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Blockchain, Active inference, Cost of computing, Economics of maintenance

Questions

  • Where is discussed the option of being rewarded with qi for work done even if you don't create the block?

Goal: Distill an exposition of Qi and Quai in terms of

  • Problem: want endogenous pricing, independent of fiat currencies
  • Principle: bimetallism, Gresham's law
  • Analogy: relate them to entropy and free energy, or kinetic and potential energy
  • Formula: formulate a useful calculation such as for a Kalman filter

Qi Quai

  • Qi: Issuance rate proportional to hash, tied to mining difficulty, making it a proxy for energy costs. (Stable price)(Medium of exchange)(Fixed denominations, no scripting)(Emissions on logarithmic curve.)
    • Explanation of Qi emissions and exchange protocol.
      • Rewards are issued in direct proportion to the energy (hash) difficulty required to mine blocks.
        • Think of difficulty as a proxy for energy costs.
        • When mining becomes more energy-intensive (higher difficulty), Qi rewards increase proportionally to compensate miners. When energy costs decrease (lower difficulty), Qi rewards decrease accordingly.
    • GPU efficiency (measured in flops) doubles every 2.69 years due to smaller transistors and increased core counts, plateauing after 2030. Qi adjusts accordingly.
  • Quai: Issuance rate linked to bits of difficulty, increasing at a diminishing rate to create scarcity. (Exponential growth in price)(Store of value)(Smart contract capabilities)
    • Quai emissions Quai uses a logarithmic emission curve. Token inflation remains below value creation - maintaining deflationary pressure.
    • block reward proportional to log-base-2 of difficulty (number of leading zeroes in the target value).
    • The constant of proportionality evolves with the launch of Qi, becoming more dynamic through the controller system for Quai/Qi conversions.
  • Can convert qi to quai or quai to qi at the protocol rate.
  • When there is demand for qi, it is mined (if it is more expensive than the production rate), and quai is converted to qi.
  • When there is a surplus of qi, then it is burned to mint quai.
  • Conversion
    • The block reward function determines potential Qi emissions, but miners choose whether to receive Quai or Qi rewards. This means Qi supply reflects actual demand from miners, who typically choose based on market conditions and utility needs.
    • Anyone can convert between Qi and Quai at the current mining reward ratio - not just miners.

Selling points

  • Get rid of MEV (maximal extractable value), relevant for decentralized finance, defi, DEXs (decentralized exchanges)
  • Can dynamically increase supply transactions with demand and guarantee that if you mint an NFT (non-fungible token) it will stay at one penny, relevant for https://rarible.com to guarantee low price large quantity mints over time
  • Payments: Decentralized scalability and stability (endogenous unit of account)(because linked to the price of electricity)(relevant for unstable nation state currencies)

Mechanism for consensus

  • Proof of entropy minima
    • energy to computation to symbolic value transformation

Steph Macurdy

  • A theory explaining the interconnected drivers of 21st-century crises, especially global catastrophic risks, and a triage strategy involving decentralized technology.

Thoughts

  • An energy market is a very recent development, a consequence of globalization, electrification, the petroleum industry.
    • Oil 30%, coal 28%, natural gas 23%, biofuels and waste 9%, nuclear 5%, solar and wind 3%, hydropower 2%.
    • IEA Energy Supply
    • Traditional fuels were wood and charcoal. Animals were used, and also wind and water. Coal was used in China in the 1200s and in Europe during the Industrial Revolution 1760-1840. Oil was negligible before 1850. Natural gas was used widely with the opening of pipelines in the 1920s.
  • Energy is the ultimate store of value Consider energy reserves.
  • By pegging Qi to energy costs, we create a currency with real-world stability and intrinsic worth. The energy market, in the short term, is volatile because the market is inelastic and thus very sensitive to supply and demand.
  • Energy backing reduces volatility Can you convert Qi to energy at a fixed rate?

Literature