Foresight Ventures: Looking at the project from the perspective of miners, how does the project gain support from miners?

TL;DR

Miners are a powerful group in the crypto space. I interviewed several large mining companies and summarized how miners as a group view blockchain projects. If you are a project owner, you can learn how to get support from miners. This article will answer the following 4 questions that you might have.

1. How are miners surviving now?
2. What kind of economic model do miners prefer?
3. What benefits do miners bring to the project? How much influence do miners have?
4. What types of projects need to consider miners’ interests as a priority? How to attract them?

1. How are miners surviving now?

1.1 The computing power in the mining circle has declined, and the computing power has returned to traditional industries and is used for server leasing and a small amount of it is idle.

• The market has been bad since last year. Mining returns are not high, and there are many projects that use graphics card machines. As a result, many miners choose to sell their mining machines or return to traditional industries and use them for server leasing, renting them out for graphics rendering, cloud servers, etc.
• The situation began to reverse in November, and some miners reorganized their computing power to mine in the mining circle.

1.2 All are low-end graphics cards. There are basically no high-end graphics cards. If there are any, they are not used for mining.

• The price of graphics cards has increased significantly. You can make money immediately by renting or reselling high-end cards. Miners are unwilling to invest in the unknown field of mining.
  • The graphics card ban in the United States and the popularity of AI have led to scarcity and price increases of graphics cards.
  • 3090 graphics cards, ranging from a few thousand to 10,000.
  • A 4090 graphics card cost 10,000 yuan two months ago and is now 20,000 yuan.
• The graphics card in the mining circle is not that good in configuration. Low-end graphics cards 3080, P106, 1080, and 2080 are particularly large in quantity, many are idle.
  • Currently, some companies in Shenzhen are expanding low-end graphics cards by soldering them so that they can run higher-demand algorithms.
  • There are also some companies making software improvements to AI algorithms so that these algorithms can run on low-end graphics cards, such as 3080.
• Filecoin miner 3090 graphics card is rare and hard to find. Most Filecoin mining machines were purchased in 2020-2021, when the 3080 graphics card was already very good. Later, the income dropped and miners stopped investing. Therefore, most Filecoin mining machines have 3080 graphics cards.

2. What kind of economic model do miners prefer?

First of all, as long as the income of the project is high enough, miners are willing to mine. Then, miners will choose the economic model they like.

2.1 Miners like economic models such as BTC/Filecoin

1. It is a layer 1 chain with native tokens.
2. Stacking computing power can get more benefits, miners with 11% of the computing power can earn that much proportion of block rewards.
3. Projects where block rewards account for a high proportion of the economic model, for example: 60~70% of Filecoin’s coins are block rewards. The proportion is not high and the willingness of miners is not high.

2.2 Miners don’t like the current PoS, ETH L2, etc.

• Most of the ETH L2 blocks are in the hands of the projects. Miners cannot participate, even if you participate, it will be part of the project’s computing power.
• Currently, L2 only wants to decentralize zk prover, while Sequencer is still far from centralization. The miners only charge a small calculation fee here, and the capture of the fees is not in the hands of the miners. Miners are working for the project, and mostly are not interested in doing that.
• The economic models of these projects are not appealing to miners. The projects have manipulated miners in the design of Tokenomics, where miners only earn a small portion of transaction fees as hard-earned money, with insufficient profit margins. As a result, miners lack interest. In these projects, miners are just followers, and the success or failure of the project depends mainly on the project party, the capital party, the market situation, etc., leaving miners without any say.
• Some Layer 2 projects have already issued coins. However, when developing a decentralized sequencer/zk prover, providing incentives to miners may not be easy and may not be friendly to miners.

3. What benefits do miners bring to the project? How much influence do miners have?

3.1 In most projects, miners are just supporting players at the bottom level. (eg: ETH L2)

• The interests of miners are not considered in the economic model. Miners are just part-time workers.
• Investors and project parties control the success or failure of the project. They can only run with them, and the miners have no right to speak.

3.2 In the above-mentioned economic model projects that miners like, the role of miners is obvious. (Such as: Filecoin, etc.)

• Miners have great investment capacity. Miners can do what they promise

3.3 BTC is very special, and miners have a lot of influential power.

• Pure PoW: 100% of block rewards are given to miners, with no foundation/VC taking any money. Miners hold significant power.
• Miners possess substantial investment capacity, enabling them to fulfill their promises and potentially fork.
• Miners are keenly aware that their income is halved every four years. As life becomes increasingly challenging, anxiety sets in. Innovations like Ordinals offer them a tangible opportunity to increase their earnings.

4. What types of projects need to consider miners’ interests as a priority? How to attract them?

4.1 Projects that require heap computing resources must consider the interests of miners. (ZK, AI computing power)

4.2 A cooperative model that is comfortable for miners.

The miners are unaware of the benefits of the new project, but it actually requires investment in machine rooms and electricity bills. Therefore, there are requirements for cooperation mode.

The investment in equipment may not be counted, but they are very concerned about the investment in data center electricity fees. To attract miners, it is best to choose a cooperation mode that they prefer.

In these patterns, the trust model is the best, with less economic pressure on the project. However, this requires the project’s economic model to be miner-friendly and backed by significant capital.

5. Summary

1. Projects that require a large amount of computer resources, such as storage, ZK, AI, and POW projects, should fully consider the interests of miners when designing their economic models.
2. Miners prefer projects with native tokens on the first layer, high mining proportions in token models, and a proportional relationship between computing power and earnings. BTC and Filecoin’s economic models can be directly referenced.
3. It is best for new projects to follow the “trust mode” where there is less economic pressure. However, this requires the project’s economic model to be friendly to miners and have strong endorsement from investors. Otherwise, miners may not be willing to invest their hard-earned money into the unknown for the sake of love.

Disclaimer：

1. This article is reprinted from [Foresight Research]. All copyrights belong to the original author [Maggie]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
2. Liability Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute any investment advice.
3. Translations of the article into other languages are done by the Gate Learn team. Unless mentioned, copying, distributing, or plagiarizing the translated articles is prohibited.