What is the meaning of “mining head” in DeFi?

08/10/2023 13:07 • AI Insights • 70 views

What is mining?

The concept of mining in DeFi is simple – it involves staking project coins in a wallet to earn profits through lending and borrowing.

These types of products are essentially mined using liquidity. In other words, by participating in liquidity mining, you can obtain mining rewards and withdraw your assets at any time.

So what does “mining head” mean in DeFi? This mainly explains what mining head is.

First, let’s understand the concept: What is the essence of mining head? For example, if you have 100 Ethereum and you need to lock 100,000 Ethereum.

If you want to trade on decentralized exchanges or other decentralized financial platforms, you must first deposit 1 ETH. If you want to buy a certain token and exchange it on a centralized exchange, you can place it on platforms like Uniswap because your ETH has already been settled.

But if you want to sell a certain coin on a DEX to obtain these coins, it is better to use these coins for other purposes.

However, if you are not willing to do so, it makes no sense.

So how high is the cost of mining head? I have previously written an article on how to calculate the daily earnings per user. Let’s take a look at the results.

Here is a graph: [Link to the graph]

This is my first analysis article, and I hope it can provide guidance. 1. Distribute profits to each investor from the beginning of mining until the end of mining head.

2. Gradually release profits after the end of mining head, and automatically release them when the earnings from mining exceed the target.

3. Unlock rewards immediately once the earnings exceed the expected amount, which is 20% of the initial investment. If the price is lower than this amount, the additional reward will be given back to the user.

4. Since each return is fixed and irreversible, the more mining head produces, the lower the profit rate will be. Of course, there are incentives to encourage investors to hold for the long term and prevent this practice from causing problems.

5. When the earnings from mining exceed the set value, the profit rate will automatically decrease, resulting in new earnings, which will then affect the investment decisions of investors.

6. The revenue will gradually increase over time, and the profit will also decrease until the total income comes down, which will cause significant fluctuations and losses.

What is mining head

According to official information, what is mining head?

Mining head of Bitcoin is a part of the Bitcoin blockchain. It utilizes a specific network protocol (called the “consensus layer”) to perform the proof-of-work mechanism, which verifies transactions and decides how to handle them, ensuring security and reliability. Since the entire network is operated and maintained by computer computations, only block producers can participate in Bitcoin mining, which prevents many miners from entering the network as they need to obtain block rewards to continue mining new bitcoins or other cryptocurrencies. Additionally, to ensure smooth activities on the chain, miners need enough time to confirm their data in the blocks they mine. If a project successfully solves this problem, its code has been open-sourced. Therefore, the best scenario for those who want to become Bitcoin miners is to find something they want to do and sell it to users on exchanges, which can help avoid hacking attacks, password loss, and other vulnerabilities.

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What is the meaning of “mining head” in DeFi?

What is mining head

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