Dogecoin block pricing experiment
22 May 2014As I’ve explained repeatedly before, the block reward is the mechanism which we as a community use to buy the hashing power which keeps our network relatively independant and secure as an honest processor of users transactions. As we cannot pay miners in fiat somehow, we pay them in Doge in the form of block rewards and transaction fees. This means that we as a community are putting a price on the hashing power used to secure our network. I thought it would be interesting to try and figure out what that number is.
The reason it’s interesting is the Dogecoin block reward schedule. To encourage mining and manage the value of the coin, Doge operates on a diminishing rewards block schedule that encourages mining and buying into Doge with hashing power by rewarding early miners more than late miners. However this works only to a point. Mining Doge has to be ROI positive or nobody would bother with it. Mining Doge also has to be ROI competitive with other altcoins or nobody would bother with it. This first requirement I address in this post, and the second requirement I’ll address some other time.
Experiment
This is current (ish) pricing and power consumption information for a variety of different mining hardware. The important number here is the final column, KH/w. As the point of this exercise is to put a Doge price on every block, the power consumption of every KH pointed at mining Doge counts.
Vendor Miner KH/s Watt Cost KH/w
-----------+------------------+---------+-------+-----------+---------
KnCMiner Mini Titan 150,000 400 $5,495.00 375.00
KnCMiner Titan 300,000 800 $9,995.00 375.00
Gridseed ASIC Blade Miner 5,200 70 $1,049.95 74.29
Gridseed ASIC 5-Chip 350 7 $79.95 50.00
DualMiner ASIC USB 2 70 2 $81.99 46.67
GAWMiner War Machine 54,000 1,280 $5,899.95 42.19
GAWMiner Black Widow 13,000 320 $1,799.95 40.63
GAWMiner Fury 1,000 30 $159.95 33.33
DualMiner ASIC USB 1 70 3 $98.00 28.00
Radeon R9 290X 850 295 $579.99 2.88
NVIDIA GTX 770 220 230 $329.99 0.96
NVIDIA GTX 560 Ti 150 170 $120.00 0.88
-----------+------------------+---------+-------+-----------+---------
Average 89.1525
At present Doge is near 1K Doge = 0.435 USD, or measured in doge/usd 2298.85.
Measuring the price per block
power costs 0.1220 USD/KWhr at US national average prices, so lets run some numbers.
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(ns doge
(:require [meajure]
[Clojure.algo.generic.arithmetic
:refer [+ - / *]]))
;; constants and definitions
;;------------------------------------------------------------------------------
(def kw-per-w
#meajure/unit [1/1000 :kwatt 1 :watt -1]) ;; definition
(def hr-per-block
#meajure/unit [1/60 :hour 1 :block -1]) ;; definition
;; simulation variables
;;------------------------------------------------------------------------------
(def kh-per-watt
#meajure/unit [375
:khash :watt -1 :second -1]) ;; variable
(def usd-per-watt-block
(* #meajure/unit [0.122 :usd :kwatt -1 :hour -1] ;; variable
kw-per-w
hr-per-block))
(def doge-per-usd
#meajure/unit [2298.85 :doge 1 :usd -1]) ;; variable
;; computation
;;------------------------------------------------------------------------------
(def price-per-watt-block
(/ doge-per-usd kh-per-watt))
(print "DOGE per watt-block |"
price-per-watt-block)
(def price-per-kh
(* usd-per-watt-block
price-per-watt-block))
(print "DOGE per KH |"
price-per-kh)
;; break even block reward
(print "DOGE for hashrate |"
(* price-per-kh
#meajure/unit [50 :mega :khash :second -1]))
DOGE per watt-block | #meajure/unit [25.785592103418296,
:second, :watt, :khash -1, :usd -1, :doge]
DOGE per KH | #meajure/unit [5.243070394361721E-5,
:doge, :khash -1, :second, :block -1]
DOGE for hashrate | #meajure/unit [2621.5351971808605,
:doge, :block -1]
Analysis
Miner KH/s Watt KH/w Min. block reward
------------------+---------+-------+---------+-------------------
