What kind of projects can gain the support of miners?

Original Title: "Foresight Ventures: How Do Projects Gain Support from Miners from the Perspective of Miners?"

Original Source: Maggie, Foresight Ventures

TL;DR

In the crypto space, miners are a powerful group. I interviewed several large mining companies and summarized how this group views blockchain projects. If you are a project party, you can learn how to gain the support of miners. This article will answer the following 4 questions.

1. What is the current survival situation of miners?

2. What economic models do miners prefer?

3. What benefits do miners seek from projects, and how much power do they have?

4. Which types of projects need to prioritize miners' interests? How to attract them?

1. What is the current survival situation of miners?

1.1 The mining sector's computing power is declining, returning to traditional industries for server leasing and some idle use.

• Since last year, the market has been poor, mining profits are low, and there are many projects using GPU machines. Many miners choose to sell their mining machines or return to traditional industries for server leasing, renting out for graphic rendering, cloud servers, etc.

• In November, the situation began to turn around, with some miners reorganizing their computing power to mine in the mining sector again.

1.2 Mostly low-end GPUs, with virtually no high-end GPUs; those that exist are not used for mining.

• GPU prices have risen sharply; high-end cards can be rented or resold for immediate profit, and miners are reluctant to invest in the uncertain field of mining.

• The GPU ban in the U.S. and the boom in AI have led to GPU scarcity and price increases.

• The price of a 3090 GPU has risen from a few thousand to 10,000 yuan.

• The price of a 4090 GPU has increased from 10,000 yuan two months ago to 20,000 yuan now.

• The GPUs in the mining sector are not that good; there is a large quantity of low-end GPUs like 3080, P106, 1080, and 2080, many of which are idle.

• Currently, some companies in Shenzhen are expanding low-end GPUs through soldering methods to run higher-demand algorithms.

• Some companies are also making software improvements to AI algorithms, allowing these algorithms to run on low-end GPUs, such as the 3080.

• Finding a 3090 GPU for Filecoin mining is quite difficult. Most Filecoin mining machines were purchased between 2020 and 2021, when the 3080 GPU was already quite good. Afterward, profits declined, and no further investments were made. Therefore, most Filecoin mining machines use 3080 GPUs.

2. What economic models do miners prefer?

First, as long as the project's profits are high enough, miners are willing to mine. Then, miners will choose their preferred economic models.

2.1 Miners prefer economic models like BTC/Filecoin

1. It is a layer one chain with a native token.

2. Stacking computing power can yield more profits; if a miner has 11% of the computing power, they can earn that proportion of block rewards.

3. Projects where block rewards account for a high proportion of the economic model; for example, Filecoin has 60~70% of its tokens as block rewards. If the proportion is low, miners' willingness is also low.

2.2 Miners do not like the current PoS, ETH L2, etc.

• Most ETH L2 block rewards are controlled by the project party, miners cannot participate, and even if they do, it is as part of the project party's computing power.

• Current L2 projects only aim to decentralize zk provers; the Sequencer is still quite centralized, miners here only earn a small computation fee, and the fee capture is not in the miners' hands, effectively working for the project party, which is not appealing enough.

• These projects' economic models are not favored. The design of the Tokenomics has sidelined miners, who only earn a bit of fee income for their hard work, with insufficient profit margins, leading to a lack of interest from miners. In such projects, miners are merely participants, and the success or failure of the project mainly relies on the project party, investors, market conditions, etc., leaving miners without a voice.

• Some L2 projects have already issued tokens, and when they later work on decentralizing sequencers/zk provers, it is not favorable for miners to receive incentives, making it unfriendly for miners.

3. What benefits do miners seek from projects, and how much power do they have?

3.1 In most projects, miners are merely bottom-tier participants. (e.g., ETH L2)

• The economic model does not consider miners' interests; miners are just workers.

• Investors and project parties control the success or failure of the project. Miners can only participate passively, lacking any real voice.

3.2 In the aforementioned economic model projects that miners prefer, the role of miners is quite clear. (e.g., Filecoin, etc.)

Miners have significant investment capabilities. What miners commit to can be delivered.

3.3 BTC is very special; miners have substantial power.

• It is pure PoW, and 100% of the block rewards go to miners, with no foundation/VC taking money, giving miners great power.

• Miners have significant investment capabilities, and what they commit to can be delivered, even to the extent of forking.

In the eyes of miners, it is evident that profits are halved every four years, and as they see conditions becoming increasingly difficult, anxiety arises. Innovations like Ordinals are visible to them and can allow them to earn more.

4. Which types of projects need to prioritize miners' interests? How to attract them?

4.1 Projects that require substantial computing resources need to consider miners' interests. (ZK, AI computing power)

4.2 Comfortable cooperation models for miners.

New projects present unknown returns for miners, yet they must invest in facilities and electricity. Therefore, there are requirements for cooperation models.

The investment in equipment may not be counted, but they are very concerned about the costs of facilities and electricity. To attract miners, it is best to choose cooperation models they prefer.

Among these models, the trust model is the best, as it places less economic pressure on the project. However, this requires the project's economic model to be friendly to miners and backed by significant capital.

5. Conclusion

1. Projects requiring substantial computing resources, such as storage, ZK, AI, and PoW projects, must fully consider miners' interests when designing their economic models.

2. Miners prefer layer one projects with native tokens, projects where mining accounts for a high proportion of the token model, and projects where computing power is proportional to profits, which can directly reference the economic models of BTC and Filecoin.

3. New projects are best to adopt a "trust model," which places less economic pressure on the project. However, this requires the project's economic model to be friendly to miners and to have good investor backing. Otherwise, miners are unwilling to invest real money into the unknown, working for love.