbon offsetting for non-renewable energy used in mining operations, or contributing to public goods initiatives
Creating and managing NFTs that represent verified ASIC mining equipment and their associated hashrate
Managing the relationship between vault stakes, the mining Infrastructure, and reward distribution
Facilitating the weekly distribution of mining block rewards to sALPH holders based on hashrate
Insuring access to renewable energy sources and/or carbon offset solutions to Vault Operators
3.1 ASIC NFT System
Each verified ASIC mining unit is represented by a unique NFT within the protocol. These NFTs contain crucial metadata including:
ASIC model and specifications
Verified hashrate capacity
Installation date and location
Maintenance history
Energy consumption metrics
Operational status
The protocol maintains a direct relationship between these ASIC NFTs and the vault's reward generation capacity. The total hashrate of all ASIC NFTs in a vault determines the expected reward generation rate, which is used to:
Calculate and distribute rewards to LMT holders
Monitor mining efficiency
Validate reported mining performance
Adjust reward expectations based on network difficulty
4. Key Components
Mined.fi's first version, supporting ALPH, BTC, DOGE and KAS is built around four key components, let's use ALPH as an example:
sALPH (Staked ALPH): The primary Liquid Mining Token (LMT) issued by the protocol
rALPH: A balance used for internal accounting of rewards
MINE: The protocol's utility token
ASIC NFTs: Representing verified mining equipment and their hashrate
5. Roles and Participation
Mined.fi's ecosystem is designed to accommodate two primary types of participants:
5.1 Vault Users
General users can participate in the Mined.fi ecosystem by:
Depositing ALPH tokens into vaults of their choice
Receiving sALPH tokens representing their stake in the chosen vault
Accruing rALPH as a representation of their earned rewards
Claiming rALPH for sALPH on a weekly basis
This structure allows users to gain exposure to mining block rewards without the need for technical expertise or acquisition of mining equipment.
5.2 Vault Operators
Vault operators are independent entities who:
Verifiably own and operate ASIC mining equipment
Manage mining operations
Create and administer vaults within the Mined.fi protocol
Vault operators play a crucial role in the ecosystem by providing the actual mining capacity that generates rewards for the LMT holders.
5.3 MINE Stakers
Both of these participants can also take part in the protocol governance by staking MINE tokens in the Mined Safety Module, which is also a requirement for vault operators to propose the creation of a new vault.
6. Protocol Functions
The Mined.fi protocol performs several key functions to maintain the ecosystem:
Issuing sALPH, sBTC, sDOGE but also sLTC, sKAS, sCKB (LMTs), using sALPH for reference: When users deposit ALPH, into vaults, the protocol mints corresponding sALPH tokens, representing the user's stake in the vault.
Facilitating Reward Distribution: The protocol manages the distribution of mining rewards to sALPH holders based on their stake and the performance of their chosen vault, through their rALPH balance.
Enforcing Protocol Rules: Mined.fi ensures that all operating vaults adhere to the established rules and parameters, maintaining the integrity and resilience of the system.
Vault Creation and Management Framework: Mined.fi provides the necessary flexibility and infrastructure for vault operators to create, customize, and manage their vaults within the protocol, allowing them to reach for new liquidity and value aligned participants.
7. Profitability Analysis
Understanding the profitability dynamics for both general users and vault operators is crucial for the long-term sustainability of the Mined.fi ecosystem.
A key feature of the Mined.fi protocol is ability for the vault to borrow USD against LMTs for ASIC acquisition. Importantly, this lending mechanism is included within the protocol fee structure. Here's how it works:
Miner receives USD, borrowed against the ALPH in the vault, with the borrowed amount capped at 50% of the vault's total supply.
Miners use this USDT to purchase ASICs, expanding their mining capacity.
The loan repayment and associated costs are included in the protocol fee, which is deducted from the block rewards.
Let's analyze the profitability implications for a Vault operator:
Within the Mined.fi protocol:
Where: Protocol_Fee includes the base protocol fee and the ALPH against USDT lending costs.
Mining independently:
Key components:
Protocol_Fee: Encompasses the base protocol fee, ALPH loan repayment, and lending costs.
Additional_Rewards_from_New_ASICs: Extra mining rewards generated from ASICs acquired through the borrowed funds.
Capital_Costs_for_ASICs: In independent mining, miners must bear the full upfront cost of acquiring ASICs.
For Mined.fi to be attractive to miners, the following condition should be met:
This equation illustrates that the benefits from the new ASICs and MINE incentives should exceed the total protocol fee (including loan costs) and rewards paid to stakers.
