Miners are centralizing into huge farms

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RCMco
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Re: Miners are centralizing into huge farms

Post by RCMco » Thu Jul 11, 2019 7:31 pm

Maybe establish a graduating fee scale where the more you pay the more services you receive.
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dnprod
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Location: Ontario, Canada

Re: Miners are centralizing into huge farms

Post by dnprod » Thu Jul 11, 2019 7:46 pm

i was thinking that people who bring large amounts of hashrate in a day/period are rewarded with lower fees for that period.
but that would annoy the 'small guy' having to pay larger fees.
so perhaps do it back-assed, those who bring a large average hashrate over a period get a "fee credit" (refund, reward) ??
sink the hook even deeper, the reduced fee applies to the NEXT period of time so they have to keep hashing to get it...
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Steve Sokolowski
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Re: Miners are centralizing into huge farms

Post by Steve Sokolowski » Thu Jul 11, 2019 8:16 pm

I don't agree with having larger miners pay fewer fees. First, it adds complexity, which results in more support tickets and having to track deals. Second, if the purpose is to get people to "buy more" as such a structure does in retail, people don't usually have miners split across pools to bring more here. Third, there's no reason to upcharge the small miners because the largest miners make 90% of the profit, so what's 1 extra percent of the other 10%? Upcharging the smallest miners doesn't make enough money to justify it. Is there a reason to have separate fee structures that I'm missing?

In regards to the issue with IRS paperwork, the research we've performed indicates indicates that more people join the pool because compliance with regulations increases trust, than do people who leave because they are trying to evade taxes. This was a surprising finding to us. It does not come across in social media, because people are more likely to complain about things they don't like than they are likely to write a positive review about something. Another point is that we started the tax compliance before the reduction in hashrate, not at the same time.

So I guess the takeaway on taxes is that tax compliance seems to build trust. Remember that a huge warehouse full of miners, which are the customers that we want to attract, can't hide from the government. These people make huge sums of money every day and want to deal with people they know they can go after if they are cheated. Shady people who have two miners in their basements can try to hide their earnings from the government, but a few miners isn't going to make them (or us) a killing. I don't think the tax issue is a significant factor, and we can't do anything about it anyway even if it is, so it's probably not worth spending any time on. We're not willing to evade taxes for any amount of money; I don't understand why anyone would choose that lifestyle given that after you can buy the basics, money is pretty useless for the things that matter in life like health.

As to what the fees should be, it's important to recognize that we can't assume that cutting fees in half and doubling hashrate will not yield equal income. When there are twice as many miners, it costs more money to parallelize the software and handle support tickets. If we cut fees in half, we need to roughly quadruple hashrate. That's because the 1% we are paying in exchange and network fees is fixed, and therefore our profit goes from 3.5% to 1.5%. Then, we also have additional charges for more bandwidth and computers and development labor. Do people think that hashrate could be quadrupled if fees were halved, or is that unreasonable?

For algorithms, many of the algorithms being suggested have coins that are not traded at any exchanges that accept US customers. One of our goals is to try to promote the Bitshares distributed exchange by pushing significant liquidity onto it, once we get it implemented in November or December. Another issue with algorithms is that it takes a lot of work to add a new algorithm and many of them simply don't have much money at stake. There are algorithms where all of the miners for all of the coins earn $1000/day, so if we could capture 10% of the market, we would earn $5 in profit and would require a year just to pay back the cost of implementation.

Finally, I'm curious if anyone might be willing to guess why we have not found a correlation between profitability and hashrate in the past. You might recall how, earlier this year, we made our pricing much more aggressive, to the point where scrypt profitability was increased by 3%. Yet, there was no statistically significant effect on hashrate. One of the reasons we haven't lowered fees is because we have tried these sort of experiments repeatedly and there has never been an effect on the number of customers as a result.
Last edited by Steve Sokolowski on Fri Jul 12, 2019 2:20 pm, edited 1 time in total.
jde
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Joined: Mon May 21, 2018 5:27 am

Re: Miners are centralizing into huge farms

Post by jde » Thu Jul 11, 2019 9:41 pm

I think a problem is that smaller altcoins have taken a major hit compared to anchor coins for an algorthim (BTC/BCH for SHA256, LTC for Scrypt, Dash for X11, Zcash for Equihash, etc.). The altcoins are worth so little that it's often just as profitable to mine the cornerstone coin directly as it is to profit switch between altcoins.

