Cloud Mining - Profitability Analysis
Hello. I am relatively new to mining, however, before investing in any new venture, I always believe there is value in doing your research. I have heard many people talk about "Hashflare" and "Genesis" cloud mining services. Some say they are a scam, others cite them as the greatest thing since sliced bread. As a Data Scientist in real life, I've put together a comprehensive analysis of both Hashflare and Genesis mining profitability as of July 3, 2017.
In this post, I look into the profitability of mining BTC, LTC, ETH, DASH, and XMR. In order to compare the different contracts, we need to be aware of the primary variables that influence profit.
Factors affecting profit:
- Coin Price
- Price of Contract
- Maintenance Fees
- Mining Difficulty Curve
- Reinvesting Profit
- Risk Free Rate of Return (Poloniex Lending)
- Exchange Rate Fees
For my analysis, I make the following assumptions:
- The value of a coin is constant throughout the entire investment period
- When profit is reinvested, it is done so immediately after payout. This is invested into either more hash power or into Poloniex's BTC lending at a set interest rate of 0.08% daily
- The rate of difficulty growth continues at the same speed that has been observed in the last 2 months
- You can only withdraw BTC to fiat currencies.
- Converting other coins to BTC incurs a 0.4% fee through Poloniex
- A 3% Genesis discount code is always applied.
- A 5% Hashflare discount is always applied.
- Transaction fees are nil.
In order to analyze each contract using the above assumptions, I have written some Python code to simulate an investment over the course of 1 year. In doing so, I have used the following figures and rates:
######################
Hashflare BTC Contract
######################
COIN_PRICE = 2500 USD
DIFF_GROWTH = 0.58% (Daily)
MIN_INVEST = 1.20 USD * 0.95
MIN_HASH = 0.01 TH/s
REV_PER_HASH = 0.00032 BTC (Amount of Coins earned at 1 TH/s, observed by my own account)
MEF_PER_HASH = 0.35 USD (35c per TH/s per day)
######################
Hashflare ETH Contract
######################
COIN_PRICE = 280 USD
DIFF_GROWTH = 1.99% (Daily)
MIN_INVEST = 2.20 USD * 0.95
MIN_HASH = 0.1 MH/s
REV_PER_HASH = 0.00044 ETH (Amount of Coins earned at 1 MH/s, observed by my own account)
MEF_PER_HASH = 0.00 USD (No Maintenance Fee for Ethereum Contract)
exchangeFee = 0.4%
expires = 365 Days
######################
Hashflare SCRYPT Contract
######################
COIN_PRICE = 50 USD
DIFF_GROWTH = 0.1%
MIN_INVEST = 13.5 USD * 0.95
MIN_HASH = 1 MH/s
REV_PER_HASH = 0.0015580013 LTC (Amount of Coins earned at 1 MH/s, observed by my own account)
MEF_PER_HASH = 0.01 USD (1c per MH/s per day)
expires = 365 Days
######################
Hashflare DASH Contract
######################
COIN_PRICE = 170 USD
DIFF_GROWTH = 0.5% (Daily)
MIN_INVEST = 5.8 USD * 0.95
MIN_HASH = 1 MH/s
REV_PER_HASH = 0.00018 DASH (Amount of Coins earned at 1 MH/s, observed by my own account)
MEF_PER_HASH = 0.00 USD (No Maintenance Fee for Dash Contract)
exchangeFee = 0.4%
expires = 365 Days
######################
Genesis BTC Contract
######################
COIN_PRICE = 2500 USD
DIFF_GROWTH = 0.58% (Daily)
MIN_INVEST = 30 USD * 0.97
MIN_HASH = 0.2 TH/s
REV_PER_HASH = 0.0004 BTC (Amount of Coins earned at 1 TH/s, observed by my own account)
MEF_PER_HASH = 0.30 USD (30c per TH/s per day)
######################
Genesis ETH Contract
######################
COIN_PRICE = 280 USD
DIFF_GROWTH = 1.99% (Daily)
MIN_INVEST = 30 USD * 0.97
MIN_HASH = 1 MH/s
REV_PER_HASH = 0.00044 ETH (Amount of Coins earned at 1 MH/s, observed by my own account)
MEF_PER_HASH = 0.00 USD (No Maintenance Fee for Ethereum Contract)
exchangeFee = 0.4%
expires = 730 Days
######################
Genesis DASH Contract
######################
COIN_PRICE = 170 USD
DIFF_GROWTH = 0.0% (Daily)
MIN_INVEST = 30 USD * 0.97
MIN_HASH = 5 MH/s
REV_PER_HASH = 0.00018 DASH (Amount of Coins earned at 1 MH/s, observed by my own account)
MEF_PER_HASH = 0.00 USD (No Maintenance Fee for Dash Contract)
exchangeFee = 0.4%
expires = 730 Days
######################
Genesis XMR Contract
######################
COIN_PRICE = 40 USD
DIFF_GROWTH = 0.89%
MIN_INVEST = 50 USD * 0.97
MIN_HASH = 60 H/s
REV_PER_HASH = 0.000052 # Amount of Coins earned at 1 H/s
MEF_PER_HASH = 0.00 (No Maintenance Fee for Dash Contract)
exchangeFee = 0.4
expires = 730
Mining Difficulty Rates were calculated using the formula:
Daily Growth = 100 * [Nth root of (diff_end_of_period / diff_start_of_period) - 1]
where N = number of days between end date and start date.