Simplified Accounting: By including the loan repayment in the protocol fee, the system simplifies the repayment process for miners.
Aligned Incentives: The protocol fee structure ensures that loan repayment is directly tied to mining success, aligning the interests of miners, the protocol, and stakers.
Vault ALPH Preservation: This mechanism ensures that the vault's ALPH supply remains intact, as repayments are automatically handled through the protocol fee.
Risk Management: The inclusion of loan costs in the protocol fee helps manage the risk of default by ensuring repayment is prioritized from mining rewards.
Scalability: As mining operations grow, the protocol fee scales proportionally, allowing for sustainable expansion of lending capabilities.
The 50% cap on borrowable ALPH helps maintain a balance between leveraging the vault's assets and ensuring its stability. This mechanism creates a symbiotic relationship where miners can expand their operations more easily, while the protocol and stakers benefit from the increased mining activity.
Miners should carefully model their potential outcomes, considering factors such as:
The total protocol fee rate, including loan costs
ASIC costs and expected performance
Projected mining difficulty and cryptocurrency prices
Potential MINE incentives
The Mined.fi protocol aims to create an ecosystem where miners can grow their operations efficiently, while maintaining the integrity of the vault's ALPH supply and providing benefits to all participants. By incorporating the lending mechanism into the protocol fee, Mined.fi offers a streamlined and aligned approach to mining expansion and profit sharing.
8. Vault Creation and Management
8.1 Initial Setup
The process of creating and managing a vault within the Mined.fi protocol involves several steps:
Prospective vault operators pay a fee in MINE tokens to initiate the vault creation process
The DAO selected auditors conduct a comprehensive verification investigation of:
Mining equipment ownership and specifications
Operational capacity
Infrastructure requirements
Company legitimacy
Upon verification, the protocol mints ASIC NFTs representing each verified mining unit
Once approved, vault operators can customize various settings for their vault, including:
Miner's fee (profit)
Initial capital threshold
Vault fee (operating costs, variable)
Vault capacity
Carbon credit offsetting options, allowing non-renewable electricity to get a carbon credit offset.
Public Goods/Human Relief donations (Solar panels/hydro/wind installation, UNICEF, Doctors Without Borders,...) options
Miner's multisig address
Vault admin address
This flexibility allows vault operators to tailor their offerings to specific market segments or operational strategies.
8.2 ASIC NFT Management
Vault operators must maintain accurate ASIC NFT records by:
Updating operational status
Recording maintenance activities
Reporting any changes in hashrate capacity
Documenting equipment replacements or upgrades
8.4 Early Withdrawal Function
To provide flexibility to users while maintaining the stability of the vault system, Mined.fi introduces an early withdrawal function. This feature allows users to access their principal in case of emergencies, balancing the need for liquidity with the importance of long-term commitments.
Key aspects of the early withdrawal function:
Withdrawal Fee: Users who choose to withdraw their principal before the end of their lock-up period will incur a fee of 2-5% of their principal amount. The exact percentage can be dynamically adjusted based on market conditions and vault stability factors.
Cooloff Period: After initiating an early withdrawal request, users must wait for a 10-day cooloff period before they can actually withdraw their funds.
Rewards Forfeiture: Any unclaimed rewards at the time of early withdrawal initiation are forfeited.
The early withdrawal process works as follows:
Where:
Principal is the original staked amount
Withdrawal_Fee is between 0.02 and 0.05 (2% to 5%)
Dynamic Fee Adjustment: The withdrawal fee can be adjusted within the 2-5% range based on factors such as:
Current market volatility
Percentage of total vault funds requested for early withdrawal
Overall vault liquidity
Borrowed ALPH by the Vault Operator
Cooloff Period Mechanism:
During the 10-day cooloff period, users can cancel their withdrawal request without penalty.
The principal continues to earn rewards during the cooloff period.
Withdrawal Caps: A maximum percentage of the vault's total funds can be withdrawn early within a given time frame to prevent liquidity crises. This cap fluctuates based on market volatility.
Benefits of the Early Withdrawal Function:
Vault Stability: The withdrawal fee and cooloff period help maintain vault stability by discouraging frequent withdrawals and providing time for the vault to adjust to large withdrawal requests.
By implementing this early withdrawal function, Mined.fi provides an additional layer of flexibility and security to users, potentially attracting more participants to longer-term staking options while maintaining the overall stability and efficiency of the vault system.
