Qubic...I can't wait until this is ready for the Real World!
What is Qubic?
Quibic advertises themselves as:
The first ever useful Proof of Work L1 Blockchain
It immediately feels enticing.
What are some of the key features of qubic crypto?
The headline features for Qubic read like a list of solutions to "Problems in crypto that need to be solved to make this a total disruption". Here's a few:
- Fee-less transactions
- Offline payment verification
- Smart contracts that are:
- the fastest
- Still decentralized
- Potential for IPO's
- Potential for passive income
- 55-million transfers per second
- An open-source AI built on top of the qubic protocol
- Oracles
They even have an amazing founder, Sergey Ivancheglo, known as CFB. For those who don't know, CFB was one of the founding members of the well-known IOTA and NXT crypto projects.
What Problem(s) Does Qubic Solve?
From my analysis, it seems that Qubic is looking to solve all of the crypto problems, plus a couple of extra ones 🚀
- Fast Transactions Per Second - 55-million
- Useless Energy Use - Useful Proof-of-Work
- Open-Source AI
- Feeless Transactions
- Offline Payment verification
How Does Qubic Tokenomics work?
I eventually built a model of how this project works from the qubic docs. The complexity of the project, along with its somewhat scattered documentation, really made this challenging, which is an issue I'll talk about later.
Qubic Tokenomics Overview
The first concept that can be a bit of a brain twister is the Qubic token. Qubic proposes a model that equates the Qubic token with energy usage. As the protocol is used (and energy is used), Qubic tokens are burned. The documentation mentions several times that this is to try and equate work being performed with energy being burned, with the goal of maximizing energy efficiency.
To maintain liquidy of supply in the network, each week 1 Trillion (yes, with a T) qubic tokens are emitted into the network which are used to pay the contributors to computors, miners, and arbitrator (more on these in a moment).
The Qubic network puts an upper limit on the total number of tokens available in the network (1,000 Trillion), and uses the burn mechanism to balance supply.
I simplified this model in my head to the following:
- Every time an action is performed on the network, the amount of Qubic tokens is reduced
- Every week, a trillion more Qubic tokens are added back to the network
- Supply is limited to 1,000 Trillion
How does Qubic incentivize mining?
To incentivize the provision of computing resources, Qubic takes an interesting approach. Resource provision is broken into three components. The documentation actually refers to only two components - computors and miners - but there are also references throughout to a mysterious entity called an Arbitrator.
I simplified these components as follows:
- Computors. These are like the super-computers of the network. There can only be 676 at a time, and they have essentially commercial-grade computing requirements (more on that). Computors receive a share of the 1 Trillion Qubic tokens emitted each week based on their performance.
- Miners. These are supporters of computors. They receive tasks from computors and are compensated by the computors for their work. There is no code-based limit for the number of miners in the network.
- Arbitrator. The arbitrator is a super mysterious entity with the job of
resolving conflictswhatever that means. There's honestly not a huge amount of information about what this is or how it works other than high-level statements about acting as the arbitrator for disputes.
There is then incentivized competition for Computors to be more efficient and effective at their tasks. This increases their chances of receiving a share of the network rewards, and they can do this by being:
a. Better at doing computing tasks themselves
b. Paying miners to join in helping them
If a Computor underperforms, they lose their Qubic. Guess where they go? Yup, arbitrators.
At the time of writing, there was literally one paragraph on Arbitrators. Here's a screenshot with a link:
What is Useful Proof-of-Work
The second brain-twister for me was what I feel is a truly disruptive innovation from Qubic. It's called 'Useful Proof of Work'.
When I finally understood what it was, I had a literal 💡moment where I thought to myself:
This totally makes sense, I can't believe no one has ever thought of this before!
To understand why I think this, here's a quick overview of what Proof-of-Work (PoW) is, why it's essential, and what Useful Proof-of-Work does.
