Bitcoin Forum

So, I knew about Bitcoin since 2011, but I didn't catch the train on time.
I'm back now, bought some, but recently I decided to try to mine and see if it's worth it.
Now, damn me and when I use my brain after my hands.

So, here you have the noob words: BITCOIN CLOUD MINING IS A SCAM.
It was worth it in the past.
It's no more worth it now.

I will be GLAD if you can prove me wrong, because I've actually spent a little money on it (I'm no rich at all) and I'll be really happyto get something out of it, or at least get back to the starting point.

So, why I say that mining is a scam?
Because of course cost is not worth the mining.
EVER.

The facts.
I bought 100 GHs from PBMining.
I want to be clear here that PBMining is NOT the problem: they have the best pay off for what I know at least.
The problem is the increasing difficulty of mining that can't be paid back, no matter what, now.
Maybe if you have free electricity and you can wait 10 years, then yes, you will make it back.
I also want to be clear that I trust in cryptocurrencies as the future of payment, and in Bitcoin especially, I'm not against it at all.
Back to the GHs offer on the market.

100 GHs on PBMining cost me 0.36 BTC.
I am checking real time how much these 100 GHs are giving me back every hour.
I only have data from yesterday because that's when I bought those MHs.
Anyway, it seems that I get something like 0.000150 - 0.000170 BTC each hour.
Now, 0.000150 an hour, brings to 0.0036 a day.
And 0.0036 a day brings to 0.0432 every 12 days.
With 100 GHs.
But that's NOW.

In a couple of days or so, the difficulty will rise again.
From what I can see here (https://docs.google.com/spreadsheet/ccc?key=0AiFMBvXvL2dtdEZkR2J4eU5rS3B4ei1iUmJxSWNlQ0E#gid=0), difficulty grows by around 15% every 12 days.
I round these 12 days to 2 weeks for convenience in the following scheme (but keep in mind things are happening at 1/7 of the speed faster).
In the following spreadsheet you have the first 12 days of income and what happens in the following 47 chunks (approximately 2 years)
It begins with 0.0432, and then the following chunks of 12 days, each one sliced down to 85% value than the chunk before. That's the missing 15% for the increased difficulty.

https://dl.dropboxusercontent.com/u/858716/bitcoin/worth_it/mining_lol_1.gif

Now, you can easily see that you will never get back what you put into mining, unless the extraction difficulty, for unknown reasons, changes and reverts back to lower values... but even then, if this doesn't happen SOON, you won't ever see your investment back.

But I am no math genius, I am no money expert, and no professor, so please, I ask you PLEASE, IF YOU CAN, PROVE ME WRONG.
It's not REALLY a drama for me, as I've "only" lost around 150 Euro into this, I'm just pissed, but for many, many people this will result in a REAL drama.

This behaviour is DAMAGING Bitcoin.
These bubbles WILL explode, SOON.

Last, but not least (or not?): this thread goes against my interest, if I am right, because PBMining (and then all the others) will explode soon, and I'll not even get back what I put in mining if I didn't open it.
Stupid me if I'm right and I didn't check all this before, and stupid me if I'm wrong, anyway it's a lose/lose situation, it seems.
Anyway, if you think this thread saved your ass or some of your savings, tipping me would be a really good action: 1ANzn7yFf1Fip2t4usLiMKxyWJEcwzMiWz
Thanks in advance for reading and to who will explain me that I'm wrong and why.



Edit: just seen there's a MINING section, sorry for posting in the wrong place...
If you think it fits better in there, just move it, but maybe it's better to give this thread best visibility (unless I'm completely wrong on my assumptions).

How about you move somewhere where MHs are more affordable instead of claiming that bitcoin mining is a scam.

with 100gh/s y can wipe your arse. fact is mining can be as hobby or as work which brings profit.

one s1 would bring you 200gh/s for 0.4btc

this can turn in to profit if you know how to do it.
not only mining with gear but later ressel.  or mine different coin like ppc and hold in to that.

you want get rich quick? invest $$$$ and just harvest profit. once gear is obsolete sell it and exchange for new.

There are people here with tens of th/s of power and they don't complaint or branding mining a scam.

The real problem here is he claims the entirety of bitcoin mining is a scam. If anything, it's cloud mining that may be able to take that title.

