DePIN Revenue Analysis: Leveraging Idle CPU

Excess CPU put to work with DePIN

Recently, a client approached us with a common yet intriguing challenge: they had surplus compute power idle in their data center and were eager to explore how this could be transformed into a revenue-generating asset. Specifically, they were interested in leveraging their excess CPU capacity to contribute to the supply side of Decentralized Physical Infrastructure Networks (DePIN) as nodes. The excess compute originated from their Open Cloud Compute (OCP) servers, which in their configuration were CPU-dense. Our task was to run several scenarios to identify which DePIN project would be the most advantageous for their needs.

In this post, we will provide a condensed version of the analysis we conducted. We compared the client’s excess compute capacity against several prominent DePINs, including Flux, Beldx, Akash, Neoxa, and Dash. We picked these projects after completing more comprehensive research that also included Golem, Render, Near, and Firo. Some of those others lacked comprehensive information on setup and/or rewards and in the end we found the first 5 to be a better fit for our client.

Please note that the insights shared here are high-level estimates and should not be considered financial advice. If you want to skip all the analysis and jump right to the results click here.

Excess Compute Specifications

As stated our client was leveraging OCP Servers similar to this Tioga Pass server with the follow max specifications:
CPU Cores: 20
RAM: 768 GB
Storage: 4 TB

They typically had anywhere from 4 to 12 of these OCP servers idle and available for extended periods, often spanning six months or longer. To provide a clear and actionable analysis, we focused on the lower end of their available resources: 4 of these OCP servers.

In the following sections, we delve into our findings, examining the potential revenue generation from contributing these servers to various DePIN projects. Our goal is to provide a comprehensive overview that will help similar organizations understand the benefits and feasibility of leveraging excess CPU capacity in this innovative way.

Analysis Notes

Before diving into the details of our analysis, it’s important to highlight a few key points:

1. Revenue-Only Analysis: This analysis focuses solely on potential revenue. We did not account for the typical operational costs associated with running these servers such as power, bandwidth, colocation/data center fees, IP Addresses, and maintenance. The client was already aware of these costs and requested a simple revenue comparison.
2. No Virtualization Consideration: For this analysis, we assumed the servers were run “to the max,” without accounting for any virtualization needs. Most DePIN projects would require setting up some form of virtualization to partition out the logical nodes, likely involving a Kubernetes cluster that would consume some resources. However, to provide a high-level revenue estimate, we did not include this in our calculations.
3. Variable and Unknown Factors: Several variables, such as token prices, can significantly impact the results. As anyone familiar with the crypto space knows, prices can fluctuate dramatically. To maintain consistency, we locked in token prices at a specific point in time for this analysis. Additionally, supply and demand dynamics can affect node rewards, with more nodes typically leading to lower rewards per node, unless offset by increased demand (for some projects). Our analysis captures a snapshot as of the end of July 2024, and should be viewed in this context.
4. Time Constraint: Our client only gave us a week to conduct the analysis and another week to review it with them and answer any follow-ups. They specifically wanted to avoid a long-running project and the dreaded analysis paralysis 😱

With these considerations in mind, let’s delve into the analysis!

Flux

Flux is a decentralized Web3 cloud infrastructure that consists of user-operated, scalable, and globally distributed computational nodes. The Flux Cloud is a people-powered network designed to help build decentralized applications with enhanced flexibility, scalability, and censorship resistance. Flux offers three node tiers: Cumulus, Nimbus, and Stratus, each requiring different collateral and specifications. Flux nodes are rewarded as blocks are mined, with each node tier receiving rewards in a round-robin fashion. Full disclosure: We have been operating Flux nodes for over three years, which has provided us with extensive insight into the network’s operations and potential.