9. Reward Generation and Distribution
The reward generation and distribution process in Mined.fi follows these steps:
Vault operators generate block rewards through their ASIC mining operations.
The protocol collects a base 10% fee on all block rewards and an optional variable fee on the miner's loan, while the Vault Operator collects its (variable) mining fee, covering for mining operation cost and its (fixed %) profits fee, which can be 0 if a loan is ongoing.
The remaining rewards (depends on vault profitability) are distributed among sALPH holders according to their stake in the vault.
rALPH balance are used to track reward accrual for each user, ensuring accurate and transparent distribution.
This system ensures that users receive rewards proportional to their investment while also supporting the protocol's sustainability through the fee structure.
10. Protocol Scaling
Mined.fi's design allows for significant scalability as the ecosystem grows:
As more users deposit ALPH, BTC, DOGE, or other PoW Coins into vaults, the total capital available for mining operations increases.
The influx of capital attracts more vault operators to join the ecosystem.
This scalability mechanism creates a positive feedback loop, potentially driving further growth and adoption of the Mined.fi protocol and its native MINE token.
11. Tokenomics
The MINE token plays a central role in the Mined.fi ecosystem, serving multiple purposes:
Governance: MINE token holders can participate in protocol decision-making, voting on proposals that affect the future direction and parameters of Mined.fi.
Staking: Users can stake MINE tokens in the Mined.fi Safety Module (MiSM) to earn additional rewards while contributing to the protocol's security and stability.
Fee Payment: MINE is used to pay for various protocol services and fees, including a vault creation request fee to insure qualitative requests and an audit and verification fee used to pay audits and law agencies selected by the DAO to conduct the due diligence of the requestor.
12. Safety and Security
Mined.fi prioritizes the safety and security of its ecosystem through several mechanisms:
12.1 Mined.fi Safety Module (MiSM)
The Mined.fi Safety Module (MiSM) is a critical component of the protocol's security infrastructure, designed to protect stakers' principal against shortfall events. The MiSM functions as a safeguard mechanism, utilizing a portion of the staked assets to mitigate potential losses.
Key features of the MiSM:
Purpose: The primary goal of the MiSM is to protect stakers' principal in the event of a shortfall, such as unexpected losses or severe market downturns.
Mechanism: In case of a shortfall event, the MiSM can sell or borrow against 25% of the total locked supply in the MiSM to cover potential losses.
Participation: Users can stake MINE tokens in the MiSM, contributing to the overall security of the protocol while earning additional rewards.
Risk Mitigation: By setting aside a portion of the staked assets, the MiSM creates a buffer that can be used to absorb losses without immediately impacting users' principal investments.
Flexibility: The ability to sell or borrow against the locked supply provides the protocol with options to address different types and severities of shortfall events.
12.1.1 MiSM Operation
In the event of a shortfall:
The protocol identifies the shortfall and triggers the MiSM mechanism.
Up to 25% of the total locked supply in the MiSM can be utilized.
Depending on the situation, the protocol can either: a) Sell a portion of the locked MINE tokens to cover the shortfall, or b) Use the locked MINE tokens as collateral to borrow funds to cover the shortfall.
The funds generated are used to cover the losses, protecting stakers' principal investments.
12.1.2 Implications for Stakers
Enhanced Security: Stakers benefit from an additional layer of protection for their principal investments.
Rewards Opportunity: By staking in the MiSM, users can earn additional rewards while contributing to the protocol's overall security.
Shared Responsibility: The MiSM creates a collective insurance mechanism where all participants contribute to and benefit from the increased security.
12.1.3 Protocol Stability
The MiSM plays a crucial role in maintaining the stability and reliability of the Mined.fi protocol:
Rapid Response: In case of unexpected events, the MiSM allows for quick action to mitigate losses and stabilize the protocol.
Sustainable Growth: By providing a safety net, the MiSM supports the long-term, sustainable growth of the Mined.fi LMTs ecosystem.
12.2 Verified Vault Operator Process: The thorough verification process for vault operators helps ensure that only legitimate and capable entities can create and manage vaults within the protocol.
It is conducted by audit and law firms competent in the jurisdiction of the mining operator, which are responsible to insure legitimacy, capacity to run such operations, all necessary checks for the protocol to mint NFTs representing the value of the infrastructure, ASICs (if initial equipments exists) and Hashrate capacity. This process is paid by the mining operator requesting the vault creation, to the DAO treasury in MINE, which is then used for a request for tenders in said jurisdiction(s).
