re: "Mining Gridcoin Isn't Profitable"


I hear a lot from folks that the reason they don't mine or the reason they think others aren't more interested in mining is that mining Gridcoin "isn't profitable". While if we could pump the coin price 100x through some magic, Gridcoin would indeed become profitable for anybody to mine regardless of electricity costs, I find this argument kind of silly as mining difficulty in Gridcoin is self-balanced like any other coin.

Traditional PoW coins do this via a built-in "difficulty" mechanism, the more miners/hashpower on the network, the harder the coin becomes to mine. Gridcoin does this via the magnitude system but the outcome is the same and the cycle goes like this:

  1. Mining appears "profitable" which attracts miners
  2. Difficulty goes up due to extra mining (or in Gridcoin's case, competition on projects for magnitude goes up), meaning less reward per amount of energy expended.
  3. Mining becomes "unprofitable" for more and more miners, leading to them quitting mining. Only the most efficient miners with the cheapest electricity and most efficient equipment can afford to continue. This causes the difficulty to drop.
  4. This continues until difficulty becomes low enough that we can start back at step one.

The end result is that most miners mining most other coins are breaking even, making very small profits, or mining at a loss. Nobody is making a living mining unless they have massive amounts of equipment and cheaper than average electricity. Loss miners are either mining with expectation of the coin increasing in value (speculative mining), doing it because they "support the coin", or simply see mining as "DCAing with more steps" so they don't mind that they're losing $5/day. They can either buy $5 of coin a day or spend $5 of electricity a day, help the network, and get some fresh KYC-free coins in exchange. For those who use mining to offset heating costs, they can withstand to have mining be quite "unprofitable" if they were already going to spend that money on heating anyways (this is my situation in winter). What would be an uncomfortable amount of loss for your average miner is quite fine for somebody utilizing the waste heat.

There is a direct relationship between coin value and the # of miners a coin can realistically support. But it will never be the case for any extended period of time that Gridcoin, or any other coin, can be expected to be mined profitably for your average person. We shouldn't expect Gridcoin to meet and sustain an imaginary goal of being "profitable to mine" that no other coin has been able to meet in a sustainable fashion. Of course, it's not a problem for other coins, they have no issue attracting a sufficient amount of miners to secure their networks.

Just some thoughts, discussion is encouraged in the comments