Given the specifications of the OCP servers, we had the flexibility to run various combinations of node tiers. We evaluated five different scenarios: one for each tier individually (All Cumulus, Nimbus, or Stratus) and two scenarios where we balanced the resources across multiple tiers. Using the current Flux price of $0.66 and the daily Flux rewards per node (Cumulus: 0.43, Nimbus: 3.23, Stratus: 7.66), we obtained the following results:

All Cumulus
Nodes: 40
Collateral: 40,000
Collateral Cost: $26,400
Rewards Per Day: 17.2 Flux
Revenue Per Day: $11.35
Revenue Per Month: $345.29

All Nimbus
Nodes: 20
Collateral: 250,000 Flux
Collateral Cost: $165,000
Rewards Per Day: 64.6 Flux
Revenue Per Day: $42.64
Revenue Per Month: $1,296.85

All Stratus
Nodes: 10
Collateral: 400,000 Flux
Collateral Cost: $264,000
Rewards Per Day: 76.6 Flux
Revenue Per Day: $50.56
Revenue Per Month: $1,537.75

50/50 Nimbus-Stratus
Nodes: 10 Nimbus, 5 Stratus
Collateral: 325,000 Flux
Collateral Cost: $214,500
Rewards Per Day: 70.6 Flux
Revenue Per Day: $46.60
Revenue Per Month: $1,417.30

25/50/25 Cumulus-Nimbus-Stratus
Nodes: 12 Cumulus, 10 Nimbus, 2 Stratus
Collateral: 217,000 Flux
Collateral Cost: $143,220
Rewards Per Day: 52.78 Flux
Revenue Per Day: $34.83
Revenue Per Month: $1,059.56

Pros of Flux

• Reward Predictability: Flux offers consistent and predictable rewards tied to block time. This allows node operators to reliably estimate their potential earnings. The Flux Node App provides a convenient way to track node performance and predict when the next reward will be received.
• Ease of Setup: Setting up a Flux node is relatively straightforward, especially with the use of the multitoolbox.sh bash script. While some familiarity with running a terminal on Linux is required, the process is designed to be user-friendly and efficient.
• Low Maintenance: Once the nodes are set up and confirmed on the network, they require minimal maintenance. Occasional updates may be necessary, but overall, the operational demands are low, making it a practical option for those looking to leverage excess compute capacity without significant ongoing effort.

Cons of Flux

• Collateral Requirements: Each node tier requires a substantial amount of Flux as collateral, which can pose a significant barrier to entry for some operators. Due to the inherent volatility of cryptocurrency, keeping this collateral locked up could result in significant gains or losses, adding a layer of financial risk. With Flux you only have to lockup the collateral for as long as the node is running and at anytime the node can be shut down and the collateral can be unlocked
• Node Popularity and Reward Dilution: The round-robin nature of node rewards means that as more nodes join the network, the time between rewards for each node increases. Currently, the number of Flux nodes has been hovering between 12,000 and 13,000. However, as the price of Flux rises, more nodes typically join the network, leading to reduced rewards for existing node operators.

Flux provides a balanced mix of predictable rewards, ease of setup, and low maintenance, making it an attractive choice for utilizing excess CPU resources in a decentralized network.

Beldx

Beldex is a privacy-focused cryptocurrency that employs advanced methods such as ring signatures, RingCT, and stealth addresses to ensure the privacy and security of senders, receivers, and transaction amounts. The Beldex ecosystem includes a variety of decentralized applications (dApps) designed to enhance transaction ease and privacy. These services include BChat, BelNet, Beldex Browser, Beldex wallets, Beldex privacy protocol, Beldex wallet extension, and Beldex bridge, all contributing to the Beldex private ecosystem, which benefits its users by maintaining transaction history on a decentralized blockchain.

Beldex masternodes have minimal specifications and require a collateral lockup of 10,000 BDX for 30 days. While the setup process is somewhat complex and necessitates a Linux wallet, familiarity with Linux, installing packages, and running terminal commands to facilitate the process. Given the specifications of the OCP servers and the current BDX price of $0.0478, we achieved the following results:

Beldx Masternode
Nodes: 80
Collateral: 800,000
Collateral Cost: $38,240
Rewards Per Day: 920 BDX
Revenue Per Day: $43.98
Revenue Per Month: $1,337.60

Pros of Beldex

• Reward Predictability: Beldx offers consistent and predictable rewards tied to block time. This allows node operators to reliably estimate their potential earnings.
• Ecosystem Integration: A suite of dApps that provide a comprehensive and private ecosystem for users means the project can attract and keep users.
• Minimal Specifications: Low hardware requirements make it accessible for many operators.

