Quai Network thesis: PoEM consensus, sharding and the energy dollar
Thread2,349 words
Long research thread on Quai: Proof-of-Entropy-Minima consensus, execution and dynamic sharding, multi-threaded execution, merged mining and parachains, and the economic model, tied to the Golden Age testnet.
Key claims
PoEM measures entropy to give finality in as little as 10 seconds
Over 50,000 TPS
Fees typically under $0.01
Quai Network Thesis (Q, Q)
@QuaiNetwork is a fully programmable high-performance EVM chain running a novel PoEM consensus on a sharded architecture.
It powers a cohesive economy of interoperable parachains, fueled by an energy-backed stablecoin.
A new economic era in crypto ↓
While everyone is focused on the trends from yesterday, @QuaiNetwork just launched its Golden Age Testnet.
That means you have a chance to be truly early on one of the most disruptive chains to launch in the coming months.
But first, time to DYOR.
In this research deep dive, we will cover:
➊ Quai Consensus Mechanism
➋ Sharding on Quai Network
➌ Multi-Threaded Execution
➍ Merged Mining & Parachains
➎ Quai Economic Model
➏ The Golden Age Testnet
➐ Conclusion
Chapters are divided into separate long-form post within the thread to make it easy for you to navigate the different sections.
Get yourself a coffee and get comfortable anon, this will be a long read.
Let's dive in. ↓
➊ Quai Consensus Mechanism
@QuaiNetwork's consensus mechanism, Proof-of-Entropy-Minima (PoEM), is an innovative evolution of Bitcoin’s PoW consensus.
While both rely on miners generating hashes to validate blocks, PoEM enhances the process by measuring the amount of entropy (randomness) removed by each block, instead of just checking if a block meets a certain difficulty threshold.
This unique measure ensures all nodes can immediately agree on the next block, eliminating delays and conflicts inherent in other consensus mechanisms.
The key features of the PoEM consensus are explained below. ↓
➤ Perpetual Consensus & Instant Fork Resolution:
Unlike PoW and PoS, which require time to resolve conflicts and reach consensus, PoEM ensures all nodes are in continuous agreement about the blockchain’s state.
@QuaiNetwork achieves this by comparing blocks based on their intrinsic weight, a reflection of the entropy they reduce, allowing nodes to deterministically select the next block.
This allows for immediate conflict resolution and efficient use of computational resources, while traditional PoW systems have to handle forks by extending the longest chain, which can take time and introduces uncertainty.
➤ Fast Finality:
Hash-based blockchains exhibit two types of finality: statistical and economic.
Statistical finality occurs when a block is considered canonical unless there is a 51% attack.
Economic finality happens when the cost of executing a 51% attack to roll back the blockchain outweighs the attacker's benefits.
PoEM offers faster statistical finality compared to existing methods. It achieves this by using a more precise measurement of the energy expended in block creation.
Instead of measuring "work," PoEM measures entropy, a concept derived from physics.
By measuring entropy, PoEM ensures that subordinate chains (handling frequent transactions) achieve finality independently from dominant chains, reducing the risk of withholding attacks and providing finality in as little as 10 seconds.
PoEM’s precision in measuring entropy instead of arbitrary work values allows @QuaiNetwork to efficiently scale across multiple execution shards, ensuring consistent, fast consensus and finality without the delays or vulnerabilities seen in traditional PoW or PoS systems.
For more details, also check the below visual.
➋ Sharding on Quai Network
@QuaiNetwork implements sharding through a combination of execution and dynamic sharding, offering a scalable and efficient way to manage high transaction throughput while ensuring security and performance.
Traditional PoW systems struggle with the coordination of multiple blockchain shards due to time delays in reaching consensus.
@QuaiNetwork's PoEM consensus mechanism solves this by enabling seamless synchronization across many execution shards almost instantly.
In execution sharding, PoEM plays a crucial role by providing deterministic fork resolution through the intrinsic block weights mentioned in the previous chapter, allowing all nodes to instantly and accurately select the correct chain tip.
This mechanism ensures that the different blockchains, or execution shards, within the network stay synchronized without delays and removes the time-based limitations of traditional consensus mechanisms.
PoEM enables @QuaiNetwork to manage a large number of execution shards simultaneously, thus significantly improving the overall scalability of the network.
To further enhance scalability, @QuaiNetwork also relies on a concept called dynamic sharding, a process that automatically increases the number of execution shards as transaction demand grows.
This dynamic expansion is triggered by two key factors: the rate of uncle blocks and the gas limit. Uncle blocks occur when multiple miners propose valid blocks at nearly the same time, but only one is chosen for the canonical chain.
When the uncle block rate reaches a certain threshold, @QuaiNetwork automatically adds new shards to reduce congestion, improving the network’s hash efficiency and maintaining quick finality guarantees.
Similarly, when the gas limit in blocks is consistently maxed out due to high demand, the network dynamically adds new execution shards to prevent transaction fees from rising.