How to address this? I would consider offering lower fees for the anchor coins. These coins tend to have more stable prices and better liquidity, which means the pool can probably profit with less than a 5% fee. I think more people would come if, for instance, they could mine LTC with a 2% fee and still be able to switch to altcoins, which would have the usual 5% fee.
MinerLuver
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Re: Miners are centralizing into huge farms

Post by MinerLuver » Sat Jul 13, 2019 11:56 am

Keep in mind

1) The USA is trailing not leading blockchain technology. Look at the lack of regulation with the current SEC administration. Listen the the fed chief. Are miners the same as investors?

2) Tariffs are killing USA mining. Added 30% to our costs that every one knows the Chinese are not paying we are. The cost of every miner you see compare to Bitmain add 30% + shipping on a $2500 miner thats added $750 to my expenses. Its killing any one associated to the USA, blockchain & mining.

3) Dotard Donnie's latest tweet on Bitcoin... enough said

Miners always go where the hash is. Why, because the pools getting the most blocks pay more. Simple. I'm living proof of it & can prove it beyond any reason of a doubt. I love your pool but if i make .03 more a day, in 30+ days I have 1 additional coin

Although your fees are higher, I understand your auto switch algorithms are suppose to be more profitable. Lately not as much. Sometimes I wonder if too many junk coins are being mined instead of solid stable projects with sustainable value. Just thinking out loud :P

Also, demanding USA personal info because of your interpretation of the IRS does not help "at all". I "understand" your point (lawyers & accountants screaming we dont know what to do but this is the best way to cya yourselves)... I just dont agree with it. The sec clearly stated Bitcoin was not an asset but Ripple could be. BTC is mined over time costing electricity, technology & effort over time. Ripple... poof we made a open cluster database & created these things out of thin air AND we say they have value?

Until the tariffs are gone, American miners are screwed. You wont see an "increase" but you can get larger part of the already existing USA market but the IRS requirement will scare away any new USA miners. The more profitable auto switching algo's wont be enough unless they are 10% - 15%+ higher returns provable.

Contact MGTCI aka stock symbol MGTI. One of the largest USA mining companies. One farm in Ohio right next to you. Contact them & offer your pools & algo with a discount for a certain amount of hashing power? What ever the deal is, have you guys considered that to any USA mining companies? ;)

Keep up great work
GLTA
cc4506
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Joined: Wed Mar 28, 2018 10:07 am

Re: Miners are centralizing into huge farms

Post by cc4506 » Sun Jul 14, 2019 1:43 pm

MinerLuver makes some good points. Add that its summer here so I only have a few going because of the heat issue and many of us have upgraded. So before when I had 6 L3's going now I just have two Z9's that are more efficient and make 3 times as much. (Yes, different Algo's but I no longer have much faith in Litecoin and have moved on).
Also I did think this was the future, I am not so sure now so adding miners isn't something I am looking into. I bet I am not alone.
PRIUSHAPPY
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Re: Miners are centralizing into huge farms

Post by PRIUSHAPPY » Mon Jul 15, 2019 5:43 pm

Hi, I'm just stopping by because I wanted to comment. It's undoubtedly the 5% fee, it is unheard of in the mining world, directly impacting the profitability of mining. 1-2% is typical.
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Steve Sokolowski
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Re: Miners are centralizing into huge farms

Post by Steve Sokolowski » Mon Jul 15, 2019 5:59 pm

PRIUSHAPPY wrote:
Mon Jul 15, 2019 5:43 pm
Hi, I'm just stopping by because I wanted to comment. It's undoubtedly the 5% fee, it is unheard of in the mining world, directly impacting the profitability of mining. 1-2% is typical.
Thanks for stopping by!

Out of curiosity, have you mined with other pools and compared their profitability to ours? Or, did you just see the fee and think that you would earn less here? You might not be aware that even though the fee is higher, tests have revealed higher profitability than the pools we tested.

Your answer will help us determine how to proceed with the fees during Awesome August. If you've tested different pools, then there is a bug with our system that is only triggered by a miner we didn't test. If you did not, then you made an erroneous assumption and we need to figure out how to make sure others don't either.
celicaguy18
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Joined: Mon Jul 15, 2019 8:51 pm

Re: Miners are centralizing into huge farms

Post by celicaguy18 » Mon Jul 15, 2019 9:06 pm

Hello,

I am probably what you would call a micro miner. I usually make around 10 cents per day and I have just started with you guys within the past week. I have a couple opinions from an outsiders perspective.

