DAO Case

The easy way

Executor DAO

• Takes in deposits as xBTC
  • Can offer direct BTC deposits via Magic
• Issues out DAO tokens
• DAO “hires” mining operator(s) to mine for it (similar to Maple finance delegate)
• DAO issues xBTC to miner

Miner(s)

• Receives xBTC and converts via Magic or out of band
• Mines
• Deposits proceeds back into DAO

Explanations

By having a straightforward process for creating and deploying mining pools smart contract and interface a few things will happen:

• will be easy for everyone to deploy a mining pool
• will be easy for users to join it and deposit funds through an intuitive web interface
• DANGER it will depend on the miner that gets the funds from the pool to do the right thing with them ⇒ the miner could stop mining and leave after he has (some) funds in the bitcoin address
• DANGER people can leave the pool easily and cut that looses but have no guarantee the next pool, that they will deposit the funds to, will not do the exact same thing

Because of the current interaction between STX, BTC, Magic Protocol the fees for mining should be sent for multiple blocks in advance ( at least 100 blocks, up to 500 if magic protocol does not have a supplier for that amount in that moment ), creating an even bigger loss from the start.

Eg. of implementation for this

** includes the problem of having the funds as miner on the step 3 **

1. X, Y, Z set up the software for mining

   1. Stacks Node
   2. Bitcoin Node
   3. Mining pool Smart Contract
   4. Front End Interface website to communicate with the Smart Contract
   5. something to keep track of xBTC/ BTC locked/used and the STX earned ( STX converted to xBTC next )
      • https://magicstx.gitbook.io/magic-protocol/guides/technical-overview

2. A, B, C, D commit to X mining pool by submitting xBTC to the smart contract

   • the smart contract keeps track of how much xBTC and STX each user has

   • the BTC used is directly proportionate with the amount each one has invested

     user	A	B	C	D	mining pool
     xBTC invested	0.1	0.2	0.3	0.4	1
     sats fee per block	1000	2000	3000	4000	10000
     STX won	100	200	300	4000	1000

   • smart contract gives the ability to auto-exchange the STX to xBTC and increase the values in the mining pools by updating the smart contract

     • if user A and B want to auto exchange to xBTC after winning 1 block from 4 blocks in which they participated:

       • A: 0.0996 sats + 100 STX to sats
       • B: 0.1992 sats + 200 STX to sats
       • C: 0.2988 sats
       • D: 0.3984 sats

       the rapport between participants in the mining pool changed

       initially: A = B/2 = C/3 = D/4

       after mining with rewards: A = B/2; B/2 > C/3;

       the rapport has to be updated by an operation that will trigger the calculation

3. Miner exchanges the xBTC unlocked to BTC ( Magic Protocol ) and uses it to mine STX

   • because the miner has control to the equivalent of multiple STX blocks mining fees he can take the funds and stop mining and nothing can stop him *1
   1. If the block is won, send a BTC transaction, mine the STX block, and claim rewards
   2. else, nothing
   3. because magic protocol technicalities:
      1. for the swap to happen it needs a supplier who accepts it, the transaction can be locked for x amount of blocks ( 200 -500 blocks = 1.5 - 3.5 days ) and still not happen
      2. so the miner should already have access to that amount of BTC
      3. if the miner has the amount for a few hundred blocks in his custody, he can stop mining and leave with those funds
      4. https://magicstx.gitbook.io/magic-protocol/guides/technical-overview
   4. for LNSwap
      1. swaps funds at a given rate by the LNSwap pool
      2. can’t swap big amounts in a single transaction ( max 5000 STX once )
      3. if continuously doing the process of swapping only xBTC to BTC the pool will become more illiquid

   *1 - the whole process can't force the miner to secure it with an equal amount as collateral because that would defeat the need for the other participants to the mining pool. If I can mine alone with that amount, there is no need to mine together with you and others and have more fees and % because of all the intermediate swaps