Advice for new users regarding CLOUD MINING

[joust]

It would be nice for you to add Megamine.com if you'd be so kind.

Our announcement thread here
https://bitcointalk.org/index.php?topic=636096.0

If you'd like a small account so you can check us out I'd be delighted to arrange that, especially given the work you seem to put into this forum.

We are new but real, you can find out who runs us (http://www.megamine.com/aboutus.php), we are backed by a well respected private equity company (Black Green Capital), we are fully approved and undertake all necessary ID checks for everyone's peace of mind (http://www.megamine.com/idrequirements.php), accept both CC (and hence you get Credit Card protection) and bitcoin payments, are UK head quartered, operate in Sweden, and quite happy to show off our kit buzzing away and answer any questions.

With our recent price change and given the size and the advantage of running on 100% hydro power, we've just dropped under the /GHs cost of the next generation of 20nm THs miners with the small advantage of you get instant activation with us rather than having to wait for the next batch of kit.

KNC Neptune Batch 3 : £5,995:3THs turn up 'Q3 2014'
Megamine Mega Miner 2TH x 2 : $6,200:4THs turn up the second you order it.

J
www.megamine.com

[jonnybravo0311]

It would be nice for you to add Megamine.com if you'd be so kind.

Our announcement thread here
https://bitcointalk.org/index.php?topic=636096.0

If you'd like a small account so you can check us out I'd be delighted to arrange that, especially given the work you seem to put into this forum.

We are new but real, you can find out who runs us (http://www.megamine.com/aboutus.php), we are backed by a well respected private equity company (Black Green Capital), we are fully approved and undertake all necessary ID checks for everyone's peace of mind (http://www.megamine.com/idrequirements.php), accept both CC (and hence you get Credit Card protection) and bitcoin payments, are UK head quartered, operate in Sweden, and quite happy to show off our kit buzzing away and answer any questions.

With our recent price change and given the size and the advantage of running on 100% hydro power, we've just dropped under the /GHs cost of the next generation of 20nm THs miners with the small advantage of you get instant activation with us rather than having to wait for the next batch of kit.

KNC Neptune Batch 3 : £5,995:3THs turn up 'Q3 2014'
Megamine Mega Miner 2TH x 2 : $6,200:4THs turn up the second you order it.

J
www.megamine.com

And your customers don't have a prayer of getting a positive return.  Assume I have $3100.  I can either purchase BTC directly or your 12 month 2TH/s contract.  BTC currently is $500, so nice easy math says I can get 6.2BTC with my cash.  Now let's take a look at that contract... at 10% difficulty increases, I'm negative at the end of my 12 months (down about 0.83BTC).  At 20% difficulty increases, I'm negative (down about 3.37BTC).  Ok, let's assume 5% increases... hooray, I'm actually in the black (up about 2.3BTC).

The only way the customer wins is if the network difficulty increases are 8.3% or lower each jump over the next 12 months.  Since the very next increase is tracking to be around 15%, it's a no-win situation for the customer.

I understand you are in business to make money, and I certainly do not begrudge you for it.  However, also understand that you're going to get called on the BS you're spouting about your prices beating out next-generation hardware (using KnC's overpriced Neptune as the example) and making it look like $3100 is a reasonable charge for a year-long 2TH/s contract.

[DrG]

It would be nice for you to add Megamine.com if you'd be so kind.

Our announcement thread here
https://bitcointalk.org/index.php?topic=636096.0

If you'd like a small account so you can check us out I'd be delighted to arrange that, especially given the work you seem to put into this forum.

We are new but real, you can find out who runs us (http://www.megamine.com/aboutus.php), we are backed by a well respected private equity company (Black Green Capital), we are fully approved and undertake all necessary ID checks for everyone's peace of mind (http://www.megamine.com/idrequirements.php), accept both CC (and hence you get Credit Card protection) and bitcoin payments, are UK head quartered, operate in Sweden, and quite happy to show off our kit buzzing away and answer any questions.

With our recent price change and given the size and the advantage of running on 100% hydro power, we've just dropped under the /GHs cost of the next generation of 20nm THs miners with the small advantage of you get instant activation with us rather than having to wait for the next batch of kit.