Cloud mining is overpriced and lots of other things, but it's not the fault of the protocol when you decide to use them.

People buy their own miners and mine that way, instead of cloud mining. As such, mining YOURSELF is not a scam, but using CLOUD MINING very well can be.

The OP still needs to learn the differences, although I will admit I'm still learning too.

What do you mean by that?
Can you spend LESS than 0.36 BTC for 100 GHs/s?
Or to better put it: can you spend less than 0.36 BTC to earn more than 0.000150 BTC a hour?

Watch, before finding PBMining I bought some GHs on CEX.IO, that offers it at TWICE the price.
Not only that: their mining also sucks off money for electricity consumption.
In short: I immediately sold that stuff and got back my BTC after finding that PBMining is half their prices (users determined...).


Can you give me some directives to where to find better price for GHs/s or you just talking?

I wouldn't call it a scam. We have dug ourselves into the trenches of our greed.

There's a teamwork exercise where all participants have to hold a long light rod, and each person has to have a finger on it, but the rod is not allowed to go higher - they have to keep it in the same position. The exercise is extremely difficult because with each person trying to have their finger touch the rod, the rod shoots up and up.

This is what is happening with mining. Because each person wants a little bit, (and some people want more), the difficulty just goes up and up and up. And it's not going to stop.

use math ... https://bitcoinwisdom.com/bitcoin/difficulty

http://www.gifcrap.com/g2data/albums/Fights/Teacher%20punches%20a%20student.gif

100GH/s ... it's useless now (since february 2014).

eBay. Buying GH for bitcoin will never pay off. But buying GH for dollars will, when the price of BTC goes up.

It's obvious actually, you're the noob here.
Anything that you invest in and don't ROI is a scam. Oh yeah, I'm loving this logic.

First, if you buy hash power with BTC, make sure you rebuy the BTC so you can track profits in fiat.

Second, cloud hashing contracts are ludicrously expensive, but not a scam as you have plenty of info to make a reasonable decision to buy or not buy.

Third, you can get *much* more cost-efficient miners that are in stock and ready to deliver that will obliterate your 0.36 BTC/100gh price point.

Fourth, I purchased two Antminers less than two months ago and they've already paid for themselves.  A <2 month ROI is insanely awesome.

You're right. If he buys the 100 GH using USD, and earns 0.28 btc in 2 years he will profit.
Those 0.28 BTC might be worth a lot more in the future.

This is much possible.
We can go on saying that cloud mining is a scam, I'm still OK with that.
Still, I think it's quite important, when I see how many people are putting money in it, what do you think?

About mining hardware, I made a quick search: http://www.amazon.com/Bitmain-Antminer-S1-Blade-Bitcoin/dp/B00HL4MEG6

Data:

• 180 GH/s. Warranty-voiding overclock to 200GH/s possible.
• Consumes 360w of 12v power. Expect 400W if overclocked.
• Power Supply is not included. Requires 2 6-Pin PCIe power connectors.

Now, I spent around 150 Euro for 100 GHs, this piece of hardware costs 210 Euro and gives you 200GHs.
If with 100 GHs I was earning 0.000150 per hour, I guess this will earn 0.000300 per hour?
Probably more, as there are no fees for the cloud support, but I can't know how much more.
Anyway, let's say it cuts off 0.000400 BTC per hour, ok? I think I'm large with that.
0.000400 * 24h = 0.0096 BTC
0.0096 * 12d = 0.1152 BTC
I put this number in my spreadsheet (thanks Google!) and the result after 1 year is: 0.752461 BTC, that, converted to euro is 320.
You get a return of around 50%.

So, ok, I'm an idiot for trusting cloud hashing. Yahoooooo! :D

Mhhh... oh but also put electricity cost in that count... don't know how much is that for running that hardware for ONE YEAR.

Yes.  Cloud mining is an obvious scam.

If the cloud mining "company" can turn a profit running their miners, then why would they share that profit with you?  They can just keep it all for themselves.  The only reason for reselling mining "profits" is to sell them for more than they are worth, allowing the cloud mining company to increase their profits at your expense.

As for pool mining with your own hardware, it is a VERY competitive business.  You need access to the best hardware as soon as it is released by the manufacturer, and you need access to cheaper electricity than your competitors.  If you are buying used mining hardware, then you are almost certainly buying hardware that the original owner has already determined is no longer profitable to run.

