Explain in detail the calculation logic of the cost and income of Filecoin mining

At the end of 2020, as the price of Bitcoin hit record highs repeatedly, the funds in the digital cryptocurrency market began to turn to mainstream currencies. At this time, it is the time for major investment institutions to prepare new layouts. Filecoin, which has the most hope of landing applications, has also become an investor. One of the favored mainstream projects.

Because Filecoin's economic model is too complex, there are many variables involved. Furthermore, the project is still in its infancy, and the mining rules have changed accordingly. Therefore, many miners do not know where Filecoin's economic accounts start.

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Filecoin mining input computing logic

According to the economic structure design of Filecoin, users contribute their own idle storage space to provide continuous and stable storage services for other users to obtain income. When users start to participate in Filecoin storage mining, they need to announce their own service details, that is, how much storage space they provide, how long the storage time is, and the service fees charged for storage services.

Among them, the storage time is divided into 180 days and 540 days in the economic structure design of Filecoin, and the choice of time will determine its own mining cycle. And these externally provided data will also involve the calculation of Filecoin mining costs. Simply put, Filecoin mining costs are divided into three parts: hardware facilities, GAS fees, and pre-staking.

The cost of hardware facilities is mainly divided into two parts, one is the purchase cost of machine facilities, and the other is the cost of network overhead. At present, the price difference given by hardware service providers on the market mainly lies in the machine configuration and IDC computer room network services.

Gas fee: In the setting of the Gas mechanism, Filecoin introduced the EIP1559 miner fee mechanism of ETH. The gas fee will increase with the increase of the computing power of the whole network. As of January 4, 2021, the gas fee for encapsulating 1T computing power is 9.5552 FIL.

Pre-pledge: In order to ensure the security of user data storage and storage service providers to provide continuous and stable storage services, Filecoin has set up a pre-pledge mechanism, which will provide a certain Amount of pledged coins. Calculated according to the data on January 4, 2021, 1T computing power needs to pledge 8.368 FIL.

Take Hashpower China's 4P mining solution as an example, 40T is sealed every day, and the storage is full within 90 days. Then the cost of mining in Filecoin is:

5.23 million (hardware facilities) + 5.42 million (gas fee, based on the gas fee on the day of writing) = 10.65 million

The pre-stake is 4.76 million (based on the pledged coins on the day of writing as a reference, the pre-stake will be returned in full after the mining cycle ends)

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Filecoin Mining Revenue Estimation

From the above, we can see that due to the pre-stake and GAS fee mechanism added to the economic structure of Filecoin, the cost for miners to participate in Filecoin mining is very huge.

In the face of huge costs, what are the benefits of Filecoin mining?

Like Filecoin mining costs, Filecoin mining income also involves multiple factors. The effective computing power of the entire network, the network baseline, the effective computing power of individuals, the daily output of the entire network, and linear release will all affect their own mining income.

Here, we can simply divide the mining income of Filecoin into two parts: current mining income and future mining income.

The mining income of the day mainly involves personal effective computing power, effective computing power of the entire network on the day, output of the entire network on the day, linear release, and currency price on the day. The calculation formula is as follows:

Daily mining income = personal effective computing power ÷ effective computing power of the entire network for the day × output of the entire network for the day × currency price for the day (calculated in USDT)

Take Hashpower China's 4P mining solution as an example, 40T is sealed every day, and the storage is full within 90 days. Filecoin mining income is (based on the data on the day of writing as a reference):

3600T (effective computing power)÷1.726EiB×242,907 FIL×21.33 U=10306 U

According to the Filecoin linear release rule, 25% of the income will be released immediately, and the remaining 75% will be released within 180 days.

Compared with the calculation model of the current day's mining income, the calculation model of future mining income mining is much more complicated. In addition to the above factors, it will also involve related factors such as the increase in computing power of the entire network, the baseline mechanism, and the time decay mechanism.

Therefore, if you want to calculate your future income, you need to first calculate the growth of the computing power of the entire network in the future and the total daily output of the entire network in the future. The logic for calculating these variables is roughly as follows:

• Effective computing power of the entire network + daily computing power increment → future growth of computing power of the entire network

• The growth of computing power of the entire network in the future + baseline mechanism + time decay mechanism → the total daily output of the entire network in the future

• Personal effective computing power ÷ effective computing power of the future day × total daily output of the entire network in the future → future mining income

Since there are many variables and unpredictable factors in calculating future earnings, manual calculation is very complicated and time-consuming, so we need to use professional economic model calculators for modeling calculations.

Using Hashpower China's 4P mining program to conduct data modeling calculations, it is predicted that the payback period of the entire program will be 240 days.

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Summary: Filecoin benefit and risk analysis

At present, the effective computing power of the entire Filecoin network is increasing slightly every day. It is estimated that around May 2021, the computing power of the entire network will reach the network baseline, and 100% of the daily coin production will be dug out.

Combined with the above data, only from the perspective of mining, the rate of return of Filecoin mining is compared with the current mainstream BTC and ETH mining, and the benefits of choosing Filecoin mining will be far greater than the current mainstream mining. However, as the end of the year is approaching, most of the funds in the market flow to mainstream currencies. Both BTC and ETH have increased significantly, while FIL, on the contrary, has experienced a slight decline. And the application of Filecoin has huge challenges in terms of current technology.

But in the long run, as long as the fundamentals of data storage remain unchanged, the development of Filecoin and IPFS technology and ecology will definitely promote the application value of the Filecoin network. Furthermore, the economic structure design of Filecoin is crucial to maintaining the circulation of the FIL market And the price plays a major role, and the short-term decline will not affect the future trend of FIL.