KNC Neptune Batch 3 : £5,995:3THs turn up 'Q3 2014'
Megamine Mega Miner 2TH x 2 : $6,200:4THs turn up the second you order it.

J
www.megamine.com

Added to the list.

Thanks for the offer for an account but I'll pass.  I do medical charity work every 2 years and have a separate BTC wallet just for that if you want to donate a few bucks for that (this Thanksgiving I will be working with some friends from the VA down in Gaudalajara, Mexico in a community clinic for 6 days).  I guess I could make a charity account haha.  Haven't found a place to buy medical supplies with BTC for those reading ... some of you could cater to those doomsday preppers 

I can tell from your posts that you spend quite a bit of time studying the mining trends.  As johnnybravo0311 noted it may not be the best return compared to buying hardware, but that is up to the end user to decide.  KNC, Bitmain and AM aren't exactly promising you'll make money either - it's up to the end user to decide what is right for them.

I noticed you signed the announcement "Justin Fielder, CEO & MD".  Is that MD as in physician or some other abbreviation in the UK?

[joust]

Added to the list.

Thanks.

Thanks for the offer for an account but I'll pass.  I do medical charity work every 2 years and have a separate BTC wallet just for that if you want to donate a few bucks for that (this Thanksgiving I will be working with some friends from the VA down in Gaudalajara, Mexico in a community clinic for 6 days).  I guess I could make a charity account haha.  Haven't found a place to buy medical supplies with BTC for those reading ... some of you could cater to those doomsday preppers  

Be delighted to. PM me the wallet address and I'll throw something appropriate there. Not sure about being able to help with buying medical supplies in BTC thought!

I can tell from your posts that you spend quite a bit of time studying the mining trends.  As johnnybravo0311 noted it may not be the best return compared to buying hardware, but that is up to the end user to decide.  KNC, Bitmain and AM aren't exactly promising you'll make money either - it's up to the end user to decide what is right for them.

It's alas my 'job'.

I don't mind comments like johnnybravo0311's because people invest for a whole host of reasons. Of course what he says is correct in the simplistic view that if difficulty continues to trend upwards higher than a certain rate then it would indeed be better to do the 'buy BTC now' than even buying hardware!

But of course it is a big IF, and if he's got a fine crystal ball then I assume he also doesn't buy international stocks or shares he just buys fiat currency

It also negates the view that with mining contracts you get a constant 'dividend' stream which you can invest how you like, potentially taking advantage of changes in the market. If you buy BTC and hold then you've 100% locked your final gains entirely against the price of BTC at the point you realise verses the point you bought, rather than having additional factors that can affect the overall returns. The same as 'pension funds' and 'property is my pension fund' views. Each are fine, just make sure if you do the latter that when you want to realise it that the housing market hasn't collapsed.

Again the analogy with buying international currency verses buying a share in a company isn't that different, after all who would have bet in the late 1990s that Apple would be the largest company in the world. You could of course have bought Guatemalan Dollars at the time as well which given where Apple was market share wise against Microsoft may have seemed the better choice!

The comparison we believe with kit is indeed valid. Generally 8-12 weeks means around 50% of the earnings of a certain hash rate will have been collected, so if you are around even double the price of kit alone, then by the time you factor in pool luck issues (which we remove with our guarantee), power (which is fully inclusive - the power alone at $0.10/kWh for a Neptune is nearly $1500), and downtime (we provide a SLG that means even if we did have a bit outage it doesn't affect your earnings) then we believe it's great value. So will you get that kit you order today in 1 week, 2 weeks or 12 weeks? If you are sure that's cool, but given we buy kit by the 100TH load we aren't that sure that all the claims made about availability are actually true.....

But if johnny doesn't we don't mind that - it's just a perspective and if he thinks he can mine better himself then we're not going to tell him he's wrong, and clearly even if he's not mining he can make his view known and we can give ours and the end customer can make their mind up.

We purposely don't make any claims about what may or may not happen (check out our website, we even say on our front page that "Please remember that past performance is not an indication of future growth of the global hashing rate which directly affects the amount of rewards that your hashing contract may make.".

