Genesis Mining - DASH mining profitability analysis

I believe there many people like me who have gained interest in altcoins during the last months thanks to their massive increase in value. One of these altcoins which i got interested in was DASH because it provides instant transactions and strong marketing. In my opinion these two traits gives DASH a great possibility to be adopted by the masses. 

In this analysis I compare the profitability of using Genesis Mining's 500 MH/s DASH mining contract to simply buying DASH. I chose Genesis Mining because it had the best price/hashrate. I try my best taking mining difficulty increases into account. First let's look at the options.

• Graviton (500 MH/s) contract costs us 2250 $ and should run hassle free for 24 months. It's provider's best bang for buck and there is no maintenance, electricity or any other hidden fee in this contract.
• ATM Dash price is hovering around 200 $ and for 2250 $ we get about 11 DASH.

Let's see how profitable cloud mining really is using this contract. 

The first pitfall here is that Cryptocompare's mining calculator doesn't take into account the increase in mining difficulty. It's very easy to conclude here: "Hey, i get 370$ per month. Only a couple of months and my investment has paid itself back!" WRONG! The Profit per year calculation is very misleading because the mining difficulty will increase a lot in a year. For the first month of mining it is possible to get close to what the calculator promises, but after that the profits will diminish.  Other problem with Cryptocompare's calculator is that it doesn't display the mining difficulty level it has used in its calculations. It is important to know the mining difficulty because it can fluctuate a lot on a hourly basis.  A better calculator is provided by WhatToMine. This calculator shows us the average mining difficulty of the last 24h and by default uses that.

See at the bottom of the picture monthly profit is 325 $. Again remember, you will get less every month.

Next let's look at the impact of mining difficulty increases:

Mathematics

Here i chose 14 one month timelines with random starting points to calculate the average mining difficulty multiplier per month. Let's call it DM/m (difficulty multiplier / month). DM/m is calculated by dividing the last difficulty by the first.

(month.day :: diffculty :: DM/m)

1. 3.10 - 4.10 :: 100 081 - 110 214  :: 1.10
2. 3.17 - 4.17 :: 125 008 - 113 562  :: 0.91 
3. 3.24 - 4.23 :: 116 319 - 118 674  :: 1.02
4. 3.31 - 5.1 :: 134 091 - 130 764  :: 0.98
5. 4.7 - 5.8 :: 99 609 - 135 348  :: 1.36
6. 4.14 - 5.15 :: 128 577 - 123 948  :: 0.96
7. 4.21 - 5.22 :: 108 880 - 122 575  :: 1.13
8. 4.28 -5.29 :: 153 578 - 193 470  :: 1.26
9. 5.5 - 6.5 :: 130 919 - 179 715  :: 1.37
10. 12.5 - 12.6 :: 141 523 - 163 856  :: 1.16
11. 19.5 - 19.6 :: 140 578 - 227 511  :: 1.62
12. 26.5 - 26.6 :: 175 566 - 243 918  :: 1.39
13. 2.6 - 3.7 :: 177 716 - 213 916  :: 1.20
14. 7.6 - 8.7 :: 210 057 - 340 677  :: 1.62

DM/m = (1.10+0.91+1.02+0.98+1.36+0.96+1.13+1.26+1.37+1.16+1.62+1.39+1.20+1.62)/14 = 1.22

In other words the mining difficulty increases by 1.22 times or 22% per month. This also implies that without changing the mining hashrate or DASH value, the payout gets divided by 1.22 every month. 

I made a program that calculates the ROI over 24 months, assuming the DASH price wont change and difficulty increases by 1.22 every month.

Variable "profit" describes the mining profit ($) and variable "DashPerM" describes the amount that is mined every month ($) and is divided by the multiplier (1.22) every month.

Output:

Conclusion

After 24 months of mining, the contract has produced 1787 $ which equates to 8.9 DASH or a loss of 463 $.

Important to notice here is that my calculations can't foretell what the future mining difficulty multiplier is in the future. I tested the program with other multipliers and with 1.16 the contract become profitable (+39$). If the mining difficulty would still decrease to 1.10, contract would produce a profit of 962$.

If you are interested in investing in DASH, I recommend you to buy it straight instead of joining a cloud mining program. I don't see any way making it profitable unless you are able to use the referral program to hire tens of people to crank up your own hashrates.

Hopefully you found my analysis helpful and please comment your criticism.

PS. Ask yourself this thought-provoking question: If the mining contract was profitable why would the company sell it to you and give the mining profit to you. Answer: They wouldn't sell it, instead of they would mine themselves and keep the profit.