EIP:918 is an Ethereum Improvement Proposal for standardizing mineable token distribution using Proof of Work.
The primary driver behind the standard is to address the very broken ICO model that currently plagues the Ethereum network. Token distribution via the ICO model and it’s derivatives has always been susceptible to illicit behavior by bad actors. New token projects are centralized by nature because a single entity must handle and control all of the initial coins and all of the the raised ICO money. By distributing tokens via an alternative ‘Initial Mining Offering’ (or IMO), the ownership of the token contract no longer belongs with the deployer at all and the deployer is ‘just another user.’ As a result, investor risk exposure utilizing a mined token distribution model is significantly diminished. This standard is intended to be standalone, allowing maximum interoperability with ERC20, ERC721, and future token standards.
The most effective economic side effect of Satoshi Nakamoto’s desire to secure the original Bitcoin network with Proof of Work hash mining was tethering the coin to real computing power, thereby removing centralized actors. Transitioning the responsibility of work back onto individual miners, government organizations have no jurisdiction over the operation of a pure mined token economy. Oversight is removed from an equation whereby miners are providing economic effort in direct exchange of a cryptographic commodity. This facilitates decentralized distribution and establishes all involved parties as stakeholders. The ERC918 standard allows projects to be funded through decentralized computing power instead of centralized, direct-fiat conversion.
The Ethereum blockchain in its current state exists as a thriving ecosystem which allows any individual to store immutable records in a permission-less, invulnerable and transparent manner. Recently, there have been proposals to mitigate some initial ICO investment risks through the introduction of the DAICO model that relies on timed and automated value transfers via the smart contract tapping mechanism. However, this does not align a token smart contract as a non-security and still has the potential to put investors at risk if not implemented carefully, relying on centralized actors to be fair and community intended. Allowing users of the network direct access to tokens by performing computations as a proof of work supplies allows any smart contract to distribute a token in a safe and controlled manner similar to the release of a commodity.
As of 2017, all Ethereum token distribution methods were flawed and susceptible to Sybil attacks. A Sybil attack is a form of computer security attack where one person pretends to be many people with multiple computer accounts in order to manipulate a system in a malicious way. ICOs and airdrops are highly susceptible to these type of attacks so there is no way to verify that all ERC20 tokens distributed by the deployer were doled out fairly or unfairly. Proof of Work distribution is resistant to Sybil attacks. This means that ERC918 tokens are among the first trustless Ethereum tokens in the world. The distribution of ERC918 tokens is fair because they are allotted via an open, decentralized mathematical algorithm (that anyone can view on the mainnet blockchain) and not a centralized human monarchy.
ERC918’s first incarnation (and inspiration) was the 0xBitcoin project that launched in early 2018. Since then, several projects have realized the standard in innovative and creative ways. Catether (0xCATE) erupted early and additionally mints payback tokens during transfer operations to offset gas costs. 0xGold and 0xLitecoin each implement the first on-chain merge-mining with 0xBitcoin and the Mineable Gem project extends the standard onto a non-fungible collectible artifacts, whereby each gem has a unique mining difficulty. The Mineables project is a newer initiative that provides users with the ability to create mineable ERC20 tokens on-chain without writing a line of code and includes a virtualized hashing artifact market that allows miners to purchase on-chain vGPUs to improve mining difficulty and rewards.