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Offline theoretical

Economics of subsidized mining pool
« on: February 05, 2015, 04:30:55 PM »

For those who haven't been following, the following changes are planned:

- minebitshares.com will pay out in BitUSD
- minebitshares.com will eliminate its pool fee
- The payout will be subsidized ("juiced") +5% by our marketing budget

Essentially, we're allowing people to merge-mine the juice, but only if they use our pool and accept BitUSD payouts.

If our target pool volume is $1000 / day, that works out to $30,000 / month new capital, for which the budget would be funding "juice" at +5% which would be $1500 / month or $50 / day (comparable to a traditional marketing campaign).

I think it would be better to simply split $50 / day among all miners who show up.  If the pool volume is more less than $1000 / day, then they get better than +5% returns.  Since our pool volume is tiny at the moment, this would lead to fantastic returns for people who switch early which would be a great boost to our marketing (we might get several people saying "switch to this pool, I did and quadrupled my returns OMG").  More importantly, if we exceed our target, then we can save a lot of money.  If we hit $2000 / day, then our budget would still be capped at $50 a day and the miners simply get 2.5% instead.

Offering a fixed juice budget is basically a no-reserve single-price auction for the capital inflow, which allows the market to efficiently discover the "right" juice percentage.  Which in theory should be pretty close to zero, i.e. if we're the only pool willing to operate at a loss, we should be able to capture the entire market.

Offering a fixed juice percentage of +5% is still buying capital inflow, but like any scheme where you have a price that doesn't respond to market signals, it's likely the price will be too high (we'd be paying more than we need to, exceeding the target and busting the budget) or too low (we could be offering a higher return and attracting more people while remaining within the budget).
« Last Edit: February 05, 2015, 08:23:58 PM by theoretical »
BTS- theoretical / PTS- PZxpdC8RqWsdU3pVJeobZY7JFKVPfNpy5z / BTC- 1NfGejohzoVGffAD1CnCRgo9vApjCU2viY / the delegate formerly known as drltc / Nothing said on these forums is intended to be legally binding / All opinions are my own unless otherwise noted / Take action due to my posts at your own risk

Offline emski

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Re: Economics of subsidized mining pool
« Reply #1 on: February 05, 2015, 04:33:19 PM »
I think this is a great idea.
If it was for other cases it might be considered as "unfair".

Offline cube

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Re: Economics of subsidized mining pool
« Reply #2 on: February 05, 2015, 04:43:43 PM »
Well.. offering additional 5% will create a subsidised pool.  This would attract a large pool of miners out there.  But the other well-established pools are not going to wait there and do nothing. They will do all it can to compete and pull the miners back.  And they are very competitive.
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Offline Rune

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Re: Economics of subsidized mining pool
« Reply #3 on: February 05, 2015, 05:37:54 PM »
This is a really clever use of marketing funds because it'll kickstart the popularity of the pool and people will likely stay with bitUSD once they've tried it.

Offline nomoreheroes7

Re: Economics of subsidized mining pool
« Reply #4 on: February 05, 2015, 05:39:34 PM »
This is a really clever use of marketing funds because it'll kickstart the popularity of the pool and people will likely stay with bitUSD once they've tried it.

 +5%

I like it. Good stuff.

Offline Stan

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Re: Economics of subsidized mining pool
« Reply #5 on: February 05, 2015, 05:40:34 PM »
Dan said he supports such a fixed daily budget.

 :)
Anything said on these forums does not constitute an intent to create a legal obligation or contract of any kind.   These are merely my opinions which I reserve the right to change at any time.

Offline Pheonike

Re: Economics of subsidized mining pool
« Reply #6 on: February 05, 2015, 05:49:05 PM »

It's like offering Yield on mining.

Offline theoretical

Re: Economics of subsidized mining pool
« Reply #7 on: February 05, 2015, 09:06:26 PM »
But the other well-established pools are not going to wait there and do nothing. They will do all it can to compete and pull the miners back.  And they are very competitive.

No, the key is we have a marketing budget and are willing to operate the pool at a loss to advertise BTS.  I'd surprised if there are lots of other pools (especially big ones) who can convince a partner to give them money to allow them to operate at a loss, since it doesn't make sense for them to do so.

And a bigger pool would have to spend more to match a small pool operating at a loss.  E.g. if our pool has $1000 / day volume and we're spending $50 / day to subsidize +5%, then a much larger pool earning $10,000 a day would have to pay $500 / day just to match us.  And then when half of our miners leave and we're only doing $500 / day volume, with the fixed-budget approach we're now suddenly offering 10%.
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Offline CryptoPrometheus

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Re: Economics of subsidized mining pool
« Reply #8 on: February 05, 2015, 10:40:21 PM »
This is a really clever use of marketing funds because it'll kickstart the popularity of the pool and people will likely stay with bitUSD once they've tried it.

I agree that this could be the greatest benefit. A very worthy one.
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Offline cube

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Re: Economics of subsidized mining pool
« Reply #9 on: February 06, 2015, 05:13:22 AM »
But the other well-established pools are not going to wait there and do nothing. They will do all it can to compete and pull the miners back.  And they are very competitive.

No, the key is we have a marketing budget and are willing to operate the pool at a loss to advertise BTS.  I'd surprised if there are lots of other pools (especially big ones) who can convince a partner to give them money to allow them to operate at a loss, since it doesn't make sense for them to do so.

And a bigger pool would have to spend more to match a small pool operating at a loss.  E.g. if our pool has $1000 / day volume and we're spending $50 / day to subsidize +5%, then a much larger pool earning $10,000 a day would have to pay $500 / day just to match us.  And then when half of our miners leave and we're only doing $500 / day volume, with the fixed-budget approach we're now suddenly offering 10%.

I do not mean the established pools will be subsidising when I refer to them being competitive.  No, they are not likely to subsidise with monies.  They are more likely to use their deep experiences and know-how to fight back - eg adding new hard-to-find mining-profitable coins, having better coin-switch algo, having multiple mining sites in different parts of the world, having better conversion-to-btc algo, more visually appealing charts.  Miners are drawn to new features and efficiencies.

Having a subsidised pool is a good start. But we must not be complacent.
« Last Edit: February 06, 2015, 05:15:45 AM by cube »
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Offline rgcrypto

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Re: Economics of subsidized mining pool
« Reply #10 on: February 06, 2015, 06:34:56 AM »
The best side of this project is the simplicity to do your taxes! :D


Offline nethyb

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Re: Economics of subsidized mining pool
« Reply #12 on: February 06, 2015, 04:22:39 PM »
 +5% I like it, as it'll help with that initial buzz,and remove a concern that I had in that  effect of the 5% bonus with smaller mining volume could be lost in the 'spread' of a lucky pool vs an ok pool for a particular day.

 

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