Mhhh I don't know if I'm totally in with this.
I think cloud mining COULD be honest.
You can ask people money to buy mining hardware that is more performant in example, and share the mining with them.
You can set up a 400000$ mining factory by building a software/hardware infrastructure thanks to people funding you, thing that you can't obviously do alone... unless you have 400000$ of course.

scams, scams everywhere...

Keep your BTC and just wait for the value to increase. No need to lose money.

I agree.

I was greedy, I paid for it :D

Another thing to consider is *where* you get your cloud mining GH/S from...

I know its popular to hate on ghash right now, but let's take a look at cex.io, the GH/S trading side of the pool.

Right now, the current sell order is at 0.00747497 BTC per GHS.

CEX charges 0.2% per trade

So let's say you bought 100 GHS from CEX, that would run you 0.748991994 BTC including the trade fee.

In order to get out with only what you put in you would need to generate 0.00149499 BTC and still sell at 0.00747497 BTC per GHS. If you are able to sell for higher than that (which in defiance of all logic and difficulty has lately been very, very possible) then you could actually profit just on the trading alone.... but we're here to talk mining, not trading.

Based on the last few blocks I've gotten, 100ghs is likely to net you about 0.00000552 per block on ghash.io and yesterday we got 56 blocks, which puts you at making 0.00030912 BTC gross.  CEX also charges maintainance fees that can run around 35% to cover power and repairs.  Factoring that in, you'll be pulling in a net daily income of 0.00020093 at present difficulty.

According to Zeroblock, the next difficulty adjustment will happen in 1.8 days as of the time of posting.  So that means 0.00036167 before the next increase.

I claim no expertise on predicting difficulty increase(Though I've heard using a ouija board or voodoo has had good success) , but let's use 20%  every 10 days since this makes the math a bit easier and I think is pretty close.


For days 0-1.8 you've so far made 0.00036167 the remainder of that last day you could expect to pull in a net of 0.00003214

For the next 9.8 days 0.00000441 per block, 0.00024696 per day (gross) and 0.000160524 per day net. Total of 0.00157314 for that difficulty and 0.0019348 grand total between now and the end of the next difficulty.

For the next 2 difficulties, which would be just about a months worth of time the numbers work as follows:

0.00000353 per block, 0.0019768 gross, 0.00128492 Net, 0.00321972 total

0.00000282 per block, 0.0015792 gross, 0.00102648 Net, 0.0042462 total


So at that point you could sell off the 100GHS you have for as low as 0.00744737  (including the .2% sale fee) and still at least get your money back.  If you sell it for what you paid then even after the first 10 days you would turn some profit. (a tiny, honestly not really worth your time profit... but a profit none the less. )  

Obviously there are a lot of factors here that would impact the calculations one way or the other... anything from an increase/decrease in the number of blocks that ghash pulls on a given day to the difficulty increase being better or worse than anticipated. Ultimately, 100ghs isn't going to make you any real money and it should be treated like a hobby more than anything, but you can easily get *some* return as long as you can sell off that hashing power.  It's the fixed multi year contract that screwed you as there isn't a viable exit strategy other than to lick your wounds and learn not to do it again next time.


TLDR: Liquidity is what makes it possible to profit. Which is why you should restate it as "contract based cloud mining is a scam"

Bitcoin cloud mining isn't a scam, it's just a rip off, I actually believe maths wise that these cloud mining companies are renting out the Bitcoin mining contracts etc. at a premium then using the money they make to mine the shit out of altcoins and sell them at an even bigger profit because they seem to be extremely determined to not add other coins to their services. We've slowly gotten the occasional Litecoin cloud mining outfits around but only after the difficulty has gone up further.

If you want to hunt for worthwhile deals I recommend https://www.betarigs.com/ which is much more P2P than these companies who rent out other peoples mining gear.

Interesting post, thank you  :)

Mhhhh sorry but are you kidding me?

Looks to me that site is full of overoveroverpriced stuff... for rent.

After all, if that stuff was still worth it, why aren't they using it?

I mean, if they can mine, why rent it?
Just mine... and earn your BTC.

Why would the cloud mining company actually need hardware, warehouse, and electricity??  They could just bet on difficulty raising fast enough to make your return less then buy-in.

