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How Profitable is Genesis-Mining?
Genesis-Mining is usually sold out 72h after listing new bitcoin mining. I believe it will be sold out soon after Black Friday. So hurry!! My first article on Genesis-Mining attracted a fair bit of attention. In it, I posited that: Since then, I have received quite a fair bit of comments, some people agreeing, some disagreeing, some asking for more details in my calculations, so I am going to post a follow-up with more details and explanations. But first: Okay, let us get started and let’s analyze just how profitable these “cloud mining” contracts can be. For this article, I will assume you have bought the diamond package. I recommend the diamond package because it is the best deal for the money. Here’s each “plan” you can buy and how much you will pay per TH/s (one TH/s currently nets you a bit over $1.4 per day after all fees): As you can see, the lowest $/THs is reached at the Diamond pack, at $159/THs. There is no point buying more hashing power because it doesn’t get any cheaper, i.e. there is no difference between buying 4 Diamond pack and buying a 100 TH/s pack, both will cost the same. At $159 per TH/s, less the 3% discount (code enter at checkout: hjsazq), you are looking at $154.23 per TH/s. Currently, a TH/s will net you: However, in addition to the $154.23 upfront fee, Genesis-Mining charges a $0.00028/GHs fee. Since a TH/s is 1,000 GH/s, it means you $0.28 will be deducted from your payout. $1.48-$0.28 = $1.20 Thus, $154.23 invested would net you $1.20 per day, meaning it would take 129 days to get your $154.23 back. Also, note you will be getting bitcoins back, so you would be repaid in bitcoins. Lastly, note this contract is open-ended. We’ll study exactly what that means and how long these contracts will last. We’ll also discuss the SHA256 algorithmn and the Antminer S9 more in details. Of course, we will also discuss the rise in difficulty and the effect on your open-ended mining. But if you have to remember ONE thing only from this article, let it be this: the timeless nature of your contract is AMAZING value! You will likely not make much in the first year (we’ll see why later), but the year 2, 3, 4… will basically be pure profit. If you are interested in cryptocurrencies, Genesis-Mining is amazing value, period. For the rest of this article, we will assume you bought the Diamond contract explained above. That is, we assume you bought cloud mining at the best price Genesis-Mining has to offer, $154.23 per TH/s. We will assume you got the Diamond package, for a total of $3,855.75 for 25 TH/s. First, at today’s price, $3,855.75 would buy you 0.477 bitcoins exactly. This will be our comparative measure for the rest of this article. Specifically, is buying bitcoins directly superior to cloud mining? Note that many places charges fees to buy bitcoins, but we’ll assume you paid none to obtain your coins. Second, let us define exactly what you are purchasing. In simple words, you are getting: That’s it. It’s really no more complicated than that. The real magic of this contract, as I explained in my first post, is that this contract potentially lasts for a decade. For a comparison, their Ether mining contract ends after 2 years automatically. Every day, more and more people mine bitcoins with more and more machines. The biggest risk to your mining contract is a significant rate in hashing difficulty. If this happens and the bitcoin price doesn’t keep up, your contract could potentially end very quickly. In this section, I will explain why this isn’t really a problem. But first, here’s quick explanation of how the rise in difficulty works. Basically, only 12.5 bitcoins are created every 10 mins. The more people mining, the less likely you are the get those bitcoins. See it like a pie: if there are only four people eating, there’s a good chance you can get a nice slice, but if there are 100 people fighting over that pie, it will be difficult to get anything but crumb. Bitcoin’s hash rate currently stands at 10,371,000 TH/s, or roughly 700,000 antminer S9. Year over year, difficulty has exploded, going from 2,297,000 TH/s to 10,371,000 TH/s, roughly a 400% increase. But this isn’t really a problem because the bitcoin price rose even more during that time, going from $738 to $8,000, a 1,100% increase. To go back to our pie example, imagine there are still 000 people fighting for the pie, but the pie is ten times bigger. Although there are more people, there is more pie too. This dramatic rise in difficulty is due to the introduction of Antminer S9. Although it was originally released in late 2016, it really took six months for it to “take off” and be made in large quantities (early S9 were very prone to