Not only is it illegal in the UK for us to do that under the FCA (the financial regulator), we are in the market of providing a service which people can make their own choice about if it makes sense for them. We've no interest in making massive claims about returns or anything else, we just put the contracts up, give a decent set of information for people to make their own mind up, and leave them to it. No whizz bang schemes, no MLMs, no pumping of the forums, just here it is and see what you think.

Given the contracts we've sold so far it seems many people do like our proposition, but also given that everyone that visits our site doesn't buy something, others think it's not for them. That's cool. Our existing customers seem to like it with many now over the 10THs level, and almost all have added additional contracts. At the same time we continue to contribute a reasonable chunk of doing the important bit of mining which is verifying the transactions.

Megamine is just one of the businesses we have active in the bitcoin arena so it's not a do all or die, and for us ensuring that we are incredibly close to the mining is very important for some of our other investments which will ultimately rely on the integrity of that, and of course everything we haven't sold we mine for ourselves so it's not all bad news for us.

I noticed you signed the announcement "Justin Fielder, CEO & MD".  Is that MD as in physician or some other abbreviation in the UK?

MD = Managing Director - means the buck stops at me for the day to day as well as the 'strategy'. It's a UK term.

J
www.megamine.com

[DrG]

Be delighted to. PM me the wallet address and I'll throw something appropriate there. Not sure about being able to help with buying medical supplies in BTC thought!

Thank you kindly.  Address is 1Lhp53MUmGaaRvrQ3ZcxxCrsgnniNFfZrw - if the funds are not used by 11/30/2014 they will be returned.  I probably need to by 2 BP cuffs, 2 3M cardio stethascopes, a couple opthalmoscopes and some other nickknack stuff.  I have a measly 0.554 in donations and that came from a bitcoin meetup - haven't received a tip or donation in 3 years so I ended up selling my sig 

But if johnny doesn't we don't mind that - it's just a perspective and if he thinks he can mine better himself then we're not going to tell him he's wrong, and clearly even if he's not mining he can make his view known and we can give ours and the end customer can make their mind up.

We purposely don't make any claims about what may or may not happen (check out our website, we even say on our front page that "Please remember that past performance is not an indication of future growth of the global hashing rate which directly affects the amount of rewards that your hashing contract may make.".

Not only is it illegal in the UK for us to do that under the FCA (the financial regulator), we are in the market of providing a service which people can make their own choice about if it makes sense for them. We've no interest in making massive claims about returns or anything else, we just put the contracts up, give a decent set of information for people to make their own mind up, and leave them to it. No whizz bang schemes, no MLMs, no pumping of the forums, just here it is and see what you think.

Given the contracts we've sold so far it seems many people do like our proposition, but also given that everyone that visits our site doesn't buy something, others think it's not for them. That's cool. Our existing customers seem to like it with many now over the 10THs level, and almost all have added additional contracts. At the same time we continue to contribute a reasonable chunk of doing the important bit of mining which is verifying the transactions.

Megamine is just one of the businesses we have active in the bitcoin arena so it's not a do all or die, and for us ensuring that we are incredibly close to the mining is very important for some of our other investments which will ultimately rely on the integrity of that, and of course everything we haven't sold we mine for ourselves so it's not all bad news for us.

My sentiments exactly.  You put the information out there to the best of your ability.  As long as megamine does up and run in the middle of the night like lunamine then it's all just business.  It's up to the customer to decide.

Does the UK have a website to show how a company is incorporated?  For example in California all corporations can be looked up here:
https://businessfilings.sos.ca.gov/

It always provides reassurance to know a company is real if they're had to get entrenched with the bureaucracy that is business licenses and incorporation.

[joust]

Thank you kindly.  Address is 1Lhp53MUmGaaRvrQ3ZcxxCrsgnniNFfZrw - if the funds are not used by 11/30/2014 they will be returned.  I probably need to by 2 BP cuffs, 2 3M cardio stethascopes, a couple opthalmoscopes and some other nickknack stuff.  I have a measly 0.554 in donations and that came from a bitcoin meetup - haven't received a tip or donation in 3 years so I ended up selling my sig 

I'll get that done for you.

