The profitability of maintaining and producing blocks for the EOS blockchain is already null and void, according to a recent survey. Of the twenty-six block producers who took part in the survey, all of them indicated that the current coin price of EOS has left them at a financial loss.
Barely Hanging On
Block producers are now eating into their own funds to stay afloat, according to the results from this survey by altShiftdev, the creator of My EOS Wallet.
The average break-even point for BP’s was when the coin was priced at $4.14 in mid-November. Since then EOS dropped as low as $1.50, before rebounding to the $2 range – none of which helps the block producers who posit $2.50 to be the point at which they essentially have to file for bankruptcy.
Many have already switched off their machines in recent weeks, while those who remain are spending their own previous EOS earnings just to stay active. Much of this economic harm is due to a bad system of incentives which sees a static reward rate set for BP’s, regardless of the value of the coin.
Mining profitability became a popular topic recently thanks to Bitcoin’s own decline, and two months ago BTC mining slipped below the profitability line when dipped below $6,600. A series of difficulty adjustments since then have righted the course somewhat, although many smaller operators were pushed out of the game.
Unlike Bitcoin, however, EOS has no difficulty adjustments for its block producers, who instead receive a flat percentage fee regardless of coin price. That was all well and good back in May when EOS was priced at $24. But now, the 1% reward doesn’t amount to all that much.
Ironically, the 1% rate was initially put in place to make sure BP’s didn’t earn too much, back when the coin price was twelve time higher than it is now.
One possible solution would be for BP’s to start to monetize some of their surrounding environment, such as websites, tools, ads, transaction fees and airdrops/ICO’s. However, perhaps due to fears over how the EOS community would react to such a move, nearly 60% of BP’s say they are either unsure about this or are completely against it.
Another possible solution is to introduce a dynamic inflation rate. One which would adjust to the changing coin price, and ensure that BP’s nether receive too little, or too much reward for their services.
Interestingly, a vast majority of BP’s said they would opt for this option, despite it meaning their profits would be greatly limited in any future bull market. According to the survey:
“A full 73% of BP surveyed want Dynamic Inflation, knowing full well it would limit their profits in bull markets and almost 35% of them were too worried about losing their current votes to do anything about it, even while on the verge of bankruptcy.”
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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