I rent a server for $500 a month, with $100 in electricity. (easy numbers, not an exact quote of course.)
My costs every month are going to be $600 total just to mine bitcoins. This is a flat rate, always going to pay it whether I mine bitcoins, or run a Quake 3 server.
I can make $1000 a month mining bitcoins with this server. That's a $400 profit, after taking out electricity and rent.
Now, if I can get someone to rent this server from me for 1 month, and pay me $600 a month for it, and only expects $700 in bitcoins, then I cover my cost of the server, the electricity, and I still keep $300 in my pocket. I'm not going to pay them $1000 worth of bitcoins to rent the server, I'm going to hold some back.
My guess is that if they are charging 0.25 for 3 days on their server, then over those 3 days, they are making 1.0 bitcoins, and only giving back 0.35, netting a profit of 0.65. All with no risk to themselves.
Now, I could retype all of that substituting Bitcoins in the small denominations like .02, .05, .10 and what-not, but it's 6:35AM in the morning, I've had a half a cup of coffee, and crusty eyes, so I don't have the mental power to do the calculations.
Now, I'm also going to try selling Premium memberships... That's just cash in my pocket above and beyond what I'm making. Who knows, maybe I'll throw a couple of ads on the front page to make a little extra. The ads will help, because no sponsor wants to work with you upfront unless you already have an established user base. Just like any website, you have to get the users first, before you can get the money.
That's how I see it.
This is a very legitimate way of looking at the scheme. Rent out your HW, renter gets 90% of perf, 5% goes on expenses, you keep 5%. Over time you can buy more hardware, and it builds. Keep a pool of BTC to pay out in the event of an outage.
Though after a few hours of thinking about it today, there are a few issues.
- It offers a way for your BTC to earn money while idle. If I have BTC idle and I can get a return on them sitting idle, then hell yeah. Alongside normal mining, this would be a great system.
- There are no images of the mining rigs, no up to date reasoning of why XYZ. If you follow the bitcoin addresses, lots of 0.25 go in, and some 0.337 go out. If the owner is hoping that more people get interested, then he can pay some of them out. This is eerily similar to a Ponzi scheme if no real evidence is being had that they have miners. Take, for example:
The 0.25 BTC option. You get ~0.3263 BTC back. Now in order to earn 0.3263 back in 60 hours (premium users), at current difficulty, you essentially need 2630 MHash/s just to break even. So when you send those 0.25 BTC, you should be 'renting' approx 4x 7970s for 60 hours.
Clearly the owner hasn't thought this through - almost 1000 different 'packages' have been bought on the site (which hasn't updated in 6 hours) that are in the pipeline. Apparently they're installing 3 new systems tomorrow - if that is another 12 7970s, then they have enough power to accomodate 9 requests for 0.25 BTC every three days. So of course, this makes me think 'Ponzi', unless the owner has actually been taken unawares by the demand, or they are using the machines to mine other coin and transfer over if it offers a better return.
If someone is making money through work, and they have an opportunity for the money they have earned grow without doing anything themselves, then they'll do it (assuming no risk). That's why people have high interest savings accounts. The bigger the % payback, more often than not the bigger the risk (hedge funds).
Now if the owner had a 1500 GH/s system from BFL, then it would make sense. He could create ~75 BTC a week. But doing some math, if I started with 1 BTC and reinvested all I got back, in a month in this scheme I would get back 15.18 BTC if I kept 5% each round. Any scheme that could 15x my money in a month sounds too good to be true.
However, it is up to individuals to make a decision either way. Clearly people have had returns, although there is starting to be a backlog and the site doesn't autoupdate.
So only invest what you can afford to lose!
