Speaking of death spiral: EOS block producers close to wind up in one

Death spiral theory subscribers argued, once Bitcoin’s price falls below its cost of mining, the incentive to mine will deteriorate, thrusting bitcoin into a death spiral. That is, without the mining activities supporting the ledger that maintains the records of who owns what.

Corey Miller, part of the BlockTower investment team, raised an interesting question apro po the topic of death spirals. While everyone was focused on the baseless bitcoin mining death spiral, EOS price crumbling got its block producers in hot water.

Cory wrote on Twitter:

In this survey filled out by block producers, the break-even cost for them was ~$4 per EOS. EOS is currently trading at $1.80.eval(ez_write_tag([[728,90],'captainaltcoin_com-medrectangle-4','ezslot_1']));

The survey he is quoting is this one, done by altShiftDev, company that developed one of the EOS wallets. The article accompanying the survey states that “The EOS Mainnet grows at a rate of 5% per year, 4% of that is locked away in the Worker Proposal Fund — an untouched account (eosio.saving) currently holding 18.5m EOS established to fund upgrades to the network.

Teams were asked at which price-point they fall into the following categories (in order): Break-Even, Cuts to Development and Community Projects, Major Layoffs and Bankruptcy. They were asked to assume a stable price of EOS for at least 3 months.

Miller continues:

EOS block producers explained

EOS focues blog, EOStribe explains block producers role as follows:

“The annual inflation [in EOS network] is 5%, but as times goes on and the EOS tokens are worth more, the token holders can vote on decreasing or increasing the inflation rate.

The inflation rate is split up into different pools because maintaining the blockchain includes Block Producers (BPs), who run the network, and worker proposals for improving the blockchain. The inflation is split up between those two groups with BPs earning 1% and worker proposals with 4%. Worker proposals are presented to the community and token holders vote on what improvements to make.

The BP funds are split up differently to maintain higher value for those most trusted in the community and whom runs one of the active twenty one BPs.

As written in the code, 25% of the BP pay goes to active producers and 75% goes to standby BPs calculated from a percentage of the votes received. 318 EOS tokens are awarded to the 21 active BPs per day. 200 EOS per percentage of the vote per day are awarded to all standby BPs.”

 

Bitcoin mining death spiral rebuffed

Arjin Balaji of TheBlock exceptional explanation of this:

Prior to proclaiming Bitcoin’s demise due to the death spiral, it’s important to understand a few common misconceptions about miners and their relationship with the difficulty adjustment:

Additionally, what death spiral crew obviously was not familiar with is one ingenious feature Satoshi Nakamoto built into the bitcoin mining design. And that feature is difficulty adjustment. Thanks to this stroke of genius baked into its fundamental design, every time a mining rig is shut down, the bitcoin protocol increases the incentive for other miners to stay online.