In this article I will narrow down the question

I should also say that this is only going to cover Ethereum mining, since that’s what I’ve been interested in.
Although it pretty much covers the rest of the currencies as well, but I haven’t stated the numbers in this article.

But first, a little about myself.

I’m a Swedish 24-year-old salesman working for a big steel organisation. I’ve worked in sales since I was 18 and I love it. I have a beautiful girlfriend and we’re expecting our daughter mid-august.
Becoming parents is the best thing ever and we’re really happy and excited. Though, of course I feel the responsibility to care of my family’s economy even more.
Don’t get me wrong, we have no issues of living the life we want even with a baby. But I want to invest for the future so that we can buy a house, travel more and start a savings account for her.

3 weeks ago

I discovered the Cryptocurrency world. Well, that’s not exactly true, I’ve been aware of Bitcoin for a while but never really read in to it. Anyhow, I’ve spent day and night reading about it and I instantly fell in love with the idea. My only concern was, how can I make good, profitable investments in this business?

I stared to read a lot...

And I mean A LOT, about mining myself. Since I’m a Ex-gamer I had some quite OK equipment to start with. Although, I quickly realised that this wouldn’t be beneficial because I could not compete with the big dragons when GPU technology constantly evolves. I would end up having to buy new CPU almost every year. This is when I found cloud mining.

At first sight, cloud mining was exactly what I’ve been looking for. No storing power-hungry mining gear in my apartment, no need for upgrade of hardware, just pure mining for revenue.

Of course I knew that the company offering this service was taking profits, but that’s something I was okay with.
At this point I had decided that I was going to invest, and genesis mining contract seemed to be the best deal. The amount I was willing to invest was around 900 dollars.
I used coinwarz.com to calculate the earnings from the mining and at first sight it looked really beneficial. I would breakeven in approx. 160 days and I would gain around 5,5-6 ETH per year.

I started to play around with the numbers below to see what happened.

I quickly realised that the “Difficulty” parameter played a HUGE role in my earnings.
When I first looked into this I thought that the difficulty rate and the price would pretty much be 1:1… How wrong I was….

I started to look into it more, and what I found was that the difficulty curve, just as the Ethereum curve, just exploded.

In 3 months, the difficult rate went from 231 427 216 568 to 925 414 803 686.

This is a MASSIVE 300% increase in difficulty.
Well now you think, "DUH Ethereum went up 4000% percent so no worries mate".
Let me tell you this. If you instead invested in Ethereum directly. You would’ve came out on the top.
Look at the charts below.

The above chart describes what whould happen if you would invest 869$ for 30 MH/S on genesis mining with today’s parameters.
Predict that the difficulty rises by a little bit less since perhaps the big hype is over (I’m not saying it is, but just for this example we predict it). Instead of a 300% increase in difficulty we give it 200% in three months. This will give us a difficulty of 277 777 624 441 1058 in September.
Next chart with above parameters would look like this.

This is a whopping decrease of 3,38 ETH per year. If we predict that the ETH will be worth about 300$ in September, this is 1014$ in decreased revenue per year.

So, what if you invested in ETH directly instead.

If I buy ETH today for 869$ I will receive 3,63 ETH.

If we assume 300$ in September, you will already have earned 220$.
If you mined, you would have earned a lot less and you would also not have the opportunity to withdraw your funds, since you have used them to pay the cloud mining company.
You are pretty much stuck with a bad investment for 2 years.

So, my conclusion after reviewing this was to buy cryptocurrency directly instead.

I went and invested 1400$ in Ethereum and Aragon.
Shortly after, you know what happened. Ether dropped down from my buy-in price @ 330$ to 239$. Obviously not fun, but I think of this as long term investment and I’m quite sure I will get my money back with huge profit. So I’m definitely HODLING!

I hope to have cleared things up for newcomers thinking cloud mining is beneficial, or at least thinking its MORE beneficial than buying currency directly.

I will try to do similar things like this in the future, analysing problems and solutions in the cryptocurrency world. So please go ahead and follow me if you liked this content.

Have a nice day!
//Ericsson93

Pictures cropped from:

https://www.coinwarz.com/calculators/ethereum-mining-calculator
http://coincap.io/