My sentiments exactly.  You put the information out there to the best of your ability.  As long as megamine does up and run in the middle of the night like lunamine then it's all just business.  It's up to the customer to decide.
Does the UK have a website to show how a company is incorporated?  For example in California all corporations can be looked up here:
https://businessfilings.sos.ca.gov/
It always provides reassurance to know a company is real if they're had to get entrenched with the bureaucracy that is business licenses and incorporation.

Yep.

http://wck2.companieshouse.gov.uk//wcframe?name=accessCompanyInfo

Company name is Megamining Ltd and company number is 08849351

A quick google of "Justin Fielder" will throw up a whole load about me and my background - prior to this I was CTO of Easynet (www.easynet.com) for 16 years so we are indeed real and not running anywhere.

Our sister company that hosts Megamine's kit is Hydro66.com which is making a very large investment in Sweden ($millions) in building a physical 150MW capable datacentre. The local governments development agency in Sweden's announcement of that is here http://thenodepole.com/2014/05/13/hydro66-build-new-wholesale-data-centre-node-pole-region/

Justin
www.megamine.com

[machoo123]

Have anyone tried scryptsy cloud mining? Was thinking of going into it

[Trademan1]

Thank you kindly.  Address is 1Lhp53MUmGaaRvrQ3ZcxxCrsgnniNFfZrw - if the funds are not used by 11/30/2014 they will be returned.  I probably need to by 2 BP cuffs, 2 3M cardio stethascopes, a couple opthalmoscopes and some other nickknack stuff.  I have a measly 0.554 in donations and that came from a bitcoin meetup - haven't received a tip or donation in 3 years so I ended up selling my sig  

I'll get that done for you.

My sentiments exactly.  You put the information out there to the best of your ability.  As long as megamine does up and run in the middle of the night like lunamine then it's all just business.  It's up to the customer to decide.
Does the UK have a website to show how a company is incorporated?  For example in California all corporations can be looked up here:
https://businessfilings.sos.ca.gov/
It always provides reassurance to know a company is real if they're had to get entrenched with the bureaucracy that is business licenses and incorporation.

Yep.

http://wck2.companieshouse.gov.uk//wcframe?name=accessCompanyInfo

Company name is Megamining Ltd and company number is 08849351

A quick google of "Justin Fielder" will throw up a whole load about me and my background - prior to this I was CTO of Easynet (www.easynet.com) for 16 years so we are indeed real and not running anywhere.

Our sister company that hosts Megamine's kit is Hydro66.com which is making a very large investment in Sweden ($millions) in building a physical 150MW capable datacentre. The local governments development agency in Sweden's announcement of that is here http://thenodepole.com/2014/05/13/hydro66-build-new-wholesale-data-centre-node-pole-region/

Justin
www.megamine.com

Neither Megamining Ltd or company number 08849351 was found with the companieshouse.gov.uk website suggested.

This website, http://companycheck.co.uk/company/08849351/view  did come up with some info however.

[jonnybravo0311]

Added to the list.

Thanks.

Thanks for the offer for an account but I'll pass.  I do medical charity work every 2 years and have a separate BTC wallet just for that if you want to donate a few bucks for that (this Thanksgiving I will be working with some friends from the VA down in Gaudalajara, Mexico in a community clinic for 6 days).  I guess I could make a charity account haha.  Haven't found a place to buy medical supplies with BTC for those reading ... some of you could cater to those doomsday preppers  

Be delighted to. PM me the wallet address and I'll throw something appropriate there. Not sure about being able to help with buying medical supplies in BTC thought!

I can tell from your posts that you spend quite a bit of time studying the mining trends.  As johnnybravo0311 noted it may not be the best return compared to buying hardware, but that is up to the end user to decide.  KNC, Bitmain and AM aren't exactly promising you'll make money either - it's up to the end user to decide what is right for them.

It's alas my 'job'.

I don't mind comments like johnnybravo0311's because people invest for a whole host of reasons. Of course what he says is correct in the simplistic view that if difficulty continues to trend upwards higher than a certain rate then it would indeed be better to do the 'buy BTC now' than even buying hardware!

