Following the announced forthcoming launch of Nxt’s Ardor Blockchain, a near-anonymous and leading investor within the NXT community dubbed ‘Megalodon’ is offering 5 million (c.$150,000) in NXT digital tokens to anyone who runs NXT nodes. Requiring no registration to participate, potential parties need automatically to download the NXT client and run the node.
Not to confuse matters, NXT is the digital currency that acts as the fuel for the Nxt eco-system. Nxt is a ‘peer to peer’ (P2P) network, meaning that the network is made up of a large number of equally important units (i.e. nodes), each consisting of an individual computer running the Nxt software. In theory, all nodes communicate with all other nodes, in effect creating a decentralized super-computer.
Running a node in basic terms means that someone is running the Nxt software on their system – or creating dedicated systems to run Nxt – and is therefore contributing to the overall network. Node operators will, under this bounty program, receive extra rewards for supporting the Nxt network.
The number of nodes is important to ensure security of the network: a small number of nodes can be compromised or attacked much more easily than a larger network.
This would not be the first time investors have put forward bounties to encourage other developers to join. For example, the Tel Aviv-based venture capital fund Aleph announced back in June 2014 the first of a series of $50,000 bounties aimed at boosting activity among entrepreneurs and developers in Israel’s bitcoin space.
The bounty involving Nxt is being distributed via the so-called NXT ‘forging’ process, the equivalent to Bitcoin’s ‘Proof of Work’ mining with a deterministic lottery. Participants need at least 1,000 NXT for 1440 to run a node and a chance of mining the winning block.
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How It Works
Nxt works on the ‘Proof of Stake’ (PoS) principle to provide security for the overall system, as opposed for example to Bitcoin, which runs on the ‘Proof of Work’ (PoW) principle.
“PoW requires a substantial investment in hardware to participate in a PoW-based system, as security is provided by a competitive race to solve a mathematical puzzle,” explains Dave Pearce, a Board member at Nxt. “The first to solve the puzzle, gets the rewards associated with creating the next block in the PoW blockchain. This process is also referred to as ‘mining’.”
‘Forging’ Within Nxt
In a ‘Proof of Stake’ system, there is no direct hardware-based competition. Instead each individual NXT holder can enter their NXT holdings (or stake) into a form of lottery to decide who receives the right to create the next block. This is referred to as ‘forging’ within Nxt, and as ‘staking’ in some other PoS systems.
But the upshot is that it means that larger NXT holders will receive more rewards from securing the network by staking than smaller holders.
“In order to cut down on overhead processing, the design decision was taken to allow only those Nxt accounts with a balance of 1,000 NXT or more to participate in the PoS staking process,” says Pearce.
A Deterministic Lottery
To be accurate, the Nxt forging algorithm is “a near-deterministic lottery” according to Pearce, adding: “The results of the algorithm can be predicted with reasonable accuracy for the next block. But prediction becomes increasingly more difficult with blocks further in the future.”
Receiving the bounty will be determined by the account balance of participants. Large and significant NXT holders and community members are passing their right to the bounty to new Node runners. For ‘runner’ substitute ‘operator’. These are the people who actually set up and maintain the nodes that form the decentralized Nxt network.
The bounty is open to anyone and represents one of the first times that a crypto currency community member has actively promoted a decentralized financial platform to interested parties.
Megalodon’s Interest & Motivation?
But one might rightly ask why would Megalodon being doing this in the first place and what is their motivation behind their move?
Well, Megalodon, who got their nickname from the Nxt community as a reference to the whale-eating prehistoric shark, is the largest current single NXT holder. He/she maintains near-total anonymity. As an aside a ‘whale’ is crypto-currency slang for a large investor or stakeholder.
Megalodon – or let’s use Meg for short – has always supported the Nxt community. And, their basic motivation appears to be the “long-term success of Nxt”, rather than short-term financial gain, according to Pearce.
He further explains: “By offering a percentage of their holdings to a bounty program, Meg can encourage the growth of the Nxt network. This growth will probably be reflected in an increase in the value of NXT itself, so Meg’s contribution to the bounty program will probably be an effective investment for them.”
Nxt can be run directly from a desktop and the Nxt community provides assistance to help users in their setup process, through the nxtforum or Nxt Slack , a project collaboration/communication platform. Specifically, it is used for day-to-day communication within the Nxt community and various project teams.
Bas Wisselink, Nxt Foundation board member based in The Netherlands, commenting on the development said: “This bounty is an excellent endorsement of the Nxt financial platform from the people who use it. We hope it will also encourage more people to sign up and see for themselves the benefits second generation Blockchain technology can bring to businesses and transactions in general.”
He adds: “As scalable Blockchain technology becomes more accessible to people lacking extensive technical backgrounds, we expect more and more people to join the Ardor platform and enjoy the benefits of a faster, more transparent, and secure financial system.”
Nxt Foundation’s mission is to drive blockchain development into the future. And, with the help of the Nxt community, Nxt is striving to create what it describes and touts as “a secure, decentralized platform for governments and businesses worldwide.”
Bounty Program & Investment
While Meg has not announced a cut-off date for this bounty program, Nxt’s Ardor blockchain platform will go live on a Testnet (non-production) system in the last quarter of 2016, with a production system expected to launch in the first or second quarter of 2017.
From a purely investment point of view, Pearce argues that “Nxt is very undervalued right now. And, it is possibly the most technically advanced and certainly the most mature blockchain platform.”
Nxt’s market capitalization has ticked up since the middle of this June before a recent slip, and stood at just over $23 million (m) as at August 23 and had seen volume (24hr) of $521,004, which is the equivalent of around 890 Bitcoin (BTC). This ranked it in 13th place in the top 20 crypto currencies – behind Factom (12th) but ahead of Waves in 14th with a market cap c.$17.5m and Emercoin in 15th (c.$15.5m), respectively.
However, Nxt has always suffered from a lack of marketing, though grass-roots adoption is “increasing steadily” according to the founders.
The Nxt executive nevertheless adds: “We expect that Nxt will become an analogue to Linux: everyone will have heard of (and used) Windows/Bitcoin, but will probably not know that Linux/Nxt is the system used for a massive range of applications: the Internet, Apple AAPL +0.41% OS and Android are all dependent on Linux.”
Nxt also corrects all of the current issues with Bitcoin while offering what Pearce describes as “a very secure system”. He boldly contends too that: “If or when the Bitcoin network fails, Nxt will be a logical choice as a replacement.” Only time will tell.