PoW refers to a way of securing a blockchain. It requires computers to solve complex problems before contributing blocks to a blockchain. These blocks are then checked by other computers (nodes) in the network doing precisely the same thing, and only when a consensus is reached can the block be added. The first computer to successfully solve the problem and contribute a valid block receives a reward. The idea is that if the problem is hard enough, and enough people are doing it, the only way a fake block could be added to the network is if 51% of the network is 'owned' by someone. In the case of Bitcoin, this would require you to have 100's of billions of dollars and enough energy to power a small country. In essence, it becomes economically unviable for an attack to happen.
So far, so good.
The thing is about this PoW approach is that it gets computers to spend enormous amounts of energy (not to mention hardware and facilities) solving problems that have absolutely no use in the real world. They are by definition arbitrary.
Qubic proposes that instead of burning these resources doing nothing work, they instead be used to provide computing power to help train Artificial Neural Networks.
Brilliant!
It's an amazing concept and if they can pull it off, would be game changing.
Imagine the entire Bitcoin mining network, with it's thousands upon thousands of GPU's suddenly helping to train an AI!
What Is AIGarth?
The final component of Qubic is Aigarth. Honestly, there's not a lot of information about Aigarth other than a bit of broad corporate stuff about AI for the people (my words).
The team rightly points out that until they figure out Useful PoW, there's not much they can say here.
In essence, Aigarth is proposed to be an AI that runs on top of the Useful PoW I just explained. I'm not sure I buy into this approach for now, but it's certainly one logical conclusion you could draw from the masses of compute power that Qubic is trying to create.
Can I Make Money from Qubic?
Now I'll turn my analysis to how to make money from Qubic.
How Much Money Can I Make from Qubic Mining?
I'll start with the most accessible way to make money from Qubic. Mining.
Mining on Qubic refers to the process of partnering with a Computor to provide computing power and then get compensated for doing so.
You can read about my experiences installing the mining software here.
In the end, with a minimal amount of optimization and installation, I was able to get to the point where I could earn around 259,000 Qubic per day. About $0.43 USD with the current price.
This is encouraging given the price is at an extreme low right now.
How Much Money Can I Make with a Qubic Computor?
According to the Qubic Tokenomics page, Computors are the main way to earn Qubic tokens. There can be no more than 676 Computors, and from what I could understand, all other things being equal, they are equally compensated.
With Qubic emitting 1 Trillion Tokens per month, the maximum revenue a Computer can receive is 1.479 billion Qubic per month.
At the time of writing, the Qubic token was 0.000001698 USD.
At the price when I wrote this, a Qubic Computor has a theoretical maximum earning potential of
1,479,000,000 x 0.000001698 = $2511.342 USD per week
At the highest point of the coin, when it was 0.00001244, this would have resulted in earnings of:
1,479,000,00 x 0.00001244 = $18,398.76 USD per week
Not bad!
You can check out the current market price of Qubic on CoinMarketCap here.
Unfortunately, when I wrote this article, I didn't have the cash to build a Qubic Computor of my own, so I can't really offer any thoughts on hardware costs, revenue sharing with miners, or general maintenance / energy costs.
I know that Qubic recommends that a Computor have at least 500Gb of RAM which is pretty hefty.
How Much Money Can I Make from Purchasing Qubic?
At the time of writing, I couldn't find a way to calculate a reasonable maximum price for Qubic, as there are too many unknowns and variables. Here are some thoughts to at least get started.
- The price of Qubic at the time of writing is ~86% below it's maximum price
- Qubic has released 10% of the available supply into the market
- I could not find a figure for the current weekly burn rate of the Qubic token. This is important because the 1 trillion Qubic being released each week is supposed to be offset by a burn rate as the protocol is used.
- The current market cap of Qubic is $183.03 Million USD, making it rank 225 in the crypto world
If I was to use this as a baseline, I could make some of the following observations:
- If Qubic were to enter the top 10 cryptocurrencies, it would have a market cap of at least $13,839,245,614 ($13.8 billion) as of 21 Aug 2024. This would be an increase of 75 x on the current market cap (or 7500%). Therefore, even if 100% of Qubic's market cap were released, the price would still have to increase by 7.5 x to achieve this.