Cons of Beldex

• Complex Setup: Requires a Linux wallet and familiarity with Linux systems, including installing packages and running terminal commands.
• Collateral Lockup: The need to lock up 10,000 BDX as collateral for 30 days can be a financial barrier and introduces potential volatility risks. Due to the inherent volatility of cryptocurrency, keeping this collateral locked up could result in significant gains or losses. The timing aspect of the lockup (30 days) only increases this risk.

Beldex offers robust privacy features and a well-integrated ecosystem of decentralized applications. However, the setup complexity and collateral requirements are important considerations for potential operators.

Akash

Akash is an open network designed to facilitate the secure and efficient buying and selling of computing resources, serving as a public utility. This makes it a promising choice for our purposes. One of Akash’s handy features is the Akash Provider Calculator, which allows users to run multiple scenarios by entering the compute resources they wish to list on the marketplace and the price they want to charge. This tool can then adjust estimate earning based on total usage. Additionally, the Akash Stats site provides insights into historical and current leases.

Given the inherent uncertainty in predicting how much compute power would be leased (referred to as “Usage”), we ran three scenarios based on the resources from 4 OCP servers with varying utilization levels: Worst Case (25% Usage), Most Likely (60% Usage), and Best Case (85% Usage).

Using the 30 Day Average Price for 1 AKT as $3.448 USD here are our results

Worst Case — 25% Usage
Monthly ARK: 74.22
Monthly Revenue: $254.38

Most Likely — 60% Usage
Monthly ARK: 178.12
Monthly Revenue: $610.52

Best Case — 85% Usage
Monthly ARK: 252.33
Monthly Revenue: $864.90

Pros of Akash:

• Minimal upfront investment: Akash only requires a wallet with 5 AKT (~$18) to start contributing computing resources.
• Flexibility: Providers can connect either individual servers or an entire Kubernetes cluster.
• Simplicity of use: Connect your servers through the the Preator app seems straightforward and the UI is intuitive.

Cons of Akash:

• Active management needed: Akash operates as a marketplace where resources must be listed and priced, requiring active monitoring to adjust prices as necessary. Although their Praetor App simplifies this process, it can be hard to anticipate how much management this may require. Although the time may be right as the Akash network just hit an all time high in spending in terms of USD according to House of Chimera.

With these considerations in mind, Akash presents a viable option for leveraging excess CPU capacity, especially for those willing to actively manage their marketplace listing.

Neoxa

Neoxa represents an innovative blockchain platform that seamlessly integrates the worlds of gaming and cryptocurrency. This platform enables users to earn cryptocurrency rewards through engaging in gameplay, leveraging a unique blend of Proof of Work (PoW) and Proof of Game (PoG) mechanisms.

A Neoxa Smartnode is a specialized node on the Neoxa blockchain that helps maintain network security. The requirements for setting up a Smartnode are minimal: 2 CPU cores, 4GB of RAM, and a 60GB SSD. Additionally, operators need to lock 1,000,000 Neoxa coins as collateral. The Smartnode setup process requires familiarity with Linux, installing packages, and running terminal commands. Given the specifications of the OCP servers and the current Neoxa price of $0.001025, we achieved the following results:

Neoxa Smartnodes
Nodes: 40
Collateral: 40,000,000 Neoxa
Collateral Cost: $41,000
Rewards Per Day: 36,000 Neoxa
Revenue Per Day: $36.90
Revenue Per Month: $1,122.38

Pros of Neoxa:

• Gaming Integration: Unique PoW and PoG mechanisms allow users to earn rewards through gameplay.
• Minimal Specifications: Low hardware requirements make it accessible for many operators.

Cons of Neoxa:

• Collateral Lockup: Requires 1,000,000 Neoxa coins as collateral, which can be a significant financial barrier.
• Complex Setup: Requires familiarity with Linux, installing packages, and running terminal commands.

Neoxa offers a unique blend of gaming and cryptocurrency, providing an exciting opportunity for those looking to leverage excess CPU capacity. However, the collateral requirements and setup complexity should be considered before committing to operating a Neoxa Smartnode.

