In observance of recent news about new all-time-high for bitcoins, I decided to take a look at options to invest into bitcoins or bitcoins infrastructure. Besides a direct way to buy bitcoins on some exchanges like coinbase.com, there are also option to buy hardware in a cloud to do effortless mining on some reasonable speeds. An example could be a service like Genesis Mining.
Let’s try to calculate the possible monetary output from such a service. For the modeling, I am going to take Ethereum currency, Medium unit with a fixed performance of 30 MH/s. You can reserve a mining unit for 2 years for a fixed price of $869. The good news that service is working on a renewable energy, so they do not charge any fees for KW/h. This is great since it is a common knowledge that profitability of mining farms tightly coupled with a local cost of energy. Nevertheless, there is a small fee for the service for doing all the administration and maintenance as well as various software upgrades, but since value is nothing in compare with projected earning we can disregard the fee.
But how much is a profit anyway? Let’s use some of the common calculators to get the ball rolling for the unit that we going to order. At the moment of writing this article projects profit was $141.5519 a month. With such a great performance we would be able to make as much as $3647.56 in 2 years. Obviously, we can neglect the original cost of a unit of $869 as well as minor fees imposed by the service. As one of the reviewers of the service said:
Everything OK. I expect to recover my investment in 7 months approx. if the price and complexity don’t change.
But here goes a shocking discovery about the service, the complexity of mining is not staying constant. By referencing a service like etherscan.io we can see that complexity chart directly correlates with current rate and as of today close to an exponential growth. I used some basic math to interpolate known complexity data points to predict future numbers.
With the very first data point in a chart equal to a profitability multiplier of one, over course of two-year profitability goes down to as little as 0.00106273488 of base profitability. So over course of 24 months with all the math taken into account, we will earn as much as $576.61. It is already significantly lower than our initial commitment of $869. It does not include a service fee, as well as all possible taxes on a capital gain that you will need to pay.
I believe this math proves that the service is nothing but unfair exchange rate of cryptocurrencies masked under the mining hardware that doesn’t exist. If you’re interested in investing in cryptocurrencies, I’d recommend to buy some on exchanges such as coinbase.com instead of taking unreasonable risk to lose money by sponsoring someone else’s prosperity.
However, if you see any misunderstanding or disconnects in math provided, I would love to discuss it in comments below.