docs_tfgrid_economics/docs/node-economics/explanation.md

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Node Economics Explained

How Farmers Earn and the Decentralized Marketplace

The ThreeFold Grid offers a unique opportunity for individuals, known as "farmers," to monetize their hardware by contributing to a global, decentralized cloud infrastructure. This document explains the core economic principles, how farmers generate income, and the role of the decentralized marketplace.

The Role of a Farmer

A farmer is an individual or entity that operates one or more "nodes" on the ThreeFold Grid. A node is essentially a physical or certified compute machine that provides resources like CPU, memory, and storage to the network. By making these resources available, farmers become integral to the decentralized cloud, enabling users worldwide to deploy applications, store data, and run various workloads without relying on centralized providers.

How Farmers Make Money

Farmers earn income by renting out "slices" of their nodes. Each node can be logically divided into multiple slices, with each slice having its own allocated resources (e.g., a certain number of CPU cores, amount of RAM, and SSD storage).

1. Node Acquisition and Setup:

   • Farmers invest in hardware to set up their nodes. The overview.md document provides examples of various node configurations, including "Mini," "Mini AI," and "Nvidia" certified nodes, along with their estimated costs.
   • These nodes are then connected to the ThreeFold Grid, making their resources discoverable and available for reservation.

2. Resource Slicing and Pricing:

   • Farmers have the flexibility to divide their nodes into multiple slices. The overview.md shows examples like a "Mini 1" node potentially offering up to 25 slices, while a "Nvidia 6000 (1x)" node might offer 1 slice due to its specialized nature.
   • For each slice, farmers can set their own pricing within a defined minimum and maximum range. This allows them to compete in the marketplace while ensuring a fair return on their investment. The pricing can be set per hour, per month, or for longer durations, with shorter reservations typically incurring higher prices.

3. Income Generation:

   • When a user reserves a slice of a farmer's node, the farmer earns income. The overview.md highlights an income split: 80% of the revenue goes directly to the farmer, 10% is burned (reducing the total supply of the ThreeFold Token, TFT), and 10% goes to ThreeFold for protocol development and maintenance.
   • The income potential varies significantly based on the node type, its specifications, and the number of slices it can offer. For instance, a "Mini 1" node might generate a minimum of $10.92/month and a maximum of $126/month, while a "Nvidia 6000 (1x)" node could yield between $390 and $4,500/month. These figures illustrate the potential for substantial earnings, especially with higher-end or specialized hardware.

The Decentralized Marketplace

The ThreeFold Grid operates as a decentralized marketplace where farmers and users interact directly.

1. Farmers Offer Resources: Farmers list their available node slices, specifying the resources (CPU, memory, SSD, AI, TPS) and their desired pricing. This information is broadcast across the grid.

2. Users Reserve Resources: Users, whether individuals or organizations, browse the available resources on the marketplace. They can search for specific configurations that meet their needs for deploying applications, hosting websites, or running AI workloads. Once a suitable slice is found, they can reserve it for a specified duration.

3. Dynamic Pricing and Bid Tiers:

   • The marketplace supports dynamic pricing, where prices can adjust based on factors like reservation length. Shorter reservations might have a higher hourly rate compared to longer-term commitments.
   • ThreeFold also sets "Bid Tiers" for various slice types (e.g., "Std Compute Slice," "Mem Heavy Slice," "AI Slice"). These tiers represent the prices ThreeFold is willing to pay for specific resource configurations, providing a baseline and ensuring a certain level of demand for farmers' resources. This mechanism helps stabilize the market and provides farmers with a clearer understanding of potential earnings.

4. Transparency and Efficiency: The decentralized nature of the marketplace ensures transparency in pricing and resource allocation. Smart contracts on the ThreeFold blockchain handle reservations and payments, eliminating intermediaries and reducing transaction costs. This creates a highly efficient and trustless environment for both farmers and users.

Conclusion

The ThreeFold Grid's node economics model empowers farmers to become active participants in the decentralized internet. By providing essential compute, storage, and network resources, farmers not only earn a sustainable income but also contribute to building a more resilient, open, and accessible digital future. The decentralized marketplace facilitates this exchange, ensuring fair value and efficient resource utilization across the globe.