Unlike single-chain networks like Ethereum, where users must outbid each other to have transactions included in a congested block, @QuaiNetwork ensures that transaction fees remain low (typically under $0.01), by increasing throughput whenever the network approaches its computational limits.
➌ Multi-Threaded Execution
@QuaiNetwork also supports parallel transaction processing across multiple sub-networks, similar to how multithreaded CPUs revolutionized computing by unlocking multi-threaded processing.
In most blockchains, all transactions must pass through a single execution thread, often leading to bottlenecks during high demand periods.
@QuaiNetwork achieves parallel processing by decoupling local consistency from global consensus, allowing transactions to be validated and confirmed simultaneously across different shards/chains in the network.
Let's unpack what that means. ↓
Traditionally, consistency (data uniformity across nodes) and consensus (agreement on the correct state of the blockchain) on blockchains are tightly coupled, causing delays as nodes rush to synchronize.
@QuaiNetwork addresses this by decoupling consistency from global consensus.
Sub-networks on @QuaiNetwork asynchronously produce blocks that achieve local consensus and consistency first, which are then organized into the global network hierarchy for final consensus.
Quai minimizes networking latency through the creation of optimized sub networks. Each miner is incentivized to self-select the lowest-latency sub networks to mine.
It also significantly increases throughput, as sub-networks can include data on-chain before global consensus is fully reached.
Quai’s sub-networks, known as zones, each maintain a unique subset of the global state. This sharding of state reduces the storage, computation, and bandwidth requirements for each sub-network.
Nodes are only responsible for the sub-networks they maintain, minimizing unnecessary data processing and transmission.
Transactions internal to a sub-network remain localized, while external transactions (those affecting multiple sub-networks) are only propagated to the relevant contexts, saving bandwidth and enhancing TPS capacity.
@QuaiNetwork multi-threaded execution environment allows blocks to be produced asynchronously across all sub-networks, enabling parallel processing of transactions.
This structure allows @QuaiNetwork to process over 50,000 transactions per second.
Despite the multi-threaded architecture, @QuaiNetwork ensures atomicity, coordinating block production and rollbacks, through its PoEM consensus mechanism, ensuring that all sub-networks remain in sync and consistent with the broader network hierarchy.
➍ Merged Mining & Parachains
➤ Merged Mining:
@QuaiNetwork extends Satoshi Nakamoto's concept of merged mining, allowing multiple blockchains to share security through combined mining efforts.
Merged mining allows a miner to check each nonce they generate against the difficulty thresholds of multiple blockchains at once.
This means a single miner can secure several blockchains simultaneously without additional energy or hardware requirements.
In @QuaiNetwork, miners merge-mine three blockchains at a time, one from each level of Quai’s hierarchical structure.
This process also naturally creates coincident blocks, which are blocks valid in multiple Quai chains and provide hash-linked references that enable trustless cross-chain communication.
Since merged mining requires no extra energy to secure multiple chains, it makes @QuaiNetwork significantly more energy-efficient.
The process maximizes both block space and security per unit of energy consumed, offering an efficient Proof-of-Work system that vastly outperforms single-chain networks like Bitcoin.
➤ Parachains:
@QuaiNetwork also supports merge-mined parachains, which are independent blockchains that can share security and trustless interoperability with Quai and its sub-chains.
Any blockchain using Quai’s ProgPoW hashing algorithm can be merge-mined with @QuaiNetwork, allowing parachains to bootstrap their security by leveraging Quai’s hash power.
Quai blocks contain an empty data field, enabling miners to include a parachain block header within a @QuaiNetwork block. This forms a hash-linked reference between the two, facilitating seamless state transfers between the networks.
Parachain liveness is determined by the incentives provided to Quai miners. Parachains that offer more attractive incentives will see more activity, as more miners will include those chains in their merged mining efforts.
Parachains also inherit security from @QuaiNetwork by merging their block headers with Quai’s, leveraging Quai’s higher hash rate to protect against 51% attacks.
This linked reference system ensures that an attacker would need to alter @QuaiNetwork's history before they could modify the parachain’s records, further strengthening parachain security.
➤ Interoperability:
All zones and parachains on @QuaiNetwork are fully interoperable, multi-chain network where transactions can seamlessly move across its various zone chains, functioning as a unified system.
This is achieved through external transactions (ETXs), which ensure atomic state transitions between chains, secured by Quai's braided architecture and new EVM opcodes.
ETXs enable trustless cross-chain transactions between all @QuaiNetwork chains. Originating on one chain and destined for another, ETXs move through dominant chains before arriving at their destination.
ETXs can be account-initiated or contract-initiated, with hash-linked references ensuring atomic transitions across the network.
@QuaiNetwork also supports deploying contracts across multiple chains, allowing them to interact and share state across the network.
This feature enables projects to deploy contracts across all Quai blockchains, ensuring dApps can operate seamlessly from any zone chain.
Finally, @QuaiNetwork ensures atomicity for all transactions and contract interactions, meaning they either fully succeed or fully fail.
In the event of a rollback on a dominant chain, all subordinate chains follow suit, maintaining consistent state across the network.