- Any calculation of Qubic's theoretical market cap doesn't consider any value added from Aigarth (or just generally Useful Proof-of-Work). Depending on your perspective, with AI being the next great investment frontier, you may feel that Qubic has the potential to go far higher than 'just' the top ten cryptocurrencies, with a commensurate possible return increase.
- If the Qubic token returned to it's previous high, it would be an increase of 7.3x or 730%
- It's impossible to predict the price impact of Aigarth (or some other AI built on top of Qubic), but what we could say is that if something equivalent to ChatGPT 4o was built using Qubic, the price should at least move to the $100 billion range (Open AI is currently valued at $80 billion), making it a 546x increase in price from current levels.
Is Qubic Worth Investing In?
Qubic has an exciting set of ideas, balanced by some significant challenges. Although I feel bullish (positive) about the coin, I hold some concerns as I research the technology. Here are my thoughts.
Useful Proof of Work
I think the concept of Useful Proof-of-Work is genuinely disruptive.
The idea that people all over the world can contribute compute power to artificial neural networks (or presumably other types of compute-intensive AI training) AND be compensated for it is amazing!
With the latest large language models (LLMs) reportedly costing multiple billions of USD to train, this has a lot of potential.
In practical terms, it also offers a way for crypto miners in general to leverage their significant stocks of GPU and CPU power.
However, I have concerns about how this would work in practice. Two big ones for me are:
- [Technical] Difficulty equivalency. The current PoW approaches work as a security mechanism because they normalize problem-solving difficulty across the network. I don't have enough background knowledge in AI to know if this a reasonably possible solution, and given that much of the value of Qubic rests on this approach, that makes it hard to form a hypothesis.
- [Practical] Competitive. My second concern is related to the above. I don't know if a solution like this is viable in the long term. For Qubic to survive, it needs to have a way to remain globally competitive. I would need to see the Qubic team execute their technology goals for a bit longer to be fully convinced.
Documentation
This is my biggest concern with the project. Their documentation is really, really lacking, and for a project making these kinds of claims, that's a huge challenge for me.
Take, for instance, the claim of 55 million Transactions Per Second. If this is achieved, it will completely and utterly dominate the world. To put this in perspective, the current maximum theoretical TPS for a mainstream chain is Solana, with 65,000, and people worldwide are excited by it.
Solana did this by extensively developing their 'Proof of History' approach.
Qubic claims to build something that is nearly 3 orders of magnitude faster - but there is absolutely no documentation on how this will happen.
I get that Qubic is kind of early in their journey, but I would have expected a more comprehensive whitepaper.
Another example is their list of milestones and project outcomes. These pages are empty on their webpage, which is pretty concerning.
What I couldn't really get a clear picture on was whether the poor documentation was a genuine lack of a clear communicator in the team, or if it pointed to a deeper "we have a cool idea but no plan to get there" problem.
Arbitrators
My second biggest concern with the project was the Arbitrators. I simply cannot help but feel that Arbitrators are a back-door method of centralized control over the project.
I've always felt that the crypto approach of 'code is law' (or decentralized trust) is one of its biggest advantages and disruptions. It has the potential to completely upend multiple industries worldwide, which is why I'm so interested in it.
However, Qubic's inclusion of an Arbitrator feels off. The Arbitrator holds enormous power in the network, and receives any Qubic that hasn't been earned by Computors. Yet, in all the documentation, there is one paragraph about Arbitrators, and I haven't really found much in the way of code for it.
This may end up being resolved in future updates, but for now, it's a major concern for me.
Team and Rate of Effort
One thing I really like about the project is the exceptional rate of effort. Even as I was researching the project, I saw multiple commits to their GitHub. Their Discord channel is also super fun and engaging, with a solid number of people.
For such a new project, this is important as it shows a lot of positive momentum, which in turn increases the likelihood of a successful project.
Participation
My final comment is more a general observation. The requirements for being a Miner or a Computer put it out of reach for most retail consumers. I don't know if this is the long term plan, or simply due to the early nature of the project, but it really is a shame.
Wrapping Up
With all that said, I actually feel really excited about Qubic. It's a really innovative project, with the potential for some solid disruption.
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