One of the biggest draws of the early crypto days was the feeling that a new, modern gold rush had been discovered. In 1848, miners traveled from all parts of the world to San Francisco after having sold everything to make the trip. They bought a pickaxe, a handful of basic supplies, and set off into the hills with nothing but a dream of striking gold. The fever of this gold rush captured the hearts and minds of people around the world, because it represented the dream that anyone, of any means, could change their life forever with hard work and a handful of luck. There is something hardwired into the human brain around situations like this, and we are drawn to the idea of hard work creating the opportunity for life changing riches.
(Above – Photo by N. Eskue on Midjourney)
While there have been many types of “gold rushes” throughout the years, many have been underwhelming or have turned out to not be as egalitarian as many had hoped. However, few have captured that “wild west” feel of traditional gold rushes like the crypto mining fever of recent years. The world went from knowing nothing about crypto and Bitcoin, to learning that anyone with a powerful computer could “mine”, effectively putting their processors to work 24/7, and as a result earn money as they competed with other miners. The rewards might be small, but could also be life changing, and we saw many people of modest means become very wealthy overnight. This phenomenon caught hold and changed our modern culture, allowing the world to see what a modern gold rush might look like. Further, it didn’t require people to sell everything and move to some remote part of the world. They could do this from home.
So what happened to that magical sense of gold rush? Who were the winners and losers? And how has this sense of mining transitioned as crypto as an industry has matured? Let’s dive into the rise and fall of traditional crypto mining, why things changed to a non-mining standard, and how an organic type of mining from platforms like Spacemesh has introduced an organic and balanced approach to mining and rewards.
Leading Consensus Methods
The core of the original crypto gold rush was a consensus method called Proof of Work (PoW), now well known by the crypto community and even vaguely understood by many outside the industry. Essentially, high-performance processors would work to solve an incredibly complex equation for the next block in the blockchain, and those that contributed to solving it would be rewarded with Bitcoin. This level of complexity is the cornerstone of Bitcoin’s security and a big part of what put blockchain technology on the map. This, however, led to inevitable conclusions. Those with money, either early winners in the gold rush or corporations who wanted a piece of the reward, spent massive amounts of capital to create crypto farms, or large setups of linked high powered processors. Some were so massive, and the rush so large, that a noticeable spike in both the energy consumed and heat generated caught the attention of the increasingly environmentally-focused society. What was once an exciting opportunity for anyone to make money became a “the rich become richer and destroy the environment doing it” story. This mining is still taking place, but at a certain point many blockchains, most notably Ethereum, shifted away from PoW consensus. It was too energy intensive, but it was also too slow, not scalable at all, and did not support the dreams for a vibrant Web3 community.
As Ethererum grew, its use of PoW became a major liability, with the ecosystem becoming famously slow, charging ridiculously high gas fees, and sparking a renaissance-level explosion of frustrated platforms striking out on their own to find better solutions. Ethereum had long announced it was changing consensus methods in its new version, but this changeover took a very, very long time. However, once it happened the ecosystem seemingly improved overnight, utilizing the now common Proof of Stake (PoS) method, which relies on a large number of nodes that have staked a minimum number of platform tokens for the privilege. Instead of using complex equations, the process relies on a big enough community with skin in the game to ensure that the blockchain grows efficiently and correctly, and that data continuity is maintained. This method is significantly faster, cheaper, and more scalable than PoW, and continues to be popular today (though many platforms have modified the method in different ways). PoS helped to prove that crypto is not a clunky fad that has very limited use case potential. Instead, the many unique attributes of blockchain can be used to create an entire thriving ecosystem. However, this innovation dashed many of the concepts that made blockchain such a fascinating dream for many. There was no gold rush, and the sense of communities working together was tempered by a feel of corporate boards (those with enough to stake and become nodes) controlling and benefitting from the system.
Trending Toward Inclusiveness, Organic Growth
This long journey from gold rush to corporate boardroom seems to be coming full circle, with new consensus methods taking the focus back to communities working together, but learning core lessons about scalability, efficiency, and the ability to include both big and small players. The biggest platform growth seen since 2023 is certainly Spacemesh, which has pioneered a consensus method called Proof of Space Time (PoST). Instead of traditional mining, participants dedicate a portion of their computer’s storage during a certain period of time (called an Epoch). These miners, or “smeshers”, come in all sizes. While a traditional mining farm could participate, so could an individual who isn’t using all their computer’s memory. And unlike PoW, the rewards are distributed much more fairly according to what was committed by each individual. While this takes away some aspects of the luck seen in gold rushes, it’s this same “luck” that means the vast majority of individuals will work very hard with zero rewards. Communities like Spacemesh acknowledge this problem and solve it through distributed rewards. The fact that they can do this using an untapped resource (extra memory) is the real value. Few can just tie up their money in purchased and staked tokens, but nearly everyone has some amount of unused computer capacity.
So what has been the community reaction to this evolved consensus? This is where we start to see the “rush” in the term gold rush. Starting in July 2023, each epoch has seen a near exponential growth. The platform made the news mid year when their numbers grew from 2,807 participants in Epoch 2 to a whopping 32,034 downloads in Epoch 4. Has this growth slowed down? Not really. The latest numbers, less than six months after launching, show that Epoch 13 now has a staggering 450,000 nodes, with a combined storage capacity of 460 Pebibytes (for reference, a pebibyte is 1,130 terabytes). This growth is grassroots, has almost no barrier to entry, and a fair reward system. Because of this, there is almost no limit to continued growth at this pace for the foreseeable future.
What’s Down The Road?
This type of growth is exactly what the blockchain/Web3 community needs. We’ve learned much from those early, wild days of PoW, and have seen that while PoS has many benefits, it loses touch with that sense of community. With consensus methods like PoST emerging and the global community responding very strongly, this should signal a much better balance for the industry in the days ahead.
Brian Wang is a Futurist Thought Leader and a popular Science blogger with 1 million readers per month. His blog Nextbigfuture.com is ranked #1 Science News Blog. It covers many disruptive technology and trends including Space, Robotics, Artificial Intelligence, Medicine, Anti-aging Biotechnology, and Nanotechnology.
Known for identifying cutting edge technologies, he is currently a Co-Founder of a startup and fundraiser for high potential early-stage companies. He is the Head of Research for Allocations for deep technology investments and an Angel Investor at Space Angels.
A frequent speaker at corporations, he has been a TEDx speaker, a Singularity University speaker and guest at numerous interviews for radio and podcasts. He is open to public speaking and advising engagements.
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