Win with miners How can project parties receive miner support?
Winning with miners How can project parties garner miner support?Author: Maggie, Foresight Ventures
TL;DR
In the field of cryptocurrencies, miners are a powerful group. I have interviewed several large mining companies and summarized how miners view blockchain projects. If you are a project developer, you can learn how to gain miner support. This article will answer the following four questions.
1. How is the survival situation of miners?
1.1 Mining power has declined, with power returning to traditional industries for server leasing and some idle capacity.
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Since last year, the market has been unfavorable, mining profits are not high, and there are many projects using graphics card machines. Many miners choose to sell their mining machines or return to traditional industries for server leasing, renting them out for graphic rendering, cloud services, etc.
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In November, the situation started to turn around, and some miners organized their mining power in the mining community.
1.2 All low-end graphics cards, basically no high-end graphics cards, and even if there are, they are not used for mining.
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Serious price hikes for graphics cards, leasing or reselling high-end cards can make immediate profits, miners are not willing to invest in the unknown field of mining.
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The graphics card ban in the United States and the popularity of AI have led to scarcity and price increases in graphics cards.
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A 3090 card that used to be a few thousand yuan is now 10,000 yuan.
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A 4090 card that was 10,000 yuan two months ago is now 20,000 yuan.
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The graphics cards in the mining community are not as well-configured, with a large quantity of low-end graphics cards such as 3080, P106, 1080, 2080, many of which are idle.
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Currently, some companies in Shenzhen use soldering methods to expand the capacity of low-end graphics cards, allowing them to run more demanding algorithms.
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There are also some companies that make software improvements to AI algorithms, enabling these algorithms to run on low-end graphics cards like the 3080.
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Filecoin miners have difficulty finding 3090 cards. Most Filecoin miners were purchased in 2020-2021, when 3080 cards were already good. However, as profits declined, they stopped investing. Therefore, most Filecoin miners use 3080 cards.
2. What is the economic model that miners like?
First, as long as the project’s returns are high enough, miners are willing to mine. Then, miners will choose the economic model they prefer.
2.1 Miners like economic models such as BTC/Filecoin
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It is a layer chain with native tokens.
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More computing power leads to higher profits, if miners have 11% of the computing power, they can earn that proportion of block rewards.
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Projects where block rewards make up a high proportion of the economic model, for example: Filecoin has 60-70% of its coins as block rewards. If the proportion is not high, miners are not interested.
2.2 Miners don’t like PoS, ETH L2, etc. nowadays
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Most of the block production in ETH L2 is controlled by the project team, miners cannot participate. Even if they participate, it is only as part of the project team’s computing power.
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The current L2 only aims to decentralize zk proof, and Sequencer is still far from being decentralized. Miners here only earn a small transaction fee for computation, the captured fee is not in the hands of miners, they are working for the project team, lacking the incentive.
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Miners do not like the economics models of these projects. The project design in terms of Tokenomics controls the miners, miners only earn a small fee as labor income, with limited profit opportunities. Therefore, miners lack interest. In these projects, miners are just followers, the success or failure of the project depends mainly on the project team, investors, market conditions, etc., miners have no say.
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Some L2 projects have already released tokens, but it is difficult to incentivize miners to do decentralized sequencer/zk prover in the future, it is not friendly for miners.
Three, what benefits do miners like from projects? How much power do miners have?
3.1 In most projects, miners are just bottom-level followers. (e.g., ETH L2)
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The economic model does not consider the interests of miners, they are just workers.
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Investors and project teams control the success or failure of the project. Miners can only follow, they have little say.
3.2 In the economic model projects that miners like, their role is very apparent. (e.g., Filecoin)
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Miners have significant investment capabilities. Miners can deliver on their promises.
3.3 BTC is very special, miners have a lot of power.
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Pure PoW, 100% of block rewards go to miners, there are no foundations/VCs taking money, miners have great power.
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Miners have significant investment capabilities, can deliver on promises, and even fork.
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In the eyes of miners, it is obvious that the income is cut every 4 years, and the days are getting harder. There is anxiety. Innovations like Ordinals are something they can see and can help them earn more.
4. Which types of projects need to consider the interests of miners? How to attract them?
4.1 Projects that require computational resources should consider the interests of miners. (ZK, AI computing power)
4.2 Cooperative models that are comfortable for miners.
New projects are unknown in terms of profitability for miners, but they need to invest in data centers and electricity costs. Therefore, there are requirements for the cooperative model.
Equipment investment may not matter, but they are very concerned about data center electricity costs. To attract miners, it is best to choose a cooperative model they like.
Among these models, the trust model is the best as it puts less economic pressure on the project. However, this requires the project’s economic model to be friendly to miners and have strong financial backing.
5. Conclusion
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Projects that require a significant amount of computational resources such as storage, ZK, AI, POW projects should fully consider the interests of miners when designing their economic models.
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Miners prefer projects with a native token, a high mining proportion in the token model, and a proportional relationship between computing power and revenue. They can directly refer to the economic models of BTC and Filecoin.
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New projects are best suited for the “trust model”, as it puts less economic pressure on the project. However, this requires the project’s economic model to be friendly to miners and have good investment backing. Otherwise, miners will not be willing to invest their hard-earned money into the unknown for the sake of love and electricity.
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