Curious mining contracts offer?

[ebritno]

Hello, I am a new member to the boards, but I am not new to them (yes, I am a former lurker) lol.

At any rate, I've noticed a lot of scam mining contracts going up, and I was curious to see if I could develop a model that... well wasn't a complete scam.
I guess with all the frenzy around bitcoin lately, mining contracts are finding that they don't have to offer a legitimate service to make a killing.

At any rate, I've gone through a handful of proposals in my research and business plan and now I have two plans I wanted to bring into scrutiny before running with it, or dropping it all together.

Option1: 
1 GH/s MINIMUM (with a prorate of the minimum hashing power 2-4 times a year)
Length of service is a minimum of 4 years. It will last longer if the contracts current hash rate can keep up with power consumption.
No reinvestment fees.
No siphoning the initial payment.
No service or maintenance fees for the first 4 years. Up to 5% thereafter.
Daily payouts.
Price: 24⁹⁹

Option2:
2 GH/s MINIMUM (with 1 prorate at 3 months)
Length of service is 6 months
No reinvestment fees.
No siphoning the initial payment.
No service or maintenance fee.
Daily Payouts
Price 24⁹⁹

As for the size of the prorate. The minimum prorate is 50% a year. But I plan to try and Prorate at 100% or more. It is mostly going to depend on the eveolution of hardware over the course of the contract.
Option 1 is a share model. So it will fluctuate in power but never fall below the minimum.

So thoughts?
Better ideas perhaps?

If I were to start offering a service like this, I feel like it should be transparent. So I am trying to expose and relay the groundwork alongside the bitcoin community.

[ebritno]

So, I have been talking to some close friends and fellow bitcoin enthusiasts about the project, trying to enlist their help. And they have offered me some support and helped me to promote a new strategy.

We are thinking about lowering the price and starting a crowd funding campaign that is make or break for our idea. If we raise the funds we can launch, and if not then it is all over.

We are going to try and match what we raise via crowd funding, provided that the customer base is there to raise a minimal amount to begin with.

If we can get 230+ people/contracts interested I think we can launch it. Otherwise we will "go home".

If we can get that level of support then we can start the price at:

1 GH/s per 6 months.
This will of course be in the same spirit of the above points.
No fees. No charging of what you produce. No crap.
Daily/Biweekly payouts etc.
Price: 9⁹⁵

This would mean that contracts would not actually start for another 3-5 months however. Which should be taken into account. I still think it would be a good deal. But I don't want to hide that fact from people.

Finally! Starting to see some very fair prices huh? Of course, this requires more of a grassroots kind of mining operation considering the crowd funding, but I feel that suits bit-coin rather well.

With Moore's law taken into consideration, 28nm/poorly made 20nm chips are going to be king for some time right now in bitcoin hardware. While making a killing on the new asci chips may not always be feasible, some degree of profitability should remain in the long term.

Bringing hashing prices down below $10 a piece should remain relatively profitable for some time, and I expect that the price above will easily drop with the price of hardware in the long term.

Any one have questions, comments, concerns, praise, or even criticism?

[railzand]

Any one have questions, comments, concerns, praise, or even criticism?

Me, I have all the above. Please could you rephrase everything so an ancient dimwitted foreigner might understand
how this model compares to reinvesting groupbuys, mining farm shares and other models
how I might make a bob or two
how you ditto

[ebritno]

Any one have questions, comments, concerns, praise, or even criticism?

Me, I have all the above. Please could you rephrase everything so an ancient dimwitted foreigner might understand
how this model compares to reinvesting groupbuys, mining farm shares and other models
how I might make a bob or two
how you ditto

So basically newer hardware costs about $3-$10 per 1GH/s of mining power. Just the hardware. This is for most of the 28nm units that have released and are continuing to be released.

Unfortunately most of these units right now cost in the thousands of dollars which many of us cannot afford in one go.

There is also the issue of power bill, space, heat, ect...

You very well may be familiar with this, but I'm trying to be thorough.

Basically the current model would sell a 6 month contract for a 1GH/s piece of the hardware at 9⁹⁵... and the option to extend the contract for 6 months at a time for $4⁹⁵

Every day or twice a week, you would receive all the bitcoins that your hashing power created.

When your contract is up, you would be sent $3.50 worth of BTC per contract per initial 9⁹⁵ contract, essentially selling us back the hardware you bought. (The hardware we are looking at now costs 3.50 per 1 GH/s).

So for every 1 GH/s you add to your account you will pay 9⁹⁵ upfront and 6⁹⁵ in the long term.

A 6 month renewal will cost 4⁹⁵ thereafter.

The model works this way, because most offers like this make profits off of their customers. We will make a profit but very insignificant (and reasonable considering space and heat constraints). Most of the profit that will be made off of the service will be from mining with un-contracted hashing power which will vary from time to time.

This is beneficial to customers because they can get cheap hosted hashing power, where they will not be responsible for paying for hardware 2-3x over like other companies and will pay for none of it in the long term.

It is beneficial to us because without offering the service, acquiring the capital to stay ahead of the mining curve on a large scale would be more difficult.

The relationship here is mutually beneficial as it should be.

What can you make off of this?
Well that is hard to say. I've plugged the numbers in on several different calculators against several different scenarios. I have seen a margin of -1.63 to +$60.00 on one contract over the course of 6 months at the current price point assuming difficulty continues to rise almost 2.6% a day.

I encourage you to test scenarios yourself on other calculators, and also try to account for the possibility of such a contract not coming due for another 3-5 months (where difficulty may be higher by some factor greater than or less that 2.6% a day).

Any other questions or concerns?

[railzand]

Thanks very much. Now I've got more "questions, comments, concerns, praise, or even criticism", but would love to hear more from the community.

[ebritno]

Thanks very much. Now I've got more "questions, comments, concerns, praise, or even criticism", but would love to hear more from the community.

Yes, It would be nice to hear from others too. lol.