docs_tfgrid_economics/docs/node-economics/pricing-model.md

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Pricing Model & Income Analysis

Understanding the economics of farming is essential for making informed hardware decisions. This page breaks down pricing, utilization scenarios, and ROI calculations.

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Pricing Components

Per-Slice Pricing Structure

Each slice has two key price points:

Minimum Price (Floor):

• Conservative market pricing
• Ensures farmers can cover costs
• Competitive with major cloud providers at bulk rates
• Assumes moderate demand

Maximum Price (Ceiling):

• Premium positioning
• Comparable to retail cloud pricing
• Assumes high demand and full utilization
• Competitive advantage scenarios

Example: Standard Compute Slice

• Min: 1.2 CC/month (~$0.15)
• Max: 12.0 CC/month (~$1.54)
• Range: 10x spread between floor and ceiling

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Revenue Share Breakdown

Every Cloud Credit (CC) spent on TFGrid capacity is distributed as follows:

pie title Revenue Distribution per 100 CC
    "Farmer (You!)" : 80
    "TFT Burn (Deflationary)" : 10
    "ThreeFold Operations" : 10

What This Means

If a user pays 100 CC for your slices:

Recipient	Amount	Purpose
Farmer	80 CC	Your income
TFT Burn	10 CC	Reduces TFT supply → supports token value
ThreeFold	10 CC	Platform development, operations, support

:::tip Farmer-First Model With 80% going directly to farmers, you keep the vast majority of value generated by your infrastructure. :::

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Income Scenarios by Node Type

Scenario Analysis Framework

We analyze three utilization scenarios for each node:

1. Conservative (20-30% utilization): Network still growing
2. Moderate (50-60% utilization): Healthy network adoption
3. Optimistic (80-100% utilization): High demand period

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Example: Mini 3 (Certified Node)

Hardware Investment: $1,000 Monthly HW Cost: 17 CC Maximum Slices: 25 Typical Active Slices: 25 (can provide full 25)

Conservative Scenario (30% utilization, min pricing)

Active Slices: 25 × 30% = 7.5 slices
Price per Slice: 1.5 CC (minimum)
Gross Income: 7.5 × 1.5 = 11.25 CC/month
Your Share (80%): 9 CC/month
Net Profit: 9 - 17 = -8 CC/month (not profitable yet)

Status: Needs higher utilization or pricing to be profitable

Moderate Scenario (60% utilization, mid pricing)

Active Slices: 25 × 60% = 15 slices
Price per Slice: 7.5 CC (midpoint)
Gross Income: 15 × 7.5 = 112.5 CC/month
Your Share (80%): 90 CC/month
Net Profit: 90 - 17 = 73 CC/month
Annual Profit: 73 × 12 = 876 CC (~$112/year)
ROI: $1,000 investment / $112/year = 8.9 years

Status: Profitable but slow ROI

Optimistic Scenario (100% utilization, premium pricing)

Active Slices: 25 × 100% = 25 slices
Price per Slice: 14.9 CC (maximum)
Gross Income: 25 × 14.9 = 372.5 CC/month
Your Share (80%): 298 CC/month
Net Profit: 298 - 17 = 281 CC/month
Annual Profit: 281 × 12 = 3,372 CC (~$432/year)
ROI: $1,000 investment / $432/year = 2.3 years

Status: Excellent ROI with strong demand

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Example: Large TFGrid Node

Hardware Investment: $2,000 Monthly HW Cost: 33 CC Maximum Slices: 100 Typical Active Slices: 20 (limited by resource balance)

Conservative Scenario (25% utilization, min pricing)

Active Slices: 20 × 25% = 5 slices
Price per Slice: 7.6 CC (minimum)
Gross Income: 5 × 7.6 = 38 CC/month
Your Share (80%): 30.4 CC/month
Net Profit: 30.4 - 33 = -2.6 CC/month (slight loss)

Status: Nearly break-even at low utilization

Moderate Scenario (50% utilization, mid pricing)

Active Slices: 20 × 50% = 10 slices
Price per Slice: 40 CC (midpoint)
Gross Income: 10 × 40 = 400 CC/month
Your Share (80%): 320 CC/month
Net Profit: 320 - 33 = 287 CC/month
Annual Profit: 287 × 12 = 3,444 CC (~$441/year)
ROI: $2,000 investment / $441/year = 4.5 years

Status: Solid profitability

Optimistic Scenario (100% utilization, premium pricing)