crashes too). This explains the massive rise of difficulty in 2017. The previous generation, the S7, could only eke out 33% of the S9’s hashing power. So with a miner 300% more efficient, it made sense that the difficulty rose by a similar amount too. Expect a similar outcome when the S11 comes out (in 2019). Now, I can say that the hashing power is unlikely to rise as dramatically in 2018. This is because there is only so many Antminer you can make. Making a S9 requires a large amount of chips and there’s just so many chips that can be made, especially with other big manufacturers fighting for it (Apple, Samsung, etc.). I believe that antminer builders are working at full capacity right now because those sell really well. I don’t see them being able to kick up production on a whim and I think the Antminer S9 is basically impossible to mine right now. Also, the law of numbers play here: no new, super efficient miner is coming out anytime soon. Sure, we added 8,000,000 TH/s in difficulty this year, a 400% rise (from 2M to 1oM), but if we add the same amount next year, that’s only a 80% rise in difficulty (from 10M to 18M). Let’s say the hashing power rises to 20M next year, a 100% rise. Obviously, it all depends on how much of the total hashing power you have. 25THs out of 10,000,000 is far more 25THs out of 20,000,000. Obviously, your 25THs will mine less bitcoins if the hashing power doubles. However, this is not necessarily a problem because the bitcoin price should keep rising too. So whether your 25TH mine: … you are getting the same payoff. Yes, bitcoins are harder to mine, but they are also made more valuable. Also keep in mind you get to keep your bitcoins, of course, and you can let them grow even more. In simple words: it’s impossible to beat on a cost/power basis. Yes, you could build machines that mine more bitcoins, but they would a) be less power efficient b) be harder to maintain and repair, because the Antminer is so ubiquitous you can grab pieces everywhere. An Antminer S9 can work at 100% in a 110V circuit if needed. Of course, it can also be run by industrial power supplies for mining farm, on a higher voltage. Not that it matters, but if you should remember one thing, just remember that the Antminer S9 generates an unbeatable amount of hash for the power it takes. It’s also relatively robust, easy to carry and quite versatile. The design is also kinda simple and can be manipulated easily. For instance, if one breaks, you can simply unplug and repair it, you don’t need to stop an entire row of them. It’s also relatively robust and perfectly designed to run 24/7. Of course, it is amazingly powerful and can push out 14 TH/s consistently, which is by far the strongest hashing power ever released for commercial products. Yes, an industrial machine could potentially crush that, but a) it would cost a fortune to design, build and run b) it would be less power efficient. To give you an idea how efficient it is, the absolute best CPU you can buy on the market right now (for the purpose of mining bitcoins) can mine 0.14 GH/s. Not TH/s, GH/s. More than 100,000 less efficient than the S9. It’s not clear how Bitmain achieved such a tremendous amount of power in so little place. An Antminer S9 will take around 1,375 KW/h. If you run it 24 hours a day and pay $0.10 per KW/h, and if you have a 93% efficient power supply (which is what is shipped with an Antminer S9), then you are looking at $3.55 in electricity cost per day. An Antminer will mine $23 or so of bitcoins per day, so you would make around $20 in profit per day, per Antminer. Of course, some farms have 1,000s of Antminers running. Electricity is your only cost when you mine (other than maintenance and maybe $30 per month for internet), so power efficiency is the most important factor. Lastly, note that there is nothing on the market that ever comes close to the S9 in terms of efficiency. I searched wide and long, I made calls, I tried to see if there was a “secret” miner somewhere and, simply said, there are none. If you want to mine bitcoins today In the last section, we agreed that the S9 is by far the most efficient miner. In fact, at today’s levels, it is impossible to beat. The only way this is going to chance is when a new, smaller chip comes out. Then, builders will be able to cram more transitors in a processor and, thus, have a more power-efficient unit. The Antminer S9 is based on the 14nm architecture, released in 2014. The 10nm architecture, the most recent chip design, got out this year. Currently, a 10nm chip is used in the most recent iPad. It will take time before builders can amass enough chips to build the Antminer S11. Currently, there are no commercial 10nm processors out: Intel will release its 10nm processor, named