You give me 1BTC.  Over your contract, I give you back 0.9.  I just need a laptop, wallet, and a script to pull that off..

It is a bit of scam from lenders side as they know they won't reach that high summ so they sell it and they still profit more.

Ye just a little bit of a scam: you buy a thing for X$, you then spend Y$ for electricity and you never reach back what you spent on it  :D

I see there is stuff for MHs.

I mean... MHs, not GHs.

What can you do with that? The essential value of a MHs miner is probably below 1$ (no wish to make counts, sorry... enough for today).

Technically, it's not a scam since you get what you paid for and they don't run away with your coins. But it's a really bad investment, especially in long-term.

Well if it's a matter of words, ok, it's a fraud, not a scam, because it will not ever pay back. Mathematically.

Have you calculated reinvesting the dividends? Like on Cryptsy, you can buy fractions of a mining share.

So what if you reinvested the payouts on a weekly basis?

Theoretically you'd get exponential growth. Perhaps this would work? Could you do the math on something like this?

That would probably fix it.
The problem is: you will never then have BTC, you will only have GHs until the end of times.

Let's say you buy 1000 GHs.
These 1000 GHs after the first month give you 0.799 BTC.
You buy 0.799 of GHs (no matter how much it is).

Now you have 1000 GHs that will never catch up the investment, AND 0.799 of GHs that will never catch up the investment  :D

I just trashed 150 Euro like an idiot, I can admit it.
But I wonder all those people in there with thousands of GHs... how comes they didn't make the count before buying so much of it?

How are renters responsible for your incompetence and lack of knowledge in basic math/logic again?

Put it as you want, they show that you can EARN, while in effect you earn nothing.
By earning, of course, everybody means earning more than what you invest.
EVERYBODY means that.
And yes, they take advantage of people ignorance.
That does not make them worth a single penny more, if you ask me.
And if you appreciate these people I despise you.

Just to be more clear: if somebody goes to your grandma and sells her some useless phone contract with higher prices teasing her in believing that she will spend less, do you think your grandma is an idiot or that scammers must be punished?

If my grandma is presented with the specs and decides to purchase the useless phone contract without any convincing then yes, it's Darwinism at its best.

I hope you will never make any mistake in your life... you are presumptuous to say the least.

I might suggest that, if you are the kind of person that expects others to act in your best interest, then Bitcoin may not yet be ready for you.

Or to SouthPark it...

'You're gonna have a baaad time"

On the bright side, the more people realize how much of a scam cloud mining is, the less centralized the mining will become!

It's basically a scam business model.

No sane company is going to give money
away, and that's exactly what it would be doing
by selling you fully managed hashing power that's
profitable.

Duh.

And furthermore, I would say most turnkey mining hardware
sales are scammy too.  Sure, you pay electricity,
maintenance, storage,etc..but it doesn't make
sense for a company to sell you gear and give
you any substantial margin when they could mine with it.

Seems like the real winners in mining either
make their own chips or at least buy chips wholesale
and assemble.  

...Except it's disingenuous to call it a scam business model.

When you purchase hash power, two main things happen:  1)  Yeah, you submit shares and get a reward, but 2) the whole reason for doing so is to secure the network.  The business model is providing a service to let you secure the network if you don't know how to do it from home.  If a person thinks that there's some magic company with infinite money that will allow any person to give them money and receive more money in return, that's a bit absurd.  

I realize you basically said the same thing as I did in my previous sentence, but I think that just places the responsibility back on the consumer rather than on the business.  If you make the argument that targeting noobs and others who lack the knowledge to know that the prices are crazy expensive is scamming, then that could also apply to a lot of other similar-looking business models.  A good example would be car leasing offers.

Although, I bet we both agree the prices are ludicrous pending significant coin-value increases.

You didn't understand the sense of this thread.
And I explained it really clearly.
Think of it.

LOLWUT?

Cloud mining isn't a scam.
Mining itself just isn't as profitable to the average Bitcoiner anymore.

Yes, and soon it won't be profitable for anybody, unless they bring out some equipment much more cheap and much more economic, and anyway, also then, it will only last few months before becoming useless.

That's the purpose of mining.   *People* mine for profit, but mining secures the network which is good for anyone that has BTC.  Also, even at these prices, there is still the potential to profit long-term, and Bitcoin can only exist long-term so long as there are miners and the network is secure and...you get the idea.