1. I have been making around 10 cents per day from other mining pools, from you guys I can only get up to about 7-8 cents per day. I am not sure if it is related to the high fees, or the constant switching from the mined coins and the time it take for my asic to catch up during the constant switching of the difficulty and type.

2. I do like that I can get paid in different types of crypto and even adjust the amount I can receive in each. (not that it really matters much)

3. The biggest thing that attracted me is that you guys pay out in bitcoin (EVERY DAY) no matter how much I earn and there is no cost associated with it. Many of the other boys have a pay threshold that would take weeks or months for me to reach!

4. Please look at this video on youtube (https://youtu.be/ZDHjaTgkUAA) It is a real test of someone who used the same equipment on your pool and another pool. Unfortunately the other pool made more. In the end that is what the end user looks at. In the follow up to the video it gives a couple suggestions as to why.

Hope this helps!
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Steve Sokolowski
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Re: Miners are centralizing into huge farms

Post by Steve Sokolowski » Tue Jul 16, 2019 7:49 am

celicaguy18 wrote:
Mon Jul 15, 2019 9:06 pm
Hello,

I am probably what you would call a micro miner. I usually make around 10 cents per day and I have just started with you guys within the past week. I have a couple opinions from an outsiders perspective.

1. I have been making around 10 cents per day from other mining pools, from you guys I can only get up to about 7-8 cents per day. I am not sure if it is related to the high fees, or the constant switching from the mined coins and the time it take for my asic to catch up during the constant switching of the difficulty and type.

2. I do like that I can get paid in different types of crypto and even adjust the amount I can receive in each. (not that it really matters much)

3. The biggest thing that attracted me is that you guys pay out in bitcoin (EVERY DAY) no matter how much I earn and there is no cost associated with it. Many of the other boys have a pay threshold that would take weeks or months for me to reach!

4. Please look at this video on youtube (https://youtu.be/ZDHjaTgkUAA) It is a real test of someone who used the same equipment on your pool and another pool. Unfortunately the other pool made more. In the end that is what the end user looks at. In the follow up to the video it gives a couple suggestions as to why.

Hope this helps!
Unfortunately, that video compares Prohashing with Nicehash. Nicehash works differently than Prohashing in that miners don't earn coins, but instead rent their miners to paying customers, and Nicehash takes a fee from the renters. Their marketplace can sometimes pay more than other pools because Nicehash miners earn money - in part - by allowing their hashrate to be used in criminal activities like 51% and block withholding attacks. 51% attacks are often used to steal money from exchanges, and block withholding attacks steal money from pools. We contacted Nicehash about whether they investigated these attacks, and they didn't reply. There is a very simple way to prevent these attacks and they have not implemented it. Their terms of service do not prohibit their service from being used for these purposes either. That's not all Nicehash is used for, but there are spikes in profitability there that rise far above market value when people rent large amounts of hashrate for these purposes.

This hypothesis is given stronger evidence by looking at Miningrigrentals, a competing cloud mining service that takes action against suspected fraud. Their rental rates are lower than Nicehash's, allowing some people to rent hashrate from Miningrigrentals and direct it to Nicehash.

Additionally, Nicehash is currently insolvent. They had $60m stolen from them, and they continued to operate anyway, an action that is illegal when serving US customers (and those in most other jurisdictions). They repaid customers in less valuable bitcoins, not the value of their accounts at the time the money was stolen, their repayments have only paid back about 40% of the monetary value of the losses, and even by their accounting they only claim to have repaid 70% - with no timeline for completion.

Finally, there are Nicehash's terms of service. You can read them for yourself at their site. The fine print states that they don't actually guarantee that you get what you paid for - the amount of hashrate can be less - and that they won't issue a refund if a seller scams a buyer. We actually had this happen to us, where they refused to pay us $2,500 when we complained to them about a suspected block withholding attack they could not refute.

In conclusion, we'll never be able to compete with Nicehash. They are running a business that is willing to take ethical shortcuts. You'll have to make a moral decision on your own about whether you feel comfortable dealing with them.

In regards to your first question, could you tell me which pool you compared the figures at? And what type of ASIC are you using?
Last edited by Steve Sokolowski on Tue Jul 16, 2019 9:52 am, edited 1 time in total.
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