Icy Lake, some time in 2018. Obviously, 10nm chip will be very expensive at launch and it is likely they will only be used in desktop computer. It will take some time, at least a year, until there are enough 10nm chips made for a new ASICS to make sense. This puts us some time in 2019, most likely in mid/late. The first Antminer will probably have the same problems that the early S9 got, and it will most likely take a year or at least half a year for a constant, reliable Antminer S11 production line to be out. This puts us in 2020 at least. Of course, it will take a while to build enough S11 to outclass the S9. In fact, even with many S11, the S9 will most likely still be profitable. Under the same maintenance terms Genesis-Mining uses ($0.00028/GHs), even the Antminer S5 is still profitable today; At 1.15TH/s, it can mine $1.82 per day and the maintenance fee would be $0.32. The S5 was released in 2014, so even four years later, it’s still profitable. Oh, and just for your information, the S5 uses 28nm chip, which were released in 2011, 3 years before the S5. With all that being said, we can safely conclude the following: All in all, you are looking at at least 5 years of efficient mining with Genesis-Mining. I would give it 5 years before your contract ends. However, as time goes, your crypto-mining contract with Genesis-Mining is likely to become less and less profitable; on the fifth year, it will most likely only pay a handful of dollars a day. Then, after five years, 25TH/s will not even mine the $7 mining fee per day and your contract will end. As we mentioned above, the S9 is based on the revolutionary 14nm chip design. If you want the absolute best commercial computer right now, you will be getting a 14nm chip. This is a HUGE difference when compared to 28nm; basically, you can ram twice as many transistor in the same chip (OK I’m doing this quickly here!) and make it consume much less energy. And at 1,375W, which is all a typical electric outlet can give (110V 15A), it will not get replaced by another miner anytime soon (not before 10nm chips). Simply said, it has the maximum amount of chips it can take. Now, let’s compare to the other super efficient bitcoin miners and how much Genesis-Mining would charge in maintenance fee for all of them Antminer S9 – released in 2016, 14nm chip – 14.00 TH/s – Can mine $21 of bitcoins per day, maintenance fee $3.92. NET PROFIT $17.08 per day. Antminer S7 – released in 2015, 28nm chip – 4.73TH/s – Can mine $7 of bitcoin per day, maintenance fee $1.32. NET PROFIT $5.68 per day Antminer S5 – released in 2014, 28nm chip – 1.15TH/s – Can mine $1.82 per day, maintenance fee $0.32. NET PROFIT $1.50 per day Antminer S4 – released in 2014, 28nm chip – 2 TH/s – Can mine $3.00 per day, maintenance fee $0.56. NET PROFIT $2.44 per day Antminer S3 – released in 2014, 28nm chip – 0.478TH/s – Can mine $0.65 per day, maintenance fee $0.14 per day. NET PROFIT $0.41 per day As you can see, all Antminer would be profitable with the Genesis-Mining maintenance fee. Please note some of the old miners were not “loaded” with chips and had a lower power consumption, hence the increase from a unit to another. Still, if you had bought mining in 2014, you will still receive a payment today, although very small (you would have made plenty back then of course, when there were no Antminer S5, S7 or S9 out). Needless to say, the new models of course are more lucrative. But you should be aware of the staying power of those miners. For your information, the new Antminer are mostly more silent/smaller. They mine less, but produce less heat and noise, for use in a typical office. Again, unlike the S3, who only used 330W, the S9 already uses 1,375W which is the maximum you can get out of an outlet (and the power efficiency is the best it can be on the 14nm architecture. It will not be beaten until 10nm are mass produced and I personally think this will take 3+ years, not 2) There is one, and only one problem with Genesis-Mining (aside from very slow support – 10+ days to get a response, but your concerns will be addressed): the contract doesn’t start mining until next March! I won’t lie, this sucks. I would like it to start mining today. In March, difficulty will be higher than it is now. That doesn’t mean the contract is less profitable because bitcoin will most likely rise too (remember, more people but bigger pie). Let’s estimate what the total hash rate will be. Looking at the past six months, where a lot of new Antminer S9 got turned on: The has rate roughly doubled from 5M to a little bit over 10M. I think that going forward, a 5M increase in difficulty per six months make sense. I do think Antminers are being built as fast as possible and, as explained, it will not be outclassed