This is enforced by @QuaiNetwork's PoEM consensus mechanism, ensuring coordination between all sub-networks.
➎ Quai Economic Model
@QuaiNetwork introduces a unique two-token system: $Quai and $Qi.
These tokens serve distinct purposes within the network, with $Quai acting as a programmable store-of-value and $Qi functioning as a medium of exchange.
$Quai is utilized on account-based shards that support smart contracts, while $Qi operates on UTXO-based chains with fixed denominations.
➤ Token Mechanics and Emissions:
Both $Quai and $Qi are distributed through the network’s PoEM consensus mechanism.
Miners are rewarded with either $Quai or $Qi, based on their preference, and can switch their reward choice at any time.
Emissions are dynamically adjusted based on network difficulty, ensuring responsive block rewards.
$Quai’s emission rate follows a logarithmic relationship with difficulty, promoting scarcity, while $Qi’s emission rate is linear, aligning more closely with energy costs.
This dynamic allows $Quai to act as a store of value, while $Qi remains a flexible medium of exchange.
➤ Conversions Between $Quai and $Qi:
The protocol includes a conversion mechanism, allowing participants to convert between $Quai and $Qi at any time using a mint/burn function, based on the current block reward ratio.
This feature helps maintain balance between the two tokens and allows the supply of $Qi to quickly adapt to demand changes, ensuring economic flexibility.
➤ Supply Dynamics:
The total supply of $Quai is determined by the initial genesis allocation and subsequent emissions, along with conversions between $Quai and $Qi.
The supply of $Qi, on the other hand, is tied directly to emissions and conversions, and is more fluid to accommodate changes in demand.
As $Qi is more closely tied to the cost of production (energy), its supply can expand or contract based on network needs.
➤ Responsive Difficulty Adjustment:
Quai Network continuously adjusts difficulty based on recent block times, allowing for highly responsive emissions and supply changes for both $Quai and $Qi.
This ensures that block rewards are always in line with network conditions, further supporting the two-token economic model's efficiency and sustainability.
The pre-allotted amount of 3 billion $Quai will be generated as part of the genesis block and distributed as shown on the visual below.
➏ The Golden Age Testnet
The @QuaiNetwork "Golden Age" Testnet introduces a gamified approach to blockchain testing, where participants can earn rewards by accumulating Testnet $Quai tokens.
A total of 10 million Mainnet $Quai tokens will be distributed to participants based on their holdings of Testnet tokens at the end of the testnet.
For example, if a user holds 1% of the total circulating Testnet $Quai, they will receive 1% of the Mainnet rewards, equivalent to 100,000 $Quai tokens.
The Testnet opens for public interaction on October 15, 2024, with public mining beginning on October 18, 2024.
The Golden Age Testnet is designed to engage participants through competition and multiple pathways to accumulate Testnet $Quai tokens.
Ways to participate include:
➤ Mining: The most efficient way to earn Testnet $Quai for those with mining hardware.
➤ Developing: EVM developers can deploy projects to earn fees and royalties.
➤ Trading: Users can trade Testnet QRC-20 tokens or NFTs, or utilize the PoW faucet to start accumulating Testnet $Quai.
➤ Arbitrage: The two-token system ($Quai and $Qi) opens opportunities for arbitrage between tokens.
➤ Social Challenges: Participants can also earn rewards through social media challenges, with weekly and daily opportunities for creative engagement.
➐ Conclusion
As the fiat debasement continues, robust currency that is not controlled by centralized entities but by simple physics becomes increasingly valuable.
@QuaiNetwork is the only programmable (and EVM compatible) high-performance PoW L1 in the market.
Through the implementation of a variety of new Proof-of-Work primitives, including a novel dual token model that creates a new type of native “stablecoin”, connected to the cost of energy, @QuaiNetwork brings reliable, real-world value on-chain to function the financial base layer infrastructure of a compute-centric economy.
A novel type of currency that can serve many use-cases like AI and DePIN, while being the best environment to build fast and secure dApps.
Within this new economic paradigm, @QuaiNetwork provides the scalable infrastructure for an economy of interoperable, merge-mined parachains that can bootstrap security and liveness from the core network.
The network achieves super fast finality, supports multi-threaded transaction execution and provides the basis for a new economic paradigm, aligned with the original ethos of crypto and Web3.
Definitely DYOR and check out the testnet anon.
Also linking back to the @QuaiNetwork Litepaper if you want to continue to DYOR. ↓
x.com/QuaiNetwork/status/1844468845609877549
Important to study the stats. 👀
x.com/0xalank/status/1847402985498050945
14 more images on X
What came next · since 18 Oct 2024
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This breakdown analyzes the project without making a call on the token, so price moves since publication are shown as market context.
Covered, no call
$QUAIQuai Networksince listing 21 Feb 2025−92%−91% vs BTC
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Daily closes in USD from DefiLlama and Yahoo Finance. Only a bullish or bearish call in a thesis or market take is tracked; explainers, lists, maps and mentions are neutral context. Not financial advice.