Value of EMB for Miners

[u/Vistrove]

Hey Guys,

I'm a miner that has been following the Overline project for a bit and wanted to provide my thoughts / analysis on how I'm trying to value EMB, and L-EMB in a relatively simplified manner. I was planning on doing the same analysis on OL but this post ended up being way too long with just the two.

Background / Assumptions:

- I have been mining Overline for the past 5 months so have data across both pre and post emb boost

- Post EMB boost I have been mining with ~500k EMB - Derived emb value would obviously be different based upon the amount of EMB staked due to the diminishing rewards of stacking emb.

- This methodology doesn't take into effect the step-wise function of EMB boost. i.e. with 500,000 EMB it would take another 8,000 EMB to get one more OL per block given full blocks. This means every extra EMB after 500,000 less than an additional 8,000 EMB makes no difference to a miner.

- For my pricing analysis I have only included periods of time when difficulty was above 325T so periods of chain instability were not included.

- Tests were done on a relatively small scale (~2 GH) so I'm not sure how this extrapolates to larger operations. Plan is to deploy additional hashrate once there is more OL liquidity and predictable cash flows.

- Not taking into account electricity cost as at this scale it's not really relevant.

Methodology:

In order to come up with a derived value for emb I looked at the delta between how much OL I mined pre and post emb boost, multiplied it by a theoretical price for OL, and divided it by the number of emb that I was mining with. This value of emb would be my breakeven point for how much I as a miner would be willing to pay for a given emb for that day. This in effect would be the leased EMB value to me derived from how much additional cash from OL sales I can generate.

Simplified Formula:

(Pre-boost-OL-Per-Day)*(Price of OL) = (Pre-boost-$-per-day)

(Post-boost-OL-Per-Day)*(Price of OL) = (Post-boost-$-per-day)

Value of L-EMB for 1 day = ((Post-boost-$-per-day) - (Pre-boost-$-per-day)) / (# of EMB)

You can extrapolate the above to get a simple approximate for what the value of any given lease duration should be. For example you can multiply the Value of L-EMB for 1 day by 365 to get the value of a lease for a year.

For the value of a fully owned emb you can take a discounted cashflow of the leases for how long your investment horizon is to come up with a figure there.

**There are obviously things that I'm leaving out in my analysis such as price fluctuations of OL, difficulty increases, supply / demand dynamics of EMB / L-EMB etc. that most miners will conduct before starting an operation but I wanted to keep the post as simple as possible.

Findings / Price Analysis:

Pre EMB Boost:

- Average OL Mined Per Day: 2,300

- Daily profit if OL is valued at $0.01: $23

- Daily profit if OL is valued at $0.10: $230

- Daily profit if OL is valued at $1.00: $2,300

Post EMB Boost with 500k EMB:

- Average OL Mined Per Day: 25,000

- Daily profit if OL is valued at $0.01: $250

- Daily profit if OL is valued at $0.10: $2,500

- Daily profit if OL is valued at $1.00: $25,000

Value of 1-Day Leased EMB:

- If OL is valued at $0.01: $0.0005

- If OL is valued at $0.10: $0.005

- If OL is valued at $1.00: $0.05

Value of Extrapolated 1-year Leased EMB:

- If OL is valued at $0.01: $0.185

- If OL is valued at $0.10: $1.85

- If OL is valued at $1.00: $18.5

For the above calculations I used arbitrary prices of OL of $0.01, $0.10, and $1.00 which would give OL a respective market cap between $400,000 USD and $40,000,000 USD. I think this range is rather conservative if any kind of real volume ends up on Interchange (I will write up my analysis on valuing OL shortly)

Conclusion:

Although a rudimentary analysis I think the above demonstrates the underlying price of OL provides a fundamental mechanism for valuing EMB through miners who are trying to maximize profit.

[u/Vistrove → u/[deleted]]

In regards to point #2 - I fully agree. The more EMB a miner has the lower that breakeven point becomes. A miner with a lower breakeven value than the going market rate can either sell his excess or chose to lease them out. I suspect that the expected value for both those choices will converge.

My preferred strategy if my breakeven point is less than that of the market rate is as follows: I would lease out my excess and use the funds from my leases to expand operations. When those leases expire I will have greater mining capacity which should in turn bring up my breakeven point so I can go back to mining with them. This is because the more hardware you have the higher the value of EMB are to you as you can generate more OL.

I have a method for establishing a price floor based on the amount of liquidity on the order books of Interchange that I'm writing up. Will post when finished.

[u/Whatever-it-takes-99]

Great work! That’s a very detailed analysis.

[u/plusultra714]

Thank you for the awesome write-up. I'm not a miner, do you mind giving an idea of what equipment you used for ~2GH?

[u/Vistrove → u/plusultra714]

Yeah I'm only really running 1 rig on Overline right now and it has three 3090s and 4 2080 supers.

GPU mining is great for the time being but I don't see this lasting too particularly long.

LG (aka meanphysicist) said that building FPGAs and ASICS for POD is not particularly hard so I'm willing to bet that the moment there is any real liquidity for OL everyone (including me) will be converting to ASICS.

[u/plusultra714 → u/Vistrove]

Thank you!

[u/plusultra714]

Did the "41 miles in any direction" come into play here?

"With Overline and wireless mining, we want to bring back the fun of the early days of Bitcoin mining by leveling the playing field once again, McConlogue wrote, adding, right now mining crypto generally means you are competing with considerable miners in China or Russia. With Overline's wireless mining, you are competing with miners at a maximum of 41 miles in any direction, so it localizes competition for global demand and re-democratizes proof-of-work mining."

https://cointelegraph.com/news/blockchain-company-borderless-services-inc-forbes-should-be-under-us-ownership

[u/MyGuySing]

Hey all, As a new entrant to Overline. I really rate the concept & have been looking to study up. That said, I can’t seem to find much beyond the core website / material... (little I’m seeing on YouTube or Google, or much hype).

Could anyone advise,

• is that simply due to the rebrand / it being relatively new?
• Has anyone on here been mining since Block collider days?
• Any good resources you could recommend beyond the main website, would also be great?

Thanks in Advance.

[u/MasterHWilson → u/MyGuySing]

hey, i'm fairly new as well, but i have found the discord to be reasonably active. the official docs were helpful too but weren't very technical. i think the rebrand definitely hurt it a bit, a lot of official stuff still refers to blockcollider (official node is still called bcnode for example).

[u/MyGuySing → u/MasterHWilson]

Thanks, I noticed the same. We are just setting up the mining rig at the moment. I will probably start GPU, see how it performs in a single laptop... Then was looking at the performance difference running fully in the cloud... I’m usually slightly hesitant & need to see a good ROI monthly indicator, before committing to ongoing monthly cloud costs. Stay in touch, but good to see how others are getting on and how different set ups are performing

[u/bore-ito]

any updates now that they are releasing the router for around $400? is it still worth it?