Second-layer tokens have been a fascinating development on the Hive blockchain. The origination of the second-layer rewards token concept started with a vision for SMTs - Smart Media Tokens.
Taking the idea of SMTs and creating second layer token solutions, Hive-Engine was born. The Hive-Engine team has provided a second-layer that operates on top of the Hive blockchain.
In part 1 of this series, we talked about earning money on Hive as a curator/author.
In part 2, we talked about earning through passive delegations of HIVE POWER to projects on the blockchain and trading HIVE + layer 2 tokens.
In this post (part 3), I’ll explain the second-layer that exists on top of Hive. There are various applications, communities and tokens that leverage the second-layer to create a wide array of opportunities that were never before possible on Hive.
I am surprised by the number of people on Hive who don’t actually know about the second-layer--or at least, don’t know how it works.
I like to think of this second-layer as a sort of watchtower. You’ve got the main Hive blockchain doing its thing down at the base-layer. It’s confirming blocks that contain your standard transactions:
- HIVE/HBD transfers
- Blog posts
- Comments
- Custom JSONs
- etc.
JSON stands for JavaScript Object Notation and in simple terms, it is a standardized file format that contains human readable text. On Hive, we can use Custom JSON operations to transmit data on-chain and store it immutably thanks to the mystical wonders of blockchain technology.
Picture this chain of blocks going by with unique transactions - similar to a train passing by with carts filled with cargo of all shapes and sizes. Each cart (cart being our analogy for a block in the chain) is a mixing pot of various “cargo types” — posts being published, comments being written, HIVE being transferred, etc. In some of these blocks, there are also these custom JSON transactions.
Using our train analogy, picture the contents of each cart. Within each cart, there is a mix of the various cargo types — posts, comments, transfers and custom “cargo”. The watchtower (hive-engine) is on the lookout for specific types of custom cargo — a.k.a. specific text strings that are contained within custom JSON transactions.
Here’s an example of a custom JSON transaction next to a “standard” operation known as a curation reward:
These transactions have essentially the same consequence, but the outcome is actually happening on two different levels. With the curation reward, the curator (my account @khaleelkazi) is receiving a payout of 0.116 HIVE (HP). With the custom JSON, my account is issuing token rewards to another user (@mariosfame) for the amount of 46.206 LEO.
Without the watchtower (Hive-Engine), this custom JSON operation would still go be posted to the blockchain, but it wouldn’t get spotted and therefore, wouldn’t have any value. It’s just a string of text saying:
"{"contractName":"tokens","contractAction":"issue","contractPayload":{"symbol":"LEO","to":"mariosfame","quantity":"46.206"}}"
Hive-Engine reads this text from the base layer blockchain and then acts accordingly on the second-layer based on the message it sees — issuing 46.206 LEO to user: @mariosfame, from token issuing account: @khaleelkazi.
The Hive blockchain has no idea what Hive-Engine has done with this data.. it just chugs along as usual and records text strings as they are — text on the screen.
The beautiful thing about being on the second-layer is agility — you don’t need to rewrite blockchain code, issue a proposal, wait for witness consensus.. instead you can work quickly and efficiently on top of an existing network that is robust and flexible enough to allow you to issue various strings of text quickly and cheaply. Hive is the epitome of quick, cheap and robust. Allowing us to store transactions with:
- 0 transaction fees
- 3 second confirmations
- 100% decentralization
How the Second-Layer is an Opportunity for You to Earn Money With Hive
That’s what we’re here for.. right? It’s cool to understand how all this stuff works and grasp the watchtower analogy so that you know how second layer applications are making use of an incredibly fast, cheap and robust blockchain like Hive.. but how do we leverage blockchain technology and our unique skillsets to earn a living in the new economy that is Web 3.0.
I often like to say that “it goes down on the second-layer”. Which basically just means that there is a lot happening on the second-layer. If you looked at Hive 3 years ago, you would’ve seen a community of content creators, investors and content curators.
Today, you’ll find a much more diverse group of people that use Hive. Some don’t ever interact with the blogging/curation features of the blockchain and instead focus on second-layer applications to generate opportunities to earn and utilize Hive.
@splinterlands players, for example, use the Splinterlands application to buy, sell and battle with NFTs (non-fungible tokens) which exist on Splinterland’s second-layer solution. Just as Hive-Engine acts as a watch-tower for Custom JSONs, so too does Splinterlands act as its own watchtower: keeping an eye on the blockchain and looking for JSONs that look like this:
To the blockchain, this transaction means nothing more than a string of text published by Hive user @shoemanchu: "edition":4,"app":"steemmonsters/0.7.41”.
To Splinterlands, this text is interpreted as the opening of a pack of Non-Fungible Tokens which are cards in the game. A particular set of cards are now owned by this player thanks to the discovery of them through the pack opening operation.
Whether you want to play Splinterlands to both have fun and earn crypto rewards for gaming or blog on Hive, but utilize a second-layer community token like LEO, there are dozens of options and more that are yet to be created. Again, the beauty of the second layer is agility.
These are just a few of the different second-layer apps that I’m personally familiar with. There are many more out there that you can (and should) discover on your own. Follow your talents and passions to find something on Hive that suits your skillset for having fun and earning a little something along the way:
- Splinterlands - Collect, Battle and Trade NFT Trading Cards
- Hive-Engine - Launch, Trade and Utilize Second-Layer Tokens
- dCity - Build, Collect and Manage Your Own NFT Simulation City
- LeoFinance.io - Blog & Earn HIVE + LEO Token Rewards
Outside of running LeoFinance, two of the main ways I utilize the second-layer is as a token trading platform and as a blogging/curation layer. I enjoy speculating on various tokens built on Hive-Engine and trade them similar to any cryptocurrency.
DEC is one of the tokens that I’ve traded actively since it was introduced. I usually wait for a major dip in the price and then quietly accumulate. One of the many reasons to trade DEC is the volume — typically above $4,000 USD on an average day and some days (as you can see from that big candle on 8/6/2020) getting as high as $20,000 USD.
As for blogging and curating with second-layer tokens: this is another great way to leverage tokenization on Hive to boost your earnings while talking about stuff you love. The majority of my earnings come from posting about a handful of topics that I enjoy. A highly requested feature of https://Hivestats.io was to add in a way to see historical author/curator/mining rewards from second-layer tokens:
Here you can see that my second-layer token rewards from authoring and curating posts was $202.57 for the past 30 days. If you compare that to my HIVE author rewards, you’ll see that I make an additional 50% in author/curation rewards on the second layer (I earned $417.21 in HIVE base-layer rewards in the past 30 days):
Remember that the base-layer (Hive itself) and the second-layer solutions (i.e. Hive-Engine) work synergistically. One thing that I love about second-layer tokenization is that you can earn on both layers simultaneously. My posts typically bring in a mix of HIVE, LEO, NEOXAG, CTP and PAL tokens and the results speak for themselves. Tokenized communities have been a great addition to the blockchain.
LeoFinance is an online community for crypto & finance. We run several projects that are powered by Hive and the LEO token economy:
| Track Hive Data | Blog & Earn LEO | LEO FAQ |
|---|---|---|
| Hivestats | LeoFinance | Learn More |
 |  |  |
| Trade Hive Tokens | Learn & Contribute | Hive Witness |
|---|---|---|
| LeoDex | LeoPedia | Vote |
 |  |  |