Orchid (OXT): Staking and Nanopayments

How OXT Token Staking Works

VPN providers use an Ethereum smart contract to join the Orchid virtual private network (VPN) marketplace by depositing Orchid’s digital asset (OXT) with the platform in exchange for eligibility to receive data traffic from customers seeking a VPN connection. The deposited amount called a “stake” can only be returned to VPN providers after a minimum of three months and acts as collateral for at least that timeframe — ultimately keeping providers invested in performing well.

The size of the OXT stake determines the percentage of customers directed to a given VPN provider. So the more a provider stakes, the greater the probability that customers will be directed to them for VPN service. Because providers are paid according to the amount of traffic flowing through their connection, the percentage of customers using their VPN service is directly proportional to their revenue. This creates a linear and simple relationship between the size of a provider’s OXT stake and their potential earnings.

If a customer is unhappy with the quality of their VPN connection, they can easily jump over to another connection from a competing VPN provider. VPN bandwidth providers that perform poorly will lose a customer’s data traffic and the income that comes with it, to a direct competitor. Therefore, providers are incentivized to offer higher quality connections to increase income and maintain their standing on the network.

Orchid VPN thus creates a virtuous cycle of incentives and healthy competition, whereby providers are invested in the platform through OXT staking and rewarded for good service relative to one another. 

Probabilistic Nanopayments

Orchid has developed its own transaction management system for users and connection providers to employ, designed to optimize cost control, operation speed, and scalability while reinforcing privacy for users. The system uses probabilistic nanopayments, which are designed to reduce transaction fees and maintain low latencies.

Transaction management within the Orchid network tracks all transactions between customers and VPN providers on a weekly basis. When a customer utilizes a VPN provider, which by definition is running a node on the network, a nanopayment “ticket” is sent to that provider equivalent to the number of packets of data a customer uses while browsing. A small number of tickets — on the order of one in millions — are randomly designated “winners,” and initiate a payment to the provider. Over time, these payments will very closely approximate the total number of tickets sent, but their randomness makes it more difficult to track user activity based on information visible on the public ledger. At the end of the week, all pending nanopayments are consolidated and resolved collectively on the Ethereum blockchain.

Orchid nanopayments help keep transaction speeds high because most transaction accounting happens off-chain, and is therefore not constrained by the time it takes to mine a block on the Ethereum blockchain. This independence enables the system to scale despite any time limitations inherent to Ethereum's processing power and reduces transaction costs as reconciliation happens in aggregate only once a week, rather than for every single transaction.

OXT therefore enables customer payments and incentivizes high-quality VPN service on the Orchid network. All bandwidth on Orchid is paid for with OXT tokens, though end users can purchase pre-filled accounts with in-app purchases using nothing more than a credit card. The token’s limited uses — payments and OXT staking — disincentivize anyone from attempting to steal them. Doing so would be like robbing a grocery store’s cash register in broad daylight, and then coming right back to that store to buy groceries with the stolen cash.

Given the significant and growing concerns about privacy and security in many spheres of life, the need for a highly secure and anonymous crypto VPN system is becoming increasingly clear. With blockchain systems gaining increasingly rapid adoption, Orchid shows strong potential for becoming an evermore essential tool.