Mini Titan 150,000 400 375.00 623.243777777
Titan 300,000 800 375.00 623.243777777
ASIC Blade Miner 5,200 70 74.29 3158.329954954
ASIC 5-Chip 350 7 50.00 4674.328333333
ASIC USB 2 70 2 46.67 5007.851224910
War Machine 54,000 1,280 42.19 5539.616417790
Black Widow 13,000 320 40.63 5752.311510378
Fury 1,000 30 33.33 7012.193719371
ASIC USB 1 70 3 28.00 8347.014880952
R9 290X 850 295 2.88 81151.533564810
GTX 770 220 230 0.96 243454.600694440
GTX 560 Ti 150 170 0.88 265586.837121212
------------------+---------+-------+---------+-------------------
Average 89.1525 28935.106
In order to recieve any return on invested compute power, a miner must find blocks. If the difficulty is too high, then it isn’t feasable to find blocks and mining is ROI negative. This is why Wafflepool and other multipools switch coins: they mine for as long as it’s ROI positive to do so and once the difficulty adjusts rendering it no longer ROI positive to do so they bail out and head for greener pastures.
So, Dogecoin has a minimum block reward of 10,000 Doge, but we won’t see that until January. At present we’re at a 125,000 Doge block reward. Looking at this table, that indicates that Nvidia GPUs are now absolutely ROI negative. I won’t be mining any more for this reason.
You don’t just get coins for mining tho, you get coins for finding blocks. Assuming that the Scrypt proof of work function is inviolate, what fraction of the hashrate do each of these miners need to represent at the current block reward to break even?
Miner KH/s Min. block reward Hashrt. Frac. Hashrt. (KH/s)
------------------+--------+-------------------+---------------+----------------
Mini Titan 150000 623.243777777 4.9859502e-3 30084.5360
Titan 300000 623.243777777 4.9859502e-3 60169.0730
ASIC Blade Miner 5200 3158.329954954 0.025266640 205804.9700
ASIC 5-Chip 350 4674.328333333 0.037394627 9359.6334
ASIC USB 2 70 5007.851224910 0.040062810 1747.2564
War Machine 54000 5539.616417790 0.044316931 1218495.9000
Black Widow 13000 5752.311510378 0.046018492 282495.1300
Fury 1000 7012.193719371 0.056097550 17826.0900
ASIC USB 1 70 8347.014880952 0.066776119 1048.2790
R9 290X 850 81151.533564810 0.64921227 1309.2790
GTX 770 220 243454.600694440 1.9476368 112.9574
GTX 560 Ti 150 265586.837121212 2.1246947 70.5983
------------------+--------+-------------------+---------------+----------------
Average 28935.106
And what’s our current hashrate? 48GH/s, or 48000000 KH/s.
Conclusion
I think the writing’s on the wall here. If everyone on the Dogecoin network was running the War Machine miner, our hashrate is a factor of 48 times higher than would be break even. What does this mean for our future? As block rewards fall, either the price of Doge will rise due to adoption as a unit of trade which will drive down the minimum block reward numbers, decreasing the hashrate fractions and increasing the global break even network hashrate.
What do I think this means? Well after fooling around with this math and the price of Doge variable the computed maximum network hashrate goes over 45GH only when the price of Doge increases to about 1523 Doge/USD, or at current market prices about 130 Satoshi BTC. If the price of Doge doesn’t rise back to the 130 mark, I expect that we will see our hashrate slowly but steadily fall until it reaches a point where miners perceive that they are breaking even, being very likely under 1GH/s according to these numbers.
If we want Dogecoin to grow into something more than a tip currency I think that we missed the boat when we turned down merged mining with LTC. We have to secure our hashrate for the long haul that it’ll take us to build real market valuation through acceptance as a unit of trade. Merged mining with LTC would have achieved that goal. So what do I think the outlook is? I think we’re gonna run out of fuel in earth orbit rather than get to the moon.
^d