Filecoin releases the most stringent mining model. What should we do if 80% of mining machine manufacturers may stop buying cloud computing power? (POC Series 5)

In addition to DeFi and Polkadot, this year's hot topics include Filecoin mining, which many investors love and hate. Recently, the official released a 32-page "Filecoin Economic Model White Paper" to preliminarily determine the main network's mining economic model, which mentioned three key points: one is the penalty mechanism; one is the mining release volume; and one is the pre-staking ratio.

80% of miners will be eliminated

The economic model is extremely harsh on miners: extremely low mining release, ultra-high pre-staking, and extremely strict penalties for technical errors. These factors combined are a fatal blow to a large number of mining machine manufacturers at the tail end of the industry. 80% of them will face a concentrated crash after the mainnet goes online.

Only 30% of the newly mined FIL will be released, and there are still 20 days of lock-up.

Unlike the deflationary minting model of Bitcoin and Ethereum (the amount of additional issuance continues to decrease), Filecoin adopts a "block reward benchmark minting" model, which only rewards miners with 30% of their mined coins in the initial stage, and the remaining 70% will be released only after the network's effective computing power reaches a certain scale.

Not only that, the authorities have also set up a lock-up period for the mined FIL, which is 20 days, and then it will be released linearly every day for 180 days. Such regulations have shattered the dreams of some miners who want to get excess returns in the early stages. It also means that it is a heavy blow to investors who want to get their money back in the short term (two months), and it also poses a major hidden danger to those miners who promise investors returns and payback periods.

Miners without good skills are easily eliminated

If the post-staking rules are just strict requirements for miners' output, then the punishment for miners' mistakes and evil deeds can be described as "terrible". Maintaining the security and stability of the storage network is particularly important for distributed storage networks. If miner nodes fail to perform their duties due to evil deeds or negligence, they will also be severely punished.

For example, when a node publishes two or more blocks within a block production cycle and meets the penalty conditions defined by the expected consensus, all collateral of the node suspected of attacking the network will be confiscated and all existing computing power will be deducted. That is, all the pre-staked and post-staked FIL accumulated by the miner will be cleared, and the accumulated effective computing power will also be cleared.

There are also some technical issues that will be heavily punished. Each node needs to submit proofs within each proof cycle, otherwise, it will be fined. Late submission of space-time proofs must be accompanied by a late submission penalty; failure to submit space-time proofs will result in all collateral being confiscated and computing power being reset to zero; and when errors occur in the data stored by a node, the node needs to actively report the loss. The corresponding collateral and the corresponding computing power of this node will be confiscated based on the number of lost sectors.

Every punishment is like staring at the staked coins in the hands of the miners (including pre-stake and post-stake), which puts miners with insufficient technical skills at great risk.

Pre-staking leads to the “Matthew Effect”

In the latest official economic model, new regulations have been made for miners to pre-pledge FIL. The pledge amount of each fan blade (32G) is approximately the output of the fan blade for 20 days, with an upper limit of 1FIL. That is, for every 1T increase in your effective computing power, you need a pre-pledge of 32 FIL (in the initial stage). There is no way to release this pre-pledge, which means that as long as your computing power is increasing, you must continue to "charge" FIL into the mining machine, otherwise your effective computing power will not be able to increase.

So you understand it this way: after you buy a mining machine, you also need fuel to allow the mining machine to continuously produce FIL, and a large part of this FIL is deducted from the output. In the initial stage, the output of all manufacturers must be lower than the input. All miners begin with a process of continuously expanding losses and input-output, making it impossible for some small mining machine manufacturers to even use the later production volume to cover the early pre-pledge, let alone obtain positive returns for investors.

The extremely low mining release volume, super-high pre-pledge, and extremely stringent penalties for technical errors are all fatal to the current massive number of long-tail small mining machine manufacturers. They will face a concentrated explosion after the mainnet goes online.

Judging from this Filecoin "space race", there are more than 360 active mining nodes. For the entire market, there will inevitably be a process of integration and centralization. A large number of long-tail small mining machine manufacturers will be gradually squeezed out of their living space and exit the market. In the end, only a few top mining factories will remain. Therefore, 80% of the mining machine manufacturers on the market are facing elimination.

What should mining machine manufacturers do if they cannot mine?

How do mining machine manufacturers who cannot mine FIL face investors who are eager to get rich quickly?

There may be three ways:

1: Compensate investors through the FIL6 futures and FIL12 futures purchased in the market earlier. After all, investors don’t care where FIL comes from.

2: Eliminate their own bubbles through the sharp increase in FIL prices in the market. Although they can only produce a small amount of FIL, as long as investors can get their money back, there is no reason for investors to attribute it to mining machine manufacturers.

3: By delaying the release of mined FIL, the complexity of Filecoin mining release rules also gives mining machine manufacturers an opportunity to take advantage of it. Mining machine manufacturers may first slow down investors by restricting withdrawals (for example, the mined FIL is only displayed in the account, but it is actually false).

However, none of these three methods are the normal investment income model of Filecoin mining machines. FIL mining machine investors should keep their eyes open to avoid being deceived. (Special author: Bu Meng Editor: Wu Shuo Blockchain)

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