for quite some time. This puts us at a hash rate of around 14M when your contract starts, a 33% rise from today’s level. Now, as long as bitcoin rise 33%, you will be fine and get the same amount you’d get today. But if the bitcoin doesn’t rise (or, worse fall), then the profitability of your contract could be very low. Of course, this is also a problem if you buy bitcoin. My own personal forecast is that bitcoins will keep rising for a very long time. But if bitcoin still hovered around $8k in March, then your diamond package would not net you $30 (after fee) per day, but roughly $22. This amount (again, assuming bitcoin doesnt rise) will then go down as more hashing power comes online. Assuming we gain 5M per six months in hashing power, your profit would only be $15.7 per day after six months of mining (in September 2018), and $11.21 after a year (in March 2019). Note that even in this nightmare scenario, you would recoup your original investment in around 8 months. But let’s go for a more reasonable, if slightly pessimistic, scenario: In that case, which is quite pessimistic, your total profit would be: For a total income of $6,529.94, not bad for a $3,855 investment. Please note that under the assumptions named above, which are somewhat low, the contract would still last 3.333 years. Now, let’s take another scenario, where the bitcoin price rises 2% per month on average. This would mean the bitcoin would rise 25% per year on average, a measure. Now, I personally think a 2% monthly rise is way too low, but let’s take this as a long term average: some years, the bitcoin will go down. This year, it is up nearly 1,000%, but let’s take a longer term average, by the way. Then our contract lasts significantly longer. We can see that: The total income for this contract, after all fees, is $12,865. Note how little money you make towards the end, due to the extreme difficulty. Of course, many (including me) would argue that the contract could do even better than that. Bitcoin could certainly be higher than $27,000 in 2024. It could easily be over $100,000. Similarly, perhaps our difficulty estimates are too high in this scenario; we estimate the difficulty will double in 2019, which is aggressive as this would imply 66,666 Antminer S9 being turned on every month. Lastly, let us test a scenario where the hash rate rises even faster than that, still 1 million per month, but plus 5% every month. Bitcoin will only rise 1% per month under this scenario. Our assumptions: Even in this nightmare scenario, with difficulty rising faster and faster, you would make a (small) profit. Also, would you really bet on Bitcoin being at only $10,000 in 2 and a half year? As a bonus, let’s analyse a DREAM scenario: We can see this contract has the potential of being extremely profitable. In fact, many would argue that the bitcoin could rise 5% per month or 10% over the long term. Also, the scenario above has a HUGE difficulty increase priced in. I think it will be very hard for you to lose money with Genesis-Mining. You would have to be spectacularly unlucky. Bitcoin would have to crash in some way. With that in mind, please remember cryptocurrencies have a huge amount of risk involved. I personally think it is THE investment of our era, but since bitcoins are, well, virtual, their price could crash at any time. Also, be aware Genesis Mining has operational risks which I haven’t discussed. There could be a fire in their center, for instance. So far, in two years, G-M has been operating very well, except for slow customer responses. I am satisfied with the mining I have ordered from them. Crypto-Mining contracts with them are extemely likely to be profitable and the “open-ended” nature of them means it could be paying you years from now. Again, I personally think the contract will last until 2022. This would mean $3,855 invested today would net from $2,000 to $14,200 in profit. And quite potentially more, if bitcoin soars. Of course, you keep every bitcoin you mine, for live if you want. If you are interested in cryptos, and you should be, Genesis-Mining is the best way to invest in cryptos, period. Use the affiliate code hjsazq at checkout to get 3% off your order. Then, text me at +1 438 300 13(zero)1 or contact me using the “contact” form above in the navigation bar and I will buy the same amount you bought on your affiliate code, so you get, as an added bonus (!), a little bit of extra hashing power. And if you liked this article, please share with people 🙂 Thank you! bitcoin, bitcoin cloud mining, cloud mining, genesis mining, is cloud mining profitable, open-ended genesis Enter your email address to subscribe to this blog and receive notifications of new posts by email. No spam. © 2018 F.S. Comeau. All Rights Reserved.