Active Slices: 20 × 100% = 20 slices
Price per Slice: 76.2 CC (maximum)
Gross Income: 20 × 76.2 = 1,524 CC/month
Your Share (80%): 1,219 CC/month
Net Profit: 1,219 - 33 = 1,186 CC/month
Annual Profit: 1,186 × 12 = 14,232 CC (~$1,822/year)
ROI: $2,000 investment / $1,822/year = 1.1 years

Status: Outstanding ROI

:::tip High-Memory Advantage Large TFGrid Node's 512 GB RAM enables premium memory-heavy slice pricing, driving higher income per active slice. :::

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Example: Nvidia 6000 (Dual GPU)

Hardware Investment: $30,000 Monthly HW Cost: 500 CC Maximum Slices: 2 (dedicated GPU slices) Typical Active Slices: 2

Conservative Scenario (50% utilization, min pricing)

Active Slices: 2 × 50% = 1 slice
Price per Slice: 300 CC (minimum)
Gross Income: 1 × 300 = 300 CC/month
Your Share (80%): 240 CC/month
Net Profit: 240 - 500 = -260 CC/month (loss)

Status: Needs higher utilization for profitability

Moderate Scenario (75% utilization, mid pricing)

Active Slices: 2 × 75% = 1.5 slices
Price per Slice: 1,650 CC (midpoint)
Gross Income: 1.5 × 1,650 = 2,475 CC/month
Your Share (80%): 1,980 CC/month
Net Profit: 1,980 - 500 = 1,480 CC/month
Annual Profit: 1,480 × 12 = 17,760 CC (~$2,273/year)
ROI: $30,000 investment / $2,273/year = 13.2 years

Status: Profitable but requires patience

Optimistic Scenario (100% utilization, premium pricing)

Active Slices: 2 × 100% = 2 slices
Price per Slice: 3,000 CC (maximum)
Gross Income: 2 × 3,000 = 6,000 CC/month
Your Share (80%): 4,800 CC/month
Net Profit: 4,800 - 500 = 4,300 CC/month
Annual Profit: 4,300 × 12 = 51,600 CC (~$6,605/year)
ROI: $30,000 investment / $6,605/year = 4.5 years

Status: Excellent returns with AI demand

:::note AI Premium Pricing GPU nodes can command significantly higher prices due to AI/ML demand. Market pricing for comparable GPU cloud instances supports these ranges. :::

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Income Comparison: All Nodes at 50% Utilization

Assuming 50% utilization and mid-point pricing:

Node Type	HW Cost	Monthly Net	Annual Net	ROI (Years)	Annual % Return
3Node Home	$500	~35 CC	~420 CC	~10	~10%
Large TFGrid	$2,000	~287 CC	~3,444 CC	~4.5	~22%
Large TFGrid 2	$1,200	~100 CC	~1,200 CC	~8	~12.5%
Mini 1	$350	~30 CC	~360 CC	~8	~12.5%
Mini 2	$800	~60 CC	~720 CC	~9	~11%
Mini 3	$1,000	~73 CC	~876 CC	~9	~11%
Mini AI 1	$2,000	~140 CC	~1,680 CC	~9.5	~10.5%
Nvidia 6000 1x	$15,000	~875 CC	~10,500 CC	~11.4	~8.8%
Nvidia 6000 2x	$30,000	~1,480 CC	~17,760 CC	~13.5	~7.4%
Tenstorrent 8x	$30,000	~1,480 CC	~17,760 CC	~13.5	~7.4%

CC values converted to USD at $0.128/CC for ROI calculations

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Key Factors Affecting Income

1. Network Utilization

What drives it:

• Total TFGrid capacity available
• Number of active users/applications
• Seasonal demand fluctuations
• Marketing and ecosystem growth

Your influence:

• Limited direct control
• Participate in community promotion
• Ensure node uptime and reliability

2. Pricing Strategy

Competitive considerations:

• AWS, GCP, Azure pricing benchmarks
• Other TFGrid farmers' pricing
• Your node's specifications (certified vs. non-certified)
• Geographic location / latency advantages

Your influence:

• Set competitive pricing when marketplace allows
• Offer discounts for long-term commitments
• Premium pricing for certified or high-spec nodes

3. Node Uptime & Reliability

Impact:

• Downtime = no income during that period
• Poor reliability = lost customers
• Consistent uptime = reputation and repeat business

Your influence:

• Invest in quality hardware
• Ensure stable internet connection
• Monitor and maintain proactively
• Use UPS/backup power if possible

4. Resource Balance

What matters:

• Nodes limited by weakest resource (CPU, RAM, or storage)
• Well-balanced nodes can sell more slices
• Bottlenecks reduce effective slice count

Your influence:

• Choose balanced hardware configurations
• Consider upgrading bottlenecks (e.g., add RAM)
• Understand which resource constrains your node