MINE stakers interested in supporting the creation of the said vault have the capacity to crowdfund the fee.
12.3 Multisig Addresses: The use of multisig addresses for miners adds an extra layer of security to the mining operations.
12.4 Smart Contract Audits: Regular audits of the protocol's smart contracts help identify and address potential vulnerabilities.
13. Advanced Strategies for Vault Operators
In the Mined.fi protocol, vault operators play a crucial role in managing mining operations and optimizing returns for both themselves and stakers. The integration of ALPH lending within the protocol fee structure offers unique opportunities and challenges. This section outlines advanced strategies for vault operators to maximize efficiency and profitability.
13.1 Optimal Leverage Management
Vault operators can borrow up to 50% of the vault's ALPH supply against USD for ASIC acquisition. Effective leverage management is crucial to ensure the Vault profitability and resilience.
13.3 ASIC Acquisition and Renewal Strategy
ASIC Efficiency Threshold:
Replace ASICs when their efficiency falls below this threshold.
Renewal Funding Mix: Optimize between using borrowed ALPH and reinvested profits for ASIC renewal to maintain competitive mining efficiency while managing leverage.
13.4 Protocol Fee Management
Given that loans against ALPH are included in the protocol fee, vault operators should:
Monitor Fee Components: Regularly analyze the breakdown of the protocol fee to understand the impact of lending on overall costs.
Optimize Borrowing: Continuously evaluate whether the additional mining capacity from borrowed ALPH justifies the increased protocol fee.
13.5 Hashrate Optimization
Vault operators should continuously optimize their mining operations by:
Monitoring individual ASIC performance against NFT specifications
Identifying and addressing underperforming units
Planning strategic upgrades to maintain competitive hashrates
Balancing energy costs against hashrate output
By implementing these advanced strategies, vault operators can optimize their operations within the Mined.fi protocol, effectively managing the interplay between borrowed ALPH, mining efficiency, and fee structures. This approach aims to maximize returns for both operators and stakers while maintaining the long-term sustainability and competitiveness of the vault.
14. Future Research and Development
Mined.fi is committed to continuous improvement and innovation. Future research and development efforts will focus on:
Optimization of reward distribution mechanisms
Exploration of cross-chain compatibility to expand the LMTs utility and reach
Development of additional vault types to cater to diverse user needs
Integration with broader DeFi ecosystems to enhance liquidity and utility
Dynamic optimization of pool parameters using AI models
Implementation of machine learning algorithms for predicting optimal commitment strategies
These efforts aim to keep Mined.fi at the forefront of decentralized mining and block reward distribution protocols.
15. Conclusion
Mined.fi's decentralized vault system represents a significant innovation in the cryptocurrency mining space, offering unique opportunities for both general users and vault operators. By issuing sALPH and other Liquid Mining Tokens, Mined.fi creates a transparent and efficient system for decentralized mining exposure, effectively bridging the gap between traditional mining operations and DeFi primitives.
For general users, Mined.fi provides an opportunity to gain exposure to mining block rewards without the complexities of direct mining operations. This democratization of mining investment through LMTs has the potential to bring a new wave of participants into the cryptocurrency mining ecosystem.
For vault operators, Mined.fi offers a platform to leverage their mining operations and potentially increase profitability through advanced strategies. The flexibility in vault creation and management allows operators to tailor their offerings to specific market segments or operational strategies.
As the protocol grows and evolves, it aims to provide increasingly attractive opportunities for all participants, contributing to the decentralization and accessibility of the mining ecosystem. With its innovative approach to combining mining and DeFi principles, Mined.fi is well-positioned to play a significant role in the evolving landscape of decentralized finance and cryptocurrency mining.
The future development roadmap, focusing on optimization, cross-chain compatibility, and advanced algorithms, demonstrates Mined.fi's commitment to long-term growth and adaptation to the rapidly changing crypto landscape. As the protocol matures, it has the potential to become a cornerstone of the decentralized mining ecosystem, driving innovation and accessibility in this crucial sector of the cryptocurrency industry.
Disclaimer: This whitepaper is a draft and does not constitute an offer for sale or solicitation of investment in any securities, commodities, or other financial instruments in any jurisdiction. Cryptocurrency mining involves risks. Past performance does not guarantee future results. Please review all documentation and understand the risks before participating.
Contact Information
Email: minedfi@proton.me
Telegram: t.me/mined.fi
Twitter: @mined_fi
Co-Authors:
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