Honestly not.
Not because I am an expert, but because it doesn't make sense to me.
Soon, costs for mining will be prohibitive and people will stop mining.
Is then Bitcoin going to collapse? I don't think so.
And, for the little I know, I don't think it's true that mining is necessary to secure the network, but if you point me to an article I'll be glad to read about this.

You are correct, you are not an expert.  
This post definitely qualifies you as a noob.  :)

The fact that mining secures the network
Is one of the most basic things about
Bitcoin and one of the most essential.

https://bitcoin.org/en/faq#how-does-mining-help-secure-bitcoin

I see your points that there additional benefits to mining other than profit, namely participation
in the network security, and that whether it's a "scam" depends on how one wants to define it.

Can we agree that consumer mining, especially cloud mining is (baring a price spike as you mentioned) inherently unprofitable and that it is unscrupulous for any company to imply otherwise?

You have no idea what you're talking about.
A portion of miners leave -> difficulty adjustment -> it is profitable for them again.
Stop talking, please. I'm running a few smaller miners and donating whatever they mine. I'm doing it to support the network, like most people should do.

I don't think cloud mining has ever been profitable
The closest you could get is zero sum since hash is sold at a discount and daily payments include that discount
Only with a rapid price rise would it break even
Although just buying bitcoin would be worth more ^_^

Look, I have made plenty of mistakes in my life but I didn't think to blame the other person(s) for them. If my grandma would get a bad deal on a phone contract is certainly would be tragic and sad, however it would be her fault 100%, especially if the seller didn't make her any promises which he didn't keep.

Mh so tell me, what will happen when all the Bitcoin will be mined?

After all coins are mined, miners will continue to solve the hashes to forge blocks of transactions. 
Even though there won't be any block rewards, they will still get transaction
fees, which by that time, could be considerable.

I only see mining needed until there won't be enough transactions to prevent somebody manipulating the blockchain.
As of today there are already tens of thousands of transactions every day, but technically I don't know if they are enough to prevent it.

And btw, you don't offend me by calling me a noob, as I stated it already, you only look childish and frustrated  ;)

Number of transactions has nothing to do with if the blockchain can be manipulated.
Transactions are bundled into blocks, and each block is linked to the previous
with a cryptographic hash to form a chain of blocks (hence the term "blockchain")

You ALWAYS need mining to find the solution to the next's block hash, to put it in simple terms.  This is how Bitcoin works.

So the bubble will explode once the last Bitcoin will be mined?

What bubble?

The last Bitcoin won't be mined until the year 2140 or so.
And at that time, miners will be profiting from transaction fees.

I like to see how some people completely fail to understand that somebody can't know everything on the world, and, in this example, also fail to understand that some people become older and simply can't understand new stuff. Good luck, big ballz dude.

That's cool, but I can't understand how it is possible that you don't see it: no more mining -> no more secure network -> manipulable transactions.
Also, you state the last one will be mined in 2140. I don't know if that includes the Moore Law, but even then, it probably doesn't include possible (or probable) biggest jumps in technology, like quantum computers, that are right behind the corner. They could be available in 10 years probably (if they are not already, I know there are some going around but people are not sure they are quantum).

Who said no more mining?  You misunderstood.

Re-read what I said earlier:  You ALWAYS need mining.
As long as Bitcoin exists, a miner will mine a new block
about every 10 minutes.

I think you are confusing mining with block rewards.
They are 2 different things.  Successfully mining a block gives you
a reward, but that reward decreases over the years until
there is mining with no block rewards.

The block rewards (new bitcoins) will stop being
issued in 2140, but there will still be transactions,
blocks, and mining... just no new coins.  Got it?

(Moore's law has nothing to do with any of this.)

So just to keep Bitcoin up and running somebody will always have to mine, right? Without any reward.
I guess somebody will take the task.

no block rewards, but they will get transaction fees (third time I'm saying this).
Pay attention much?

Sorry but they get transaction fees on Bitcoins they mined, if I'm not wrong again.
Why would they want to keep mining when no more Bitcoins are extracted?

Yes you are wrong again :)

There is a difference between block rewards and transaction fees.

https://en.bitcoin.it/wiki/Transaction_fees

No, I don't think I am so stupid, sorry  :)
Transaction fee = miner gets it on any transaction people do.
Block reward = when new Bitcoins are discovered.