For BTC I used https://www.coinwarz.com/difficulty-charts/bitcoin-difficulty-chart
for SCRYPT I used https://www.coinwarz.com/difficulty-charts/litecoin-difficulty-chart
For ETH I used https://www.coinwarz.com/difficulty-charts/ethereum-difficulty-chart
For DASH I used https://www.coinwarz.com/difficulty-charts/dash-difficulty-chart
For XMR I used https://www.coinwarz.com/difficulty-charts/monero-difficulty-chart
Note: Dash/Litecoin difficulty is virtually constant. I artificially imposed a 0.1% Daily growth
For the first set of figures, I assume that coins are never re-invested into more hashpower - They are immediately moved to Poloniex for lending:
The results are interesting. It shows that the Scrypt and Dash contracts are clear winners, however it should be noted that the Hashflare Dash contract expires after 1 year, as opposed to 2 years with Genesis. Scrypt is a lifetime contract. It also appears that none of the other contracts are profitble, given the assumptions we made when forcasting profits. Recall that we are even taking advantage of risk free lending at 0.08% daily return in all of these calculated figures.
In the next plot, I iterate through every investment period weekly, optimising reinvestment amounts in order to achieve the maximum profit in that period. For example, if 'days' is 100, then this plot shows what would have been the maximum profit achievable in 100 days if reinvestments were done optimally.
You can also see the earliest possible ROI achievable by each contract. Again this assumes optimal reinvestment:
We may also want a combination of increased hashpower, but still have a decent profit at the end of the year. A balance of the two might be preferred, so I have put together a scatter plot that shows the profit and hashpower increase (as a multiple of the initial power) at the end of the 365 day period for the three profitable contracts:
That pretty much covers it. The only profitable contracts are Scrypt and Dash, the best being Dash on Genesis mining for short term, and Scrypt for long term. If you found this information useful, or feel like these results just saved you money then you are more than welcome to use my referral code on Genesis or sign up with my referral code for Hashflare:
Genesis: GH8zn5
Hashflare Signup: https://hashflare.io/r/1FC9DD72
Mining is a "race to zero". As long as it's profitable, mining will increase until it's no longer profitable. At that point, only people who believe the price will rise, will continue to mine. If mining at a loss, it is better to invest directly by buying some. Ok, mining is fun, and if you already have the equipment, then you've already made the choice...
Nice charts, by the way!
Yep, it will certainly be that way, and I suspect quite soon! With the mass sell-outs of RX 480's and the huge increase in market capital across the whole crypto space, difficulties are likely to keep rising exponentially. I think Dash is probably the only safe bet, and thats only if you get in right NOW.
I might put together an excel sheet people can play with :)
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STOPThanks for sharing this calculation with us! Interesting read!
No worries,
I'll add in some further analysis on how to reinvest optimally assuming that the price of each coins decays at some arbitrary rate. I feel It's best to choose a strategy that will protect against the worst case scenarios, rather than hope for the best.