Genesis Mining: You might get your money back

in #cryptocurrency3 years ago

This post is an update to my previous post Genesis Mining projected income, where I made deeply erroneous projections, based on little to no meaningful research. The most glaringly obvious was the lack of foresight in terms of mining difficulty increases. Although I was loosely aware of this metric, I didn’t appreciate just how dramatic an effect it would have on mining efficiency and ultimately profit.
The projections in that post were based on the difficulty level at the time of publication. Since then, I have vasty improved my understanding of this space.If you read no further, please take the following away from my analysis: with hindsight I would strongly advise myself against purchasing Genesis Mining contracts[^1].

Data source

The following analysis is based upon 1) 30 days of mining output from Genesis Mining, and 2) averages in mining difficulty increases from three months of historical data (projected forward).

Ethereum (ETH)

Contract

Cost: $1,133
Haspower: 41.35 MH/S
Start date: 2017/06/01
Contract term: 24 months
Coin value at this date: $229.51
Number of coins could have bought: ~4.9 ETH

Forecast:

Current price: $258
Projected difficulty: 500+ GH/M
Total coins: ~3
Days to break even: Not possible at current value.
Projected return: $806 (loss of ~$327)ETH projection

Summary

If the past three months of difficulty increases continue at this exponential rate, which is insane by the way, it’s not possible to get your money back at current market rate. Coin value would need to increase to $378 with the diffulty not increasing beyond the projected rate.Thankfully Genesis Mining allows you to allocate your hashing power from ETH to ETC, which I’ve now done and leads me onto…

Ethereum Classic (ETC)

It might be worth noting that this is the same contract as above, but tailored to ETC values (I didn’t purchase an additional contract).

Contract

Cost: $1,133
Haspower: 41.35 MH/S
Start date: 2017/06/01
Contract term: 24 months
Coin value at this date: $17.63
Number of coins could have bought: ~64

Forecast:

Current price: $17
Projected difficulty: 20 GH/M
Total coins: ~60
Days to break even: Not possible at current value.
Projected return: $1031 (loss of ~$100)ETC projection

Summary

Again, it’s not possible to make a profit on this mining contract at current value. The mining difficulty on ETC is fairly linear, and at least if the projection holds, I’ll come close to breaking even. Still, as you can see I would’ve been better off just buying the coins. I would own 64 ETC and not have to wait 24 months.

Monero

Contract

Cost: $291
Haspower: 318 H/S
Start date: 2017/06/08
Contract term: 24 months
Coin value at this date: $53.08
Number of coins could have bought: ~5.5

Forecast:

Current price: $45.46
Projected difficulty: 4 G/M
Total coins: ~3.3
Days to break even: Not possible at current value.
Projected return: $150 (loss of ~$141)XMR projection

Summary

Monero’s difficulty is, like Ethereum Classic, quite linear. Still, at current value it’s not possible to break even. In fact, I’m projected to lose around half of my investment at current value. Yup. And again, you can see it would be far more sensible to simply purchase the coins.

Bitcoin

Contract

Cost: $338
Haspower: 2.66 TH/S
Start date: 2017/06/08
Contract term: Lifetime[^2]
Coin value at this date: $2,688
Number of coins could have bought: ~0.125

Forecast:

Current price: $2520.9
Projected difficulty: 80 GH/M
Total coins: ~0.4
Days to break even: ~210
Projected return: $1022 (profit ~$634)[^2]BTC projection

Summary

[^2]: Genesis Mining will continue mining BTC until a point where it’s not longer profitable to do so. I’ve estimated about 30 months, or when the block reward halves in mid-2018.Wow. Bitcoin’s difficulty increases fairly linearly too, and as such my lifetime contract might actually generate a healthy return on investment!

Conclusion

Invested amount: $1714
Projected return: $2139
Profit: $425.00
ROI: ~24.8% over 2.5 years. Annulised ~9.2%.[^1]: When I began this post, I stated that with hindsight I would strongly advise my former self against purchasing any Genesis Mining contracts. Whilst broadly I still feel that this is true, especially for Ether and Monero mining, Bitcoin does look at least a little promising. With the aformentioned hindsight, I think maybe I wouldn’ve bought a larger BTC contract and nothing else. Perhaps half of the total investment on just BTC.If after this fairly large critique of Genesis Mining you feel you’d like to give a BTC lifetime mining contract a go, then please use this Genesis Mining discount link. It’ll give you a 3% discount and me 2.5% bonus.Any and all questions or critiques of my analysis welcome! If you have more positive data, then I’d really love to see it. 

Source Here

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Mohsene, fantastic breakdown of the math here. I have both ETH and XMR contracts with these guys and I came to the same realizations you did, but I still believe in the contracts for this reason: dollar cost averaging. You could have straight up bought the coins and held them. And you may have done it at a high and 2 years later it's on a huge dip. Right now you get a little coin every day without the volatility of price. And you can swap to another coin for payouts. I have my XMR pay in LTC because I think LTC has more upside at this time, I may move it around again in a few days. So I agree that if you just do nothing for 2 years you may lose money, but if you keep an eye on your payouts and take advantage of times your mined coin increases in value (perhaps to up your hashes) then you could still make bank. The real trick is to combine that with someone that will consistently do that with you so you both can reciprocate referrals. Thanks again for the great post!