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ROI Sensitivities

Utilization Impact

For a Mini 3 node ($1,000 investment):

Utilization	Monthly Net Profit	Annual Profit	ROI Years
20%	-8 CC	-96 CC	Never (loss)
30%	9 CC	108 CC	74 years
40%	45 CC	540 CC	14.8 years
50%	73 CC	876 CC	9.1 years
60%	109 CC	1,308 CC	6.1 years
80%	181 CC	2,172 CC	3.7 years
100%	253 CC	3,036 CC	2.6 years

Assumes mid-point pricing at all utilization levels

Pricing Impact

For a Large TFGrid Node ($2,000 investment) at 50% utilization:

Price Point	Monthly Net Profit	Annual Profit	ROI Years
Minimum	99 CC	1,188 CC	13.4 years
25th percentile	420 CC	5,040 CC	3.2 years
Midpoint	287 CC	3,444 CC	4.6 years
75th percentile	756 CC	9,072 CC	1.8 years
Maximum	1,186 CC	14,232 CC	1.1 years

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Comparative Cloud Pricing

To validate our pricing model, here's how TFGrid compares to major cloud providers:

Standard Compute Instance

TFGrid Standard Slice:

• 2 cores, 4 GB RAM, ~140 GB SSD
• Price: 1.2 - 12.0 CC/month ($0.15 - $1.54/month)
• Hourly: $0.005 - $0.05/hour

AWS t3.medium:

• 2 vCPUs, 4 GB RAM
• Price: $30/month ($0.042/hour)

GCP e2-medium:

• 2 vCPUs, 4 GB RAM
• Price: $24/month ($0.033/hour)

TFGrid Advantage: 50-95% cheaper than major clouds at similar specs

AI/GPU Instance

TFGrid AI Slice (Nvidia 6000):

• 24 cores, 124 GB RAM, 96 GB GPU
• Price: 300 - 3,000 CC/month ($38 - $384/month)
• Hourly: $0.053 - $0.53/hour

AWS p3.2xlarge (V100 16GB):

• 8 vCPUs, 61 GB RAM, 16 GB GPU
• Price: $3.06/hour ($2,200/month for full-time)

GCP a2-highgpu-1g (A100 40GB):

• 12 vCPUs, 85 GB RAM, 40 GB GPU
• Price: $3.67/hour ($2,640/month for full-time)

TFGrid Advantage: 80-95% cheaper with larger GPU memory (96 GB vs 16-40 GB)

:::tip Competitive Positioning Even at maximum pricing, TFGrid undercuts major cloud providers significantly. At minimum pricing, it's dramatically cheaper while providing more resources. :::

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Risk Factors & Considerations

Market Risks

• Network adoption rate: Slower than expected growth delays profitability
• Competition: Other decentralized cloud platforms
• Pricing pressure: Race to the bottom if oversupply occurs
• Technology shifts: New hardware makes existing nodes obsolete faster

Operational Risks

• Electricity costs: Not included in hardware cost calculations
• Internet costs: Bandwidth charges in some regions
• Maintenance: Hardware failures, replacements
• Obsolescence: 5-year amortization assumes hardware remains competitive

Mitigation Strategies

• Start small: Test with lower-cost nodes before scaling
• Diversify: Mix node types (standard + AI)
• Stay informed: Active participation in community
• Plan for upgrades: Budget for hardware refresh cycles

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Total Capacity & Market Size

Based on ThreeFold's current bid commitments (see TF Bid Packages):

Total Potential Market:

• ~24,150 slices across all bid types
• ~$253,800/month at minimum pricing
• ~$3,965,625/month at maximum pricing
• ~$507 million annual market at maximum pricing

This represents committed ThreeFold demand, not total market potential. Additional demand will come from:

• End-user applications
• Enterprise offtakers
• Individual developers and projects
• Partner ecosystems

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Next Steps

For Potential Farmers

1. Review Node Specifications - Choose hardware based on budget
2. Run your own calculations - Use your local electricity/internet costs
3. Start conservative - Plan for 30-40% utilization initially
4. Monitor and adjust - Track real performance and optimize

For Current Farmers

1. Evaluate upgrade paths - Consider certified nodes Q4 2025
2. Optimize pricing - Balance competitiveness with profitability
3. Improve uptime - Maximize income from existing hardware
4. Plan for AI - GPU nodes represent significant growth opportunity

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:::info Living Document As the network matures and real utilization data becomes available, these projections will be refined. Join the community to stay updated on actual farmer income reports. :::

:::tip Questions? Discuss pricing strategies and share experiences in the ThreeFold Forum and Telegram community. :::