You didn't understand my question.
I put it another way: transaction fees are given to miners based on the bitcoins they mined or by solely the fact that they are mining?

When a miner solves a block,
they get the block reward + all fees from
the transactions in that block.

If they don't solve the block, they get nothing.

I see, thank you  :)

The sum of all transaction fees from all transactions contained within a block are distributed among miners according to the number of shares they submit relative to the rest of the network.

Transaction fees are given to miners based on their proportional share of network hashing power, not according to the number of bitcoins mined.   If it were based on the number of bitcoins mined then miners would never even receive the transaction fees after the block subsidy reaches zero.

And with regards to the necessity of mining for the continuation of Bitcoin, if you stopped mining indefinitely then there would be no more confirmed transactions...ever.  "Manipulating" transactions is pointless if you don't have any more confirmed blocks in the future.

I am not familiar with the service you are using, but on Cryptsy you can trade your mining shares back to BTC at any given time. So eventually, if you reinvest the dividends your 1 share will be 2, then 4, then 16, then 256. Or probably less because of the increase in mining difficulty.

But eventually, you could cash in these shares for BTC.

I calculated that if you reinvested the dividends on a weekly basis, after a few years you'd be generating like 1 BTC per day. Of course, this doesn't take into account the increase in difficulty, the decrease in share values, and of course the risk that Cryptsy gets Goxxed.

So as intrigued as I have been about mining, my experiences have only lost me BTC. The good news is that after a year I'll get my principal back, so it shouldn't be a loss...but I ain't gonna get riBTCh

Why are you eager to find a fatal flaw that is not there?
You won't live to see that day anyways, so you shouldn't worry about it. Also, you can find this information by doing some research.

But watch: if you cash back your BTC, somebody else is losing.
So, while you CAN do something by TRADING, you can't do anything by mining.
It's just another asset you are trading, but in general that asset value is nothing.
The only real winner is the cloud mining service.

In theory the rate of difficulty increases will slow down as the rate of efficiency of miners (in terms of W/GHs) starts to plateau.

Although there is not a difficulty limit in the Bitcoin protocol there is a theoretical limit as to how high difficulty can rise to. The difficulty will likely not rise to above a rate at which electricity costs would exceed the expected value of the bitcoins mined.

Yeah, I thought of [sic] it. You jumped into a deal before thinking it through. Now you seem to be looking to others that you think should have saved you from yourself.

You need to take responsibility for your own actions in Bitcoin. Ain't nobody else gonna do it for you. It's the Wild West out here - you need to act with appropriate forethought and trepidation, lest you get taken advantage of.

caveat emptor before tempus fugit

im doing a test right now..

i hav my own rig mining and i have bought some cloudhash aswell.. (matching hash amounts)

24 hour results

cloudhash amount i can withdraw is 20% lower then my own rigs rewards

if i can remember to come back to this topic ill keep it updated

(but of course you have to account for electric fee that the cloudhash charges, so im not too shocked)

Thank you, I've already stated that I'm noob and in a subsequent post that I've been idiot.
But you look idiot too, at this point.
Because you know, I'm not the only one who put some money in PBMiner, there are other people who have put much more than me, and probably some more are thinking to put money in it.
That's why I wrote this thread.
Maybe you can catch it now.

Ye, and you have to subtract electricity in your own "income" from mining as well... and see if it really pays back... unless you are stealing electricity :D

Cex.io the company behind Ghash.io offers cloud mining.
Do not buy this. You will end up mining in the Ghash pool which is nearing 51% hash rate of the total network.
Which, in simple language, gives certain people the ability to perform a mass fraud (double spending) in bitcoin.

Check before you post. They're at 35% at the moment.  source: https://blockchain.info/pools

That's not going to happen as fast as it should/maybe ever because people keep doing preorders and cloud mining. People running cloud mining operations don't' really care about the price/profitability because they make money by getting someone else to pay for it. Preorders enable companies to make miners that they would never be able to sell off the shelf, and cause miners to use/plug in unprofitable miners in an attempt to make some money instead of losing it all.

If a miner were to receive a miner that uses more electricity then it produces bitcoin they would likely not use it for very long as they would just be loosing more money by running it.