But of course it is a big IF, and if he's got a fine crystal ball then I assume he also doesn't buy international stocks or shares he just buys fiat currency

It also negates the view that with mining contracts you get a constant 'dividend' stream which you can invest how you like, potentially taking advantage of changes in the market. If you buy BTC and hold then you've 100% locked your final gains entirely against the price of BTC at the point you realise verses the point you bought, rather than having additional factors that can affect the overall returns. The same as 'pension funds' and 'property is my pension fund' views. Each are fine, just make sure if you do the latter that when you want to realise it that the housing market hasn't collapsed.

Again the analogy with buying international currency verses buying a share in a company isn't that different, after all who would have bet in the late 1990s that Apple would be the largest company in the world. You could of course have bought Guatemalan Dollars at the time as well which given where Apple was market share wise against Microsoft may have seemed the better choice!

The comparison we believe with kit is indeed valid. Generally 8-12 weeks means around 50% of the earnings of a certain hash rate will have been collected, so if you are around even double the price of kit alone, then by the time you factor in pool luck issues (which we remove with our guarantee), power (which is fully inclusive - the power alone at $0.10/kWh for a Neptune is nearly $1500), and downtime (we provide a SLG that means even if we did have a bit outage it doesn't affect your earnings) then we believe it's great value. So will you get that kit you order today in 1 week, 2 weeks or 12 weeks? If you are sure that's cool, but given we buy kit by the 100TH load we aren't that sure that all the claims made about availability are actually true.....

But if johnny doesn't we don't mind that - it's just a perspective and if he thinks he can mine better himself then we're not going to tell him he's wrong, and clearly even if he's not mining he can make his view known and we can give ours and the end customer can make their mind up.

We purposely don't make any claims about what may or may not happen (check out our website, we even say on our front page that "Please remember that past performance is not an indication of future growth of the global hashing rate which directly affects the amount of rewards that your hashing contract may make.".

Not only is it illegal in the UK for us to do that under the FCA (the financial regulator), we are in the market of providing a service which people can make their own choice about if it makes sense for them. We've no interest in making massive claims about returns or anything else, we just put the contracts up, give a decent set of information for people to make their own mind up, and leave them to it. No whizz bang schemes, no MLMs, no pumping of the forums, just here it is and see what you think.

Given the contracts we've sold so far it seems many people do like our proposition, but also given that everyone that visits our site doesn't buy something, others think it's not for them. That's cool. Our existing customers seem to like it with many now over the 10THs level, and almost all have added additional contracts. At the same time we continue to contribute a reasonable chunk of doing the important bit of mining which is verifying the transactions.

Megamine is just one of the businesses we have active in the bitcoin arena so it's not a do all or die, and for us ensuring that we are incredibly close to the mining is very important for some of our other investments which will ultimately rely on the integrity of that, and of course everything we haven't sold we mine for ourselves so it's not all bad news for us.

I noticed you signed the announcement "Justin Fielder, CEO & MD".  Is that MD as in physician or some other abbreviation in the UK?

MD = Managing Director - means the buck stops at me for the day to day as well as the 'strategy'. It's a UK term.

J
www.megamine.com

Hi Justin,

First, I want to thank you for taking the time to come here and reply both to DrG and myself.  As I stated in my original post, I realize that you run a company and as such you wish to make a profit for your company.  I also stated that I do not begrudge you for this.  Let's face it, unless you're some kind of philanthropic and altruistic entity who is doing it for the love of the Bitcoin, you're out there to make a buck (well, pound sterling in your case )

I absolutely agree with your statement that it is up to the end user to decide what to do.  Should the consumer purchase their own kit, or a service like yours, ultimately the consumer is the one who has made the decision to do so.

To be perfectly honest, MegaMine is one of the very few cloud mining entities that I actually believe truly exists, owns hardware and mines coin with that hardware.  I have called virtually every other "cloud mining" operation a Ponzi or outright thieves.  The unfortunate truth is that pretty much every one of them has proven to be just that: a bunch of thieves who run off with people's cash/BTC.

