Proof of Work & Vegetables

Jul 10 2019

I wrote about Plenty previously and luaded them for their smart business model to run a company in a perfect competition for lower costs. The benefit is virtually limitless demand and therefore extremely high potential for profits. The better their technology (input), the better their return.

I was thinking about how that translates to technology, and while I do not currently have a great answer for software, the answer is certainly their for hardware. Mining on the blockchain (at least for now) provides unlimited reward for those willing to provide processing power. The prices are fixed just like vegetable industry, but if you can get your costs low enough per unit of output, you can have a great business. For example, finding a source of cheap electricity, investing in high processing power, buying water cooling equipment all have cost lowering attributes just like vertical, hyrdoponic planting.

The trade off is of course the up-front fixed costs in both cases. Plenty had to invest a lot in R&D, warehouses, etc. Mining cryptocurrenies efficiently costs high powered GPUS, water cooling equipment, space as well, etc.

The difference is that Plenty is using custom technology that is beyond the knowledge of the rest of the market so they are able to capture outsized returns because prices do not recflect the new cost of farming.