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The term mining in cryptocurrency first started with Bitcoin. Bitcoin mining is also called computing power mining. Through the PoW consensus mechanism and the SHA-256 algorithm, Bitcoin generates a new block every 10 minutes. A new block can be packaged and obtained only when the computing power meets the conditions. The computing power is a measure of computing speed (mining machine). The higher the computing power, the greater the possibility of getting bitcoin rewards.
With the development of the blockchain and encryption market, mining has evolved into many types, such as transaction mining, PoS mining, storage mining, pledge mining, liquidity mining, etc.
Transaction mining means that a certain number of platform tokens or other currencies will be rewarded by the platform that provides transaction services during each specified period and distributed to those participating in the transaction according to specific rules based on user transaction volume or transaction fees and other data.
The FCoin exchange first inspired the concept of transaction mining. In May 2018, the "trading mining" model was introduced by the FCoin exchange, and the market value of the exchange reached 60 billion U.S. dollars in just half a month. On June 26, 2018, FCoin's 24-hour trading volume hit a record of US$17 billion, when the total 24-hour trading volume of the top ten exchanges during the same period was only US$6 billion. FCoin is best known in the US and Europe because it once paralyzed the Ethereum network, causing the exchange coin FToken price to rise about 100 times in two weeks. However, according to CoinMarketCap data, in just two months, FCoin's 24-hour trading volume dropped dramatically to US$160 million until it disappeared. The decline in FCoin trading volume and the ultimate failure were due to its token design's essential flaws. The daily release and market sell-off eventually led to the collapse of the FToken price.
Although the concept of transaction mining has been controversial from the beginning, the daily surge in transaction volume data will prove that the operation of the transaction mining incentive mechanism is practical and effective. There is no doubt that through trading and mining exchanges, the commission income paid by users is returned to users in an incentive manner, which can greatly increase the trading volume and liquidity of the exchange and attract more users to participate.
Through the example of FCoin, it is crucial to understand that the success of transaction mining is dependable on a good token mechanism design. The current hot market for trading and mining should belong to the decentralized exchange DYDX. So how is it different from FCoin's transaction mining mechanism?
First of all, DYDX has its own set of calculation methods, which are calculated and distributed based on handling fees and open positions. Secondly, the tokens DYDX obtained by transaction mining are not received immediately but in each epoch ( It will be unlocked after 28 days), and the amount of DYDX for trading mining rewards is not fixed and will gradually decrease over time, which significantly reduces the selling pressure of tokens and prevents the price collapse to a certain extent.
According to the design of DYDX, the transaction mining incentives will be issued within about 5 years and will be issued once every epoch (28 days). At present, few DYDX tokens are circulating in the market with a market value of about 800 million US dollars, but with the increase in the number of tokens released, the impact on the price and transaction mining can only be verified by time.
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