Constellation network, their $DAG and hypergraph transfer Protocol (HGTP) are pretty tasty. They multiple great value propositions and the technology to back it up alongside a means to earn passive income.
Constellation is a zero-fee “blockchain” (er, actually a “DAG”; a Directed Acyclic Graph) that aims to enable mass-adoption of crypto by making it easy for businesses to build scalable and secure solutions on a proven framework and efficiently pass on value to their customers/users.
It also enables free, cross-chain transactions. Yep; that means direct feeless swaps BTC > ETH > WHATEVER.
They see it as the third generation of Blockchain and utility. The ease of use proposed has been likened to what WordPress did for web; made it easy for businesses to develop web solutions with minimal technical knowledge.
And there is a huge emphasis on big data and efficient, real-time processing. An area that is experiencing explosive growth due to the amount of data we now produce, and something that blockchains struggle with.
Constellation's specialist ‘blockchain' area is in big data, with a focus on providing a secure, queryable, and interoperable network of trusted data. They already have connections with the US government (inc an SBIR contract) and a partnership with ChainLink.
And, as you can imagine, there’s an opportunity to earn passive income…
The main income opportunity comes from operating Constellation nodes or participating in “co-nodes”; managed ‘fractional’ nodes offered by a third party. Lite nodes are also on the roadmapl
Did you know the energy 🔌 used to run 4 $DAG nodes 🌐 is equal to that one used to power a single light bulb? 💡-Constellation
Now, that's impressive!
Let’s take a look…
What is a “DAG”?
A DAG, “directed acyclic graph” is a mathematical structure that never forms a closed loop.
Within crypto, a DAG structure allows data to be written in parallel to the network. This is not to be confused with $DAG, the ticker name used for Constellation.
Unlike in a DAG, in a blockchain, the “chain” of data is linear — it must be sequential. ie. the only route in a blockchain is Node 1 > Node 2 > Node 3 > Node 4 > Node 5….etc.
This structure is what gives DAGs the potential to be super-efficient, fast and scalable. Ideal for big data, high-volume and micro transactions such as IOT (internet of things).
Popular cryptos that use a DAG structure or elements are IOTA ($MIOTA) – probably the best known ns my first DAG-love, Nano ($XNO), Fantom ($FTM), Avalanche ($AVAX), Dero ($DERO) and of of course, Constellation ($DAG – clever ticker!).
Why am I interested?
One of my first altcoin purchases back in 2017 was IOTA. I thought it was going to change the world through IOT, smart cities and a greener, more sustainable way of doing things… Maybe it still will.
Either way, that was my first intro to DAG technology and its amazing potential.
Around June/July 2021 I discovered Constellation and it piqued my curiosity however, I was very much on a “passive income” journey and investing in other projects, so cash was limited.
One of the main reasons I didn’t dive any further was because nodes cost 250,000 $DAG — way out of my reach; the token ran from $0.12 all the way up to $0.45 in August; yep, around $100,000 USD for a node!
Light nodes were also being discussed, but there was never any further information on requirements.
April 2022, it seemed opportunities to earn passively with less than 250,000 $DAG were becoming more and more likely. Primarily, this was around third-party ‘Co-Nodes’ that would also be fully managed and auto-compounded. And Mainnet 2.0 seemed within touching distance and the price was back down to around $0.15, so I thought, “Why not?” and started DCAing in.
What is Constellation Network?
As already mentioned, Constellation and their Hypergraph Network (HGTP) is a “DAG” (Directed Acyclic Graph), rather than a Blockchain.
They gained governmental and military connections after winning SBIR phase 1 and phase 2 contracts 2019 and 2021 for the Air Force (Small Business Innovation Research)— something that is extremely difficult to achieve (similar to SBRI in UK; Small Business Research Initiative).
The HyperGraph network is known as HGTP a “Layer 0” (Bitcoin, Ethereum etc have been known as Layer 1 for many years).
HGTP sits below other layers and can communicate with them alongside external data.
It is an interoperable and decentralized infrastructure with a programmable interface or framework that anything can be built upon or transact with.
Due to its design and the massive liquidity pools sitting on the L0, fee-less, cross-chain transactions will be possible. Yes, you will be able to swap BTC for ETH (or other tokens/coins) instantly and at no cost.
The network is connected by nodes that use a reputation-based consensus mechanism; Proof of Reputable Observation (POR) that is highly decentralized. Basically, the reputation of the node, such as its uptime. It is extremely cheap and efficient.