CEX charges it's users what is essentially the actual cost of electric and maintenance for their GHs so when the electric cost exceeds the mining revenue they will essentially turn off their GHs. I am not sure about other cloud mining services, but I imagine they have similar terms (it would be possible that customers essentially prepaid for electricity)

Well thats why the lend the gh to you :)

Try cex.io at least you can sell your ghz any time its much more expensive tho

I would recommend Scrypt.cc, it is much more profitable since it mine other coins and converts it to BTC. You can sell your KHS at anytime if you need some money fast, or you could buy and sell KHS as a form of income.

That makes no sense. The assets that you've accrued are directly related to mining. Without the mining dividends being reinvested, you have no value beyond the principal.

So while cloud mining may not be great, your premise is flawed.

Let's say you pay 100 $ for 100 GHs for 5 years.
In the first year you recover 90 $ with those 100 GHs, and at the end of the 5 years you get up to... uh, well, 95 $, because after the first year the mining income becomes so small it's nearly nothing, thanks to the steady increase of difficulty of the mining process.

Let's say that after the first year you reinvest those 90 $ and buy 90 GHs (it doesn't matter if you do that month by month or week by week, the mechanism is PERFECTLY THE SAME).
After 5 years you still didn't get those 90 $ back. You will be at 86 $ or something. This because, again, mining difficulty increases and you don't reach what you invested.

And let's say that after the second year you reinvest that income of 86$ into 86 GHs.
At the end of the first year of this last investment you get back 80$, STILL LESS THAN THOSE 86$ YOU INVESTED. And after 5 years you will again get less than what you invested.

The result is: you will always have more and more GHs and never get back more BTC than what you invested.
It doesn't matter if you reinvest the BTC you earn from mining or you invest more BTC thanks to grandma paycheck for your birthday: they are BTC, and the GHs you buy with them does not give you back more BTC than what you put in.
But you are actually investing in GHs to get back more BTC than what you invest, right?

Now, I put here a couple examples, then that's all.
You can now buy 1 GHs on CEX.IO for 0.0068 BTC.
This is what you get back after one year (LOL): https://tradeblock.com/mining/a/6c9fc98920
CEX.IO has artificially pumped prices imho, and the only successful people in there are successful because they trade. But even then, there are commissions when you buy GHs or sell for BTC...

PBMining is much better: you can buy 1 GHs for 0.003 BTC at the moment.
This is what you get back after one year: https://tradeblock.com/mining/a/609bf460dc
0.01 BTC. Well, at least you are in active by a measure (if difficulty doesn't get another strange jump).

At this point the only thing you can dispute is the difficulty increase I have put in there.
But look, I didn't invent it, there is DATA (https://docs.google.com/spreadsheet/ccc?key=0AiFMBvXvL2dtdEZkR2J4eU5rS3B4ei1iUmJxSWNlQ0E#gid=0) about it, and the trend is not changing.
It has been an average of 18% on each step of 12 days in the past and this last step jumped to 25%.
DATA.
Now, you can HOPE the increase in difficulty will be less and everybody will get more BTC, but... that's just... hope.
Statistical data suggest otherwise.

Now, you can either understand this or you can't.
I warned you the way is possible to me to do so, I can't imagine a better way to explain what goes on, and I can't fight (and I don't want) people that WANT to believe something.
It's not even my right, or my duty.
I just talk about this because I feel I do good to people and, in last analysis, to Bitcoin.
I hope this can help you.

It is not about how much hashpower that you purchase, it is about the price of your hashpower in terms of GHs (or THs)

Let's assume for a second that your math is correct. CEX is still a much better value than pbmining.


(using your numbers, not mine)

Year 1
Invest $100
Earn/Reinvest: $90

Year2:
Earn/Reinvest: 80

So that puts the total value at $170. Remember, yes, CEX charges a commision, but its 0.2% so if you were to sell $200 worth of ghs the commision is $0.40 and if you can't turn at least 40 cents worth of profit then you're doing it wrong.  With PB mining, your math is actually about right since you can never get out of it what you put into it and at the end of your contract you can't just sell the GHS off to someone else, the GHS just disappears.

Personally, I buy hardware and use the proceeds to reinvest into cloudhashing at CEX, BECAUSE I can get it back out later. Essentially it becomes like a BTC savings account with a modest bit of interest.  (I've also done some investing in BTCJam, but have also lost money a few times there as well)

Yes CEX has the advantage that you can reconvert your GHs into BTC anytime and yes, as you wrote, it's like having your BTC in bank, because they produce some interest over time.

