Analysis of Buying Bitcoin Contract on Genesis Mining

in genesis •  7 years ago  (edited)

Just read my conclusion (mark as *CONCLUSION*) if you don't want to see so many maths and words.

I am going to estimate the number of bitcoin mined for buying the contract on Genesis Mining.

Make it simple first:

  • Assume the price of bitcoin is USD 2500 for a long time.
  • According to the data from 4 Jul 2016 to 2 Jul 2017, we may assume that the difficulty will increase 4.55% every biweek (two weeks). The difficulty now is about 710,000,000,000.
  • We buy the contract with 1 TH/s and the maintenance fee is USD 0.00028 for each GH/s.

Let’s calculate!
The bitcoin mined for first 14 days is about 0.00495831 bitcoin.
The maintenance fee of 14 days is 0.001568 bitcoin.
According to the above assumption, the difficulty keeps increasing and the bitcoin mined for the next 14 days will be about 95.648% of the previous 14 days.
Let n be the number of biweeks that bitcoin mined is still greater than maintenance fee (so the contract is still alive).
We have the following inequality:
0.00495831 * 0.95648^(n – 1) – 0.001568 > 0
After solving this, n is about 27. It means that the contract will stay alive for about 378 days (27 * 14 days).

In these 378 days, total bitcoin mined is:
(0.00495831 – 0.001568) + (0.00495831*0.95648 – 0.001568) + (0.00495831*0.95648^2 – 0.001568) + … + (0.00495831*0.95648^26 – 0.001568)
= 0.03732733 bitcoin (something about geometric sequence)
which is equal to USD 93.3 (1 bitcoin = USD 2500).
But the price of the contract is USD 150 for 1 TH/s.

It is even worse if the price of bitcoin drops. In this case, we’d better buy the bitcoin directly. USD 150 is about 0.06 bitcoin.

How can we get more bitcoin than directly buying it (> 0.06 bitcoin)?

The first possible way is the difficulty increases slower than expected but it is unlikely to happen.
The second possible way is the price of bitcoin keeps increasing.

Let’s say we expected the price of bitcoin will be double every year. (In 2018, 1 bitcoin = USD 5000; in 2019, 1bitcoin = USD 10,000; in 2020, 1 bitcoin = USD 20,000)
The maintenance fee paid by bitcoin will decrease and the contract can stay alive for longer period (about 900 days). Then total bitcoin got in these 900 days is about 0.0585…...still less than 0.06……

*CONCLUSION*
I must be honest. Sorry to say that my conclusion is unless the mining difficulty increases slowly or the price goes up rapidly (plus you buy more hash rate for a better price), it is better to buy the bitcoin directly. I mean, you may still get profit by joining the mining contract (because the price of bitcoin may go up a lot) but what is the point if we can buy it directly to get even more bitcoin? Of course, the real situation is much more complicated than above so whether to buy bitcoin contract is up on you.

If you want to buy the contract on Genesis Mining, I suggest you buy other altcoin contract such as Dash or Monero. You can get 3% discount on any contract using my promo code “S6ew4u” (and I will get a little bit hash power).

Thank you so much for reading this post.
I will appreciate it if someone donate some coin to me :)

My bitcoin address:
1AZGREs9nNBJf1i5aWqGfsQG2Fhz3movcr

My ethereum address:
0x3998b5eb1b30a642c6d4cccfef4fc2fb01d5ee0a

My zcash address:
t1ZdAvQup7iz6hUg1CdXQ1pwX59vdBDmvgv

Authors get paid when people like you upvote their post.
If you enjoyed what you read here, create your account today and start earning FREE STEEM!
Sort Order:  

Affiliate code >>> NkQanX - Use mine and comment back and ill hit you back ASAP, doing 10-15 upgrades tomorrow.

Congratulations @fareast! You have completed some achievement on Steemit and have been rewarded with new badge(s) :

You published your First Post

Click on any badge to view your own Board of Honnor on SteemitBoard.
For more information about SteemitBoard, click here

If you no longer want to receive notifications, reply to this comment with the word STOP

By upvoting this notification, you can help all Steemit users. Learn how here!

Interesting. Thanks for sharing Your calculations with us!

Congratulations @fareast! You have received a personal award!

1 Year on Steemit
Click on the badge to view your Board of Honor.

Do not miss the last post from @steemitboard!


Participate in the SteemitBoard World Cup Contest!
Collect World Cup badges and win free SBD
Support the Gold Sponsors of the contest: @good-karma and @lukestokes


Do you like SteemitBoard's project? Then Vote for its witness and get one more award!

Congratulations @fareast! You received a personal award!

Happy Birthday! - You are on the Steem blockchain for 2 years!

You can view your badges on your Steem Board and compare to others on the Steem Ranking

Vote for @Steemitboard as a witness to get one more award and increased upvotes!