Current concensus mechanisms are much more expensive. Proof of Work (POW), as used by Bitcoin is extremely expensive. Ethereum are moving away from POW to Proof of Stake (POW) which uses 99% less energy, but is nothing compared to Constellaion's POR mechanism.
Hypercube and state channels are other massive elements of HGTP. Essentially, DAG networks can be created within the HGTP network; the HGTP network is a DAG network of DAG networks; a constellation of DAGs, each a business or value in its own right.
Far too technical to deep dive into here, especially as I only have a basic understanding myself! However, I’ll give a short overview of the key elements below.
Finally, the Constellation HGTP Mainnet 2.0 is expected to launch in the second half of 2022. This is when the opportunity for node income really begins (currently there is a ‘soft stake’ option to earn a small income).
What is HyperCube?
Hypercube is an end-to-enduser interface / tool for deploying businesses, applications and cryptocurrencies on HGTP. It is a development suite for designing and creating compliant State Channels with minimal technical or coding knowledge.
Fancy creating a public or private blockchain-based business? See the benefits of moving your data to the blockchain? Want to manage your own data?
HyperCube could be the best place to start!
What is a State Channel?
A State Channel is a business of some description, also referred to as a microservice. It is Smart Contracts on steroids. State Channels exist on HGTP and can define their own means of operation; fees, rewards, minting etc.
Essentially, it is an independent DAG network of its own – a network within the network, with all the HGTP goodies included; mint tokens, interact with other blockchains and third-party data.
One example of a State Channel is Lattice ($LXT), a decentralised exchange that can trade with zero fees.
Another is Alkimi – a decentralized ad exchange for real-time bidding (RTB) of digital ad impressions that solves fraudulence within the digital advertising industry.
To perform consensus on a State Channel nodes are required (a tokens).
State Channels offer rewards to node operators in return for delegating their $DAG to support their state channel. These rewards could be in their own token, $DAG or any other token.
More State Channels and network traffic mean more incentive for nodes which ultimately results in a faster network.
What is the $DAG token?
The utility token for Constellation Network is $DAG. It is used as collateral for operating a node, for governance and transaction fees; it is used for everything.
The total supply is capped at 3.7 Billion (3,693,588,685), of which around 2.5B are already circulating (end May 2022).
The token is designed to capture the value of all usage on the network, and all value held in the network. This is referred to as Generative Economics.
“Generative economic systems sustain life and benefit the many versus the few. In a generative economic blockchain system, all participants in the network benefit from the success of each individual node and State Channel.” — Constellation
Basically, the more State Channels (and network usage), the more utility the $DAG token gains, the more it gets locked up and the more scarce it becomes….every $DAG holder benefits as usage on the network increases.
Read more on $DAG tokenomics here: https://constellationnetwork.io/pdf/Constellation-Network-Token-Economics-v2.pdf
$DAG passive income opportunities
As you can see, there is a great potential for price appreciation if Constellation achieves their goals. In the meantime, there is an opportunity to earn passive income or build your $DAG bag. The big ones are around $DAG nodes.
Option 1: operate a $DAG node
You’ll need technical know-how, server and 250,000 $DAG tokens.
Option 2: be a $DAG co-node operator
Details TBC, however the aim is to allow anyone with 1,000+ $DAG tokens to participate. No technical knowledge required. Fee expected to be 10% of rewards however, it is likely these will be easily covered by having a professional operate your node and manage its reputation + auto-compound it. Probably something similar to PoktPool.
Other options such as light nodes and staking may become available.
Option 2 will be my choice. Even if I had enough $DAG for a full node, I'd still choose to pool via Option 2 so the collateral is well-managed and maintained.
How much can I earn with $DAG nodes?
This is the tricky part, similar to $POKT nodes, earnings are based on usage, and because you are paid in $DAG tokens; price-appreciation. However, you may also be paid by the State Channels in other tokens eg EEVER. That complicates matters further.
And earnings depend on node reputation and State Channel application.
Finally, mainnet 2.0 and full nodes have not yet been launched so there are no examples of earnings.
Sorry; that’s not what you want to hear!
Constellation, similar to many of my more recent 2022 investments, is all about future passive income and thus is very speculative — I do not have any personal figures to share.
Their vision is exciting and I believe if they accomplish their goals, the utility and token price will rise significantly and with it, node income. So for now, I am DCAing (dollar-cost-averaging) in by purchasing $DAG tokens regularly (alongside some other tokens operating within the ecosystem such as Lattice, $LXT).
As always, do your own research!
Useful links to get you started;
Awesome Twitter thread: https://twitter.com/Sykodelic_/status/1528814029845561344