But it's risky.
In example, I had 100 GHs in CEX and when I saw the new difficulty increase was 25% I sold immediately at 0.00716 and I was right: price now is around 0.00682 and I think they make it rise artificially thanks to bots.

It's totally possible that you can carve out some income by trading all time in there if you are skilled and with some luck, still, it's not income from mining.
And when I first joined CEX my thought was exactly like yours: "I put my BTC there to earn something instead than holding them in a cold storage".
No.
That doesn't work.
With each difficulty increase, your GHs value is going to drop and the other danger is: people open eyes and see they are just wasting money and GHs price will suddenly drop to hell and you will waste a lot of BTC value (that CEX will RETAIN).
In fact, at each given point in time, CEX has a huge amount of BTC for free, around 2 times the value, because of the overpriced GHs.
When GHs value will crash (because at some point people will open their eyes), they will keep the BTC, and people will remain with the real value of GHs, that amounts at less than half of what you can find GHs on their website now.

Under a point of view is like if your bank would tell you "give me 100$, and you get an interest of 0.1% the first month with decreasing rate of 40% each month, BUT YOU CAN TRADE ON PETROL!"
Fuck you, bank, thank you  :D

I invested some money into PB mining aswell, but i have arranged myself now with the thought it might not be worth it  :-\ a lesson to be learned i guess...

This analysis is flawed as the NPV of the GHs will decline over time as the amount of revenue they generate will decline over time to eventually reach zero.

You would think so, but because GHS are used as a mechanism for trading it can live almost in its own bubble. It's been between .0065 and .0075 per GHS since early April.  I'm not denying that the prices somewhat defy logic ...a diff increase of 20% *should* cause a fall in price of 20%... but it doesn't. As long as you can sell the GHS for a price that is greater than (original price*1.004)-mined income then you will profit.  - Moreover, you at least have the OPTION of liquidity... which is a better gig than a standard cloud mining contract since you can cash out whenever. (its how I bought my hardware)

You can sell them anytime why would you say its a scam .

The original post was regarding a fixed-time contract with pbmining, which (as far as I know) you can't sell off... and since you'll never get out of it what you put into it... is why its a bad investment (not sure scam is the right word, but definitely a bad investment)

The buyer made bad decision and blame the company rather than themselves.

If bad investment is considered a scam, then all current batch of ASIC manufacturers should be considered scammers also.

Don't know if I would call it a scam, but it sure is a bad investment.

One thing people should be aware is this.

If ASIC mining is that profitable, all the ASIC manufacture won't be selling those machine and would rather mine themselves.

http://www.thefreedictionary.com/scam

The ASIC manufacturers need to sell their machines because they need funds for R&D and because they receive the entire payout from the machine right away instead of over time and not at a payout that is dependent on the network difficulty or the price of bitcoin

Cloud mining is worse than a scam or bad investment because it actively encourages ASIC manufacturers to ruin the Bitcoin ecosystem through centralization.

Cloud mining isn't just a dumb investment but an attack on Bitcoin itself.

If there are enough cloud mining providers then it could leave the network somewhat more decentralized then prior to the entry of cloud mining.

Bitmantech also opened a cloud mining service today and they are in the process of transferring all their hashpower over to p2pool.

Not decentralized enough. The physical location of miners need to be located and controlled in a decentralized fashion.

We are heading in the wrong direction otherwise.

Ideally we want users to also be miners in the future.

Judging a scam by whether it is profitable or not is not conveinced.

The scam is when ASIC manufactures intentionally use their client's "pre-order" investment capital to build a Cloud hashing infrastructure that they than use to resell hashing power to other clients or mine themselves while they continuously delay shipments with lies for excuses. 

This is indeed a scam and outright fraud.

Of course is scam, what is then?

This will really not be possible due to the small number of blocks per day. More or less all users were miners in the very early days of bitcoin, however this eventually changed when the difficulty got to even modest levels.

The way things are going and how it will continue to go is people who own physical machines will point their mining capacity at pools in a semi-centralized fashion. Granted users can easily change pools that they mine on in the event that a specific pool acts in a less then honest or less then perfect way.