In a proof of work (PoW) system, a reward is given for undertaking complex computational work involving solving problems. This exercise is termed mining and people who undertake this work are called miners. Miners compete with each other to find solutions to problems and are rewarded whenever they are able to do so first.
In theory, this is a wonderful principle but it requires complex hardware and a lot of electricity to run this hardware.
On the other hand in a proof of stake (PoS) system, the creator of each block is determined by the wealth it holds, there are no rewards involved, so the miners get the transaction fee.
The cost-effectiveness of PoS is immense compared with PoW.
GoldMint is a platform that operates a Blockchain based cryptoasset called GOLD and they deploy a proof of stake system unlike proof of work, which is used by some other Blockchains like Bitcoin. GoldMint has taken an innovative approach to handling a precious commodity.
Cointelegraph has already written in detail about their Custody Bot apparatus that will help in the transfer of gold to Blockchain.
As Dmitry Pluschevsky, Founder, CEO GoldMint explains the rationale behind picking PoS:
“The most important thing is the speed of transactions as well as low producing costs for miners owning MNT. With PoS they don’t need to buy expensive hardware neither to pay a lot for the electricity. Due to these benefits, the attraction to the GoldMint Blockchain for miners will increase. In other words, PoS is faster and more economical than PoW, as it reduces energy costs and makes it possible to mine using an ordinary laptop.”
PoS + Graphene = Friends
There are reasons why proof of stake models are becoming more commonplace. It is already being used in Blockchains such as Graphene which include Steem/Steemit/GOLOS social networks, NXT (Including Waves) etc.
Ethereum too is planning a move to PoS, all of which are indicators that PoS is mature and production ready.
There are also other cryptocurrencies that are trying a hybrid approach which combines PoS + PoW, Steem being one of them. GoldMint has chosen the Graphene Blockchain.
Dmitry Pluschevsky tells us the reason for making this particular choice:
“Implementing PoS “from scratch” can be very difficult and time-consuming. That is why GoldMint has chosen Graphene as a basis for its Blockchain. Graphene is a time-proven solution and has a large community of developers.”
How can you get MNT and GOLD tokens?
In order to get hold of GoldMint’s MNT and Gold tokens, you won’t have to wait very long since their crowdsale is all set to begin in just two weeks on Sept. 20, 2017, the successful pre-ICO in June 2017 has already raised over $600,000 in less than 36 hours.
The token on sale is called MNT and it is a precursor to the token GOLD, whose value would be based on its namesake precious metal. MNT is an ‘internal token’ and is used to confirm GOLD cryptoasset transactions, and there is a maximum cap of 10 mln MNT tokens that will exist. This is in line with the PoS concept that the number of coins usually stay fixed.
So how do both of GoldMint’s currencies work? Investors who participate in the crowdsale will be receiving MNT.
Revealing the benefits the holders of MNT tokens would be able to reap, Pluschevsky tells us:
“The relation between GOLD and MNT is for now only related to the miners operations. Cause Miners (who own MNT tokens) will earn as much as 75 percent in GOLD commissions for validated transactions.”
GOLD can be purchased at the moment with fiat currencies like the US dollar. In the future when GOLD is listed on exchanges, users will be able to buy it with major cryptocurrencies including MNT. GoldMint guarantees Gold cryptoassets buyback for fiat according to the principle:
The buyback price for one GOLD equals one ounce of gold of 999 quality on the LBMA + Q%. GoldMint will be updating prices in real time on its site. In case money is accessed by MasterCard/VISA credit cards or PayPal, standard commissions of these payment systems are charged.
The redemption of GOLD leads to burning of corresponding units after they are transferred from a GoldMint wallet to a special GoldMint account. The equivalent amount in fiat currency is then transferred to the client.
What is good for miners is good for the environment
The choice of proof of stake model is good for another reason as well. Proof of stake involves using far less electricity than proof of work.
Medium estimated that the entire Bitcoin network (PoW) would consume 835.4 kilowatts or 7.31 gigawatt-hours per year, which is about the yearly consumption of 674.5 American homes.
Talking to us about the environmental consequences of mining Pluschevsky explains:
“Nowadays Blockchain industry is spending no less than 0.3 percent of all electrical PoWer on mining. Therefore it is accordingly responsible for the proportional amount of harmful atmosphere pollution.
It is unacceptable for electronic technology of the XXI century. Therefore, changing for PoS is inevitable and we in GoldMint will try our best to facilitate this process.”
An innovative approach backed by solid experience
The idea of using PoS will also lead to more opportunities for holders of MNT tokens to capitalize on gold transactions.
Pluschevsky during his stint at LOT-ZOLOTO already helped pawn shops in Russia convert 450 kg of 595-carat gold a month and delivered a revenue stream of ₽500 mln per month.
His experience with LOT-ZOLOTO and relationships with the pawnshop industry in Russia can help GoldMint turn Gold into a hedgeable and easily transferable commodity.
Their technical approach of using a future ready PoS model thus fits in nicely and makes sense to both investors and future users of GoldMint.
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