Dash

Dash (DASH) is a decentralized, open-source cryptocurrency and blockchain created in 2014. Initially known as Darkcoin, it was rebranded in 2015 to Dash, which stands for “digital cash.” As a fork of Litecoin, Dash is one of the first prominent alternative cryptocurrencies. It offers fast, low-cost payments globally and aims to provide a user-friendly experience with privacy akin to cash. Unlike many cryptocurrencies that are seldom used for transactions, Dash has built a scalable digital payment system.

Dash Masternodes are powerful servers backed by collateral held in Dash and are designed to provide advanced services and governance on the blockchain. Dash has pioneered the concept of masternodes since its inception in 2014, making it one of the earliest options for node providers. There are two types of Masternodes: the Standard Masternode and the Evolution Masternode. For this analysis, we focused on the Standard Masternode, which requires 3 x 2 GHz CPU Cores, 8 GB RAM, 80 GB SSD, and 1,000 DASH as collateral. The Masternode setup process requires familiarity with Linux, installing packages, and running terminal commands. Given the specifications of the OCP servers and the current DASH price of $25.15, we achieved the following results:

Dash Maternodes
Nodes: 78
Collateral: 26,000 DASH
Collateral Cost: $653,884
Rewards Per Day: 6.07087 DASH
Revenue Per Day: $152.68
Revenue Per Month: $4,643.98

Pros of Dash:

• Established Network: Dash is one of the earliest cryptocurrencies to implement masternodes, providing a mature and stable network.
• Fast, Low-Cost Transactions: Dash offers quick and inexpensive transactions, making it practical for everyday use.

Cons of Dash:

• High Collateral Requirement: Operating a Dash Masternode requires 1,000 DASH as collateral, which can be a significant financial barrier.
• Complex Setup: The setup process requires familiarity with Linux, installing packages, and running terminal commands.

Dash provides a reliable and scalable digital payment system with a well-established network of masternodes. However, the high collateral requirements and setup complexity should be considered by those looking to operate Dash Masternodes.

Conclusion

Each DePIN we looked at had some similarities including the need for linux experience and familiarity with running bash commands. They also all had some collateral needs, however Akash was the lowest only required an amount less than $20. Setup ran from simple Akash with the Preator app and Flux with the multitoolbox.shscript to more complex with Beldex looking to to be the most complex followed by Dash and Neoxa. They each had several pros and cons and after consulting with our client we ranked them accordingly. Keep in mind that you may rank them in a different order depending on what you are trying to achieve.

1. Akash: With a monthly revenue of approximately $900 and no significant upfront collateral, Akash emerged as the ideal choice for the client. The straightforward setup and user-friendly management via the Praetor app were decisive factors. Although the client was open to investing in collateral, the option to avoid this risk of volatility was appealing after reviewing charts and discussing potential risks. The only downside was dedicating a resource to managing the marketplace pricing to ensure all resources were fully utilized at the best price.
2. Beldex: Despite having the second lowest collateral cost (less than $40,000) and an estimated monthly revenue of around $1,400, Beldex was considered one of the top options. However, the complexity of the wallet and node setup, coupled with the collateral requirements, placed it second.
3. Flux: Flux boasted one of the highest monthly revenues, estimated between $1,000 and $1,500 depending on the node tier setup. However, the high collateral requirements ranging from $130,000 to $250,000 impacted its ranking. While the node setup was simplified by the script, the high collateral needs were a significant drawback, despite the client’s perception of Flux as the most stable asset reviewed.
4. Neoxa: Neoxa required slightly more collateral than Beldex ($41,000) but generated less monthly revenue at ~$1,200/month. Combined with its relative newness and the potential for high volatility (especially compared to Flux), this led to Neoxa being ranked fourth.
5. Dash: Despite being a longstanding player in decentralized node networks, Dash’s extremely high collateral requirement, over $650,000 overshadowed its potential for the highest monthly revenue estimated at $4,600/month. The significant financial barrier placed Dash last in our ranking.

In this analysis, Akash emerged as the top choice, though there was considerable debate among the top three options, with Flux and Beldex also being viewed as strong contenders. What do you think? Let us know in the comments. If you would like a similar analysis tailored to your needs, please reach out to us at info@marzrock.com.