When you buy Bitcoin mining Open-Ended contract from Genesis-Mining, no one explains you exactly how long this contract will last. Almost all mining Youtubers are shouting proudly - this is your investment for life, encourage you to invest more, address it as "life-time" contract - but is it really so?
Since I have invested a month ago into Genesis owning 10 TH/s of Bitcoin mining contract (for 1358 USD), after seeing our fellow steemer @steponas article on his Bitcoin mining experience with Genesis-Mining where he declares his earnings, but states that he is uncertain about upcoming ROI times - I've commented using simple math that his ROI should be 280 days, but booooy - after that I started to dig deep and I think I was soooo wrong..
Writing this article, for the first time I've read the Genesis contract terms (I know - I am amazing investor), which states that you are covering maintenance fee of 0.00028 USD per GH/s per day, that means 2.80 USD/day for my 10 TH/s. And the contract will be terminated if my miner will not be able to cover these expences. After 3 weeks of mining I'm recieving 6.44 USD/day (after maintenance tax) - so there is not much room to breathe already. Lets dig deeper.
All the popular Bitcoin mining calculators do not increase Network difficulty, instead just use the current one, but in reality - the increasing overall Hashing power simultaniously increases Network difficulty.
Every 14 days the difficulty rises more that 5% from the dawn of Bitcoin. That means that my miner is getting weaker and weaker every day and my share from mined Bitcoin block gets smaller and smaller since everyone else is upgrading their hashpower. I found the right calculator this time with projected daily difficulty and to be fair I used more optimistic 4% difficulty increase (though 5% would be more realistic - still I do ignore historical data and facts and go with 4%) and the results where unexpected:
Since the only life line for my contract is ability to mine more than fixed maintenance fee of 2.80 USD/day I really depend only on Bitcoin price. These calculations are made with 2500 USD/BTC price, but even then I will never get back my investment (400 USD short) and my contract will become negative on day 407. After that I will say goodbye to my hard working miner. The same goes for all Genesis contracts, since Hashpower earns are distributed equally among all contractors. So @steponas on these conditions may never ROI too and without contract upgrade the trip to promise land will be over.
And in this case you may think that wait - but what if Bitcoin price will skyrocket? Well, as history data shows - it will increase network difficulty even more (up to 13.4% for first weeks of the June when Bitcoin kissed amazing 3000 USD/BTC) which will bring profits down drastically. So these contracts are doomed in my opinion.
But in this case I see positive side too. I will still have my mined 0.5 bitcoin, I will still be able to lock these funds for 5 years and wait for the times when I will be able to buy a brand new 7th generation Tesla for that amount of cryptocurrency without any need to exchange it for USD!
You are correct, the only way for you to have hope is to pray that the increase in the price of bitcoin outpaces the pace at which the difficulty mining rises. The one good factor is that the electricity rate is set, so this becomes less of a factor over time as the price of bitcoin rises. I really like the way you break it down mathematically and graphically. You think like me. Following.
Thank you :) I wish I'd come up on such kind of calculations before my blind investment following the crowd. I wonder if there is a way from this pit by changing sha-256 contract of mining Bitcoin to some other altcoin? Maybe there is slower increasing difficulty, where my miner can be more profitable?
You have to be very careful with that. If the coin you are mining is too invaluable, all of your mining will be consumed paying the electricity portion of your agreement, and might not even be profitable which would put your entire contract at risk.
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This analysis needs to factor in the correlation of BTC price and difficulty. Mining usually returns more BTC in the long run vs just buying BTC. But this gain has to be weighed against the risk of being shaken out the contract if the price drops drastically for a few months.
@brnffn well, the price of bitcoin is at 6000 dollars.
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I get the peculiar feeling that maybe cloud mining is not so profitable. "If it sounds too good to be true, it probably is."
I had the same “lifetime” contract with Hashflare and they reneged in the deal. Buyer beware!