by John | Mar 19, 2018 | Cloud Mining Profitability, Cryptocurrency, Learning from Mistakes
Don’t use a cloud mining calculator without keeping in mind they are static calculations. You need to remember that mining difficulty almost always goes up as time passes.
But don’t worry. If you’re thinking about cloud mining profitability I have an easy rule of thumb you can use to quickly rule out unprofitable cloud mining contracts.
You simply calculate the profitability using a static calculator and determine if you’d make back the initial amount.
I’ll use hashflare.io as an example, as of 19 March 2018 they are selling 100 KH/s for USD$2.20.
Using a static mining profitability calculator like the one over at etherscan we can see that if network hashing power stays the same, we’ll make a whopping $0.1141 per month or $1.3692 per year. In other words you’ve spent $2.20 to get $1.3692 worth of Ether.
Not smart.
But say the number came back at $3. That would be $0.80 profit per contract. Easy money right?
No.
Don’t Stop with A Static Cloud Mining Calculator
Unfortunately it gets worse, because as I previously mentioned that is using a static network hashrate calculation. As more and more people mine Ethereum the network hashrate increases meaning you’ll mine less.
For example if the network hashrate were to go up to 300000 GH/s you’d only make $0.10 per month.
Network Hashing Power Has Historically Only Gone Up
It’s vital to take into account the growing network hashrate when calculating cloud mining profitability
Is it possible the network hashrate stays the same or goes down?
Yes, but it has never gone down over an extended period of time.
So unless the hashing power of the network stops going up and drops off, there is no way that ethereum cloud mining at hashflare.io will be profitable.
You’re Probably Better Off Just Buying the Cryptocurrency
It’s possible the price of Ethereum goes up and you end up making some money, but you would have made MORE money if you bought ETH directly.
If the mining contract will yield at least the amount you pay, I go to my second rule of thumb. A 50% discount.
I would have to see a cloud mining contract at a 50% discount or more to even consider purchasing buying it. So if hashflare.io was offered 100 KH/s for say $0.65 I would consider it.
With cloud mining you are risking that the network hashrate doesn’t go up too fast and you’re risking that the price of the coin doesn’t go down. I want to be compensated for those risks so I look for a 50% discount.
However, as it stands, ethereum cloud mining at places like hashflare.io is a losing investment, and you’re much better off simply buying the cryptocurrency outright.
I’m not aware of a cloud mining service that has a chance of being profitable. If you know of one please let me know!
I made the mistake of buying a ethereum cloud mining contract at hashflare.io and it cost me 20.73 ETH and I hope others don’t make this same mistake.
Cloud Mining Calculator
https://etherscan.io/ether-mining-calculator
https://www.coinwarz.com/calculators/ethereum-mining-calculator
by John | Mar 21, 2017 | Cryptocurrency, Currencies, Learning from Mistakes, Personal Journey
I wrote back in June of 2016 in an article Ethereum Cloud Mining is Not Profitable. Today is exactly 1 year since I purchased an Ethereum cloud mining contract at Hashflare.io. As I recapped in that article:
In order to simply break even ETH would need to trade up to around 18.7 USD.
I would also be better off if I had just bought ETH.
That article was written about 3 months after I had made the investment in Ethereum Cloud Mining.
I wish I had done the in depth analysis in that article before I made the investment in Ethereum Cloud Mining so that I would have known not to make the investment.
And that is the lesson I learned:
Perform your due diligence before making an investment!
An artist’s representation of how I envisioned Ethereum Cloud Mining would go
I attempted due diligence but I did not consider all the relevant facts. These relevant facts were available to me at the time if I had known to look for them.
Since my mining contract is up I want to recap what actually happened with the benefit of all the facts.
The main beneficiary of my bad experience is anyone who is newly considering Ethereum Cloud Mining: caveat emptor.
There might be other cloud mining services out there that are profitable but in my experience Hashflare.io was not one of them.
Ethereum Cloud Mining Recap
On 21 march 2016 I spent $561 for a cloud mining contract at Hashflare.io. Ethereum was trading at $10.81 at the time. In the one year of mining I mined 41.27 Ethereum. As of writing Ethereum is currently trading at $42.6.
Source: http://coinmarketcap.com/currencies/ethereum/
So that 41.27 Ethereum would be worth $1,758 if I had held onto all of them and then sold today.
This is a $1,197 gain which sounds nice but it really isn’t and I’ll explain why.
Why a $1,197 Gain Wasn’t Very Good
But what if the price of Ethereum had not gone up 294%?
An artist’s representation of how Ethereum Cloud Mining actually went
What if it had stayed the same price of $10.81. Those 41.27 Ether I mined would be worth just $446.
What does that mean?
It means: The gain was entirely due to the increase in the price of ETH–the mining itself was not profitable.
In fact, if I had taken $561 and just purchased Ethereum directly, I could have acquired 51.89 Ethereum, which at current prices of $42.6 would now be worth $2,210 or a gain of $1,649.
So other than sounding cool Ethereum Cloud Mining through HashFlare.io provided no value.
The Problem with my Analysis
The downfall of my analysis when initially evaluating the investment in Ethereum Cloud Mining was assuming linear growth in hashing power of the Ethereum network.
I explain this in more detail in my original article and I also provide a process for making more accurate predictions wether a cloud mining contract will be profitable or not. Using that process I predicted I would mine about 30 ETH.
This prediction was much closer to what I actually mined compared to the 120 ETH predicted using static models.
It was a tough lesson to learn but thankfully the amount at risk was relatively small at $561.