Having written what I have so far, let me now address my post, and your reply to it.  The simple fact of things is that mining, no matter if I own the hardware, or you do, is playing a game of risks.  When I made the decision to purchase my own hardware, I did so knowing that I might end up being negative on my investment.  I had the same choice to make that I stated in my post: I could buy BTC outright, or purchase hardware.  Your analogy to purchasing fiat vs stock is actually quite an accurate assessment.  I also like your comparison to purchasing Apple stock in the 1990s.

When making the decision to purchase hardware, a number of factors come into play:

• Upfront hardware costs
• Hardware availability
• Hardware time to market
• Power consumption
• Hash rate of the hardware
• Network difficulty changes

There are more, but I've covered the basics, and I think we understand where I'm going with it.  That is, before getting into the mining game, you as a consumer had better educate yourself.  I believe that is true for everything.  For example, I don't go purchase a new vehicle just because I saw an ad on the television and happen to like the color blue.

So, back to where we started.  You represent a company that exists, first and foremost, to make a profit for its share/stakeholders.  You are providing a service for which there is a pretty decent market, and you are trying to capture a portion of that market.  You must make all the same decisions I listed above in addition to determining how to make that profit by selling your service.  To do this, you need to minimize your own risks.  You've done this by charging a premium for your services, partnering with power providers to obtain very cheap power, purchasing your hardware in bulk quantities to get it at discount and mining for yourselves on the hardware that is not currently sold on contract.

Charging $3100 for 2TH/s is indeed a premium price that significantly reduces your own risk, and places it upon the consumers' shoulders.  Yes, the analysis I made in my first post was simplistic.  I did it that way on purpose to illustrate that risk.  In the interest of full disclosure, I currently own about 4TH/s of hardware in the form of 9 Antminer S3s, and 5 Antminer U2s (which I currently use to play the lottery and solo mine).  I have previously owned (and since sold) Antminer S1s, Antminer S2, Spondoolies-Tech SP10.

[joust]

Neither Megamining Ltd or company number 08849351 was found with the companieshouse.gov.uk website suggested.

This website, http://companycheck.co.uk/company/08849351/view  did come up with some info however.

Sorry, seems the link 'times out'.

Here is Companies House's main link to it's 'webcheck' portal.

J

[joust]

Hi Justin,

First, I want to thank you for taking the time to come here and reply both to DrG and myself.  As I stated in my original post, I realize that you run a company and as such you wish to make a profit for your company.  I also stated that I do not begrudge you for this.  Let's face it, unless you're some kind of philanthropic and altruistic entity who is doing it for the love of the Bitcoin, you're out there to make a buck (well, pound sterling in your case )

[snip]

Charging $3100 for 2TH/s is indeed a premium price that significantly reduces your own risk, and places it upon the consumers' shoulders.  Yes, the analysis I made in my first post was simplistic.  I did it that way on purpose to illustrate that risk.  In the interest of full disclosure, I currently own about 4TH/s of hardware in the form of 9 Antminer S3s, and 5 Antminer U2s (which I currently use to play the lottery and solo mine).  I have previously owned (and since sold) Antminer S1s, Antminer S2, Spondoolies-Tech SP10.

Johhny,

All good points, and ones that we would want everyone that makes a decision to enter mining to appreciate.

On the "premium" point, it's interesting where various companies have positioned their pricing.

We are at $3100 for 2THs for a 12 month, $3600 for a 3 year contract (after 3 years it's really not going to be worth mining 2TH).

Compare that to CEX.io
Current price is $1.891/GHs which means 2TH/s is $3782
1 year "maintenance" fee at $0.18/GH/month is $4320 for 1 year, $12,960 for 3 year.
Total cost 1 year : $8102 and for 3 years : $16742

So we'd probably argue that we aren't 'premium', and that if you do a "TCO" then we are cheaper, plus if you follow our pricing we directly reduce in-line with difficulty increase so for a continuous investor we would argue that we offer a very good deal.

As I said, if you are happy with your 4TH then cool, and if you got your kit at a price that is working for you then well done. The thing is that people aren't guaranteed to get their kit if they order now (exactly who do you order from....), and every week it's late can make huge differences to the returns.

I would be interested to see how your 4TH is earning to be honest - one of the other advantages that we give is to remove all 'luck' issues - we pay exactly 100% of your percentage of the global hash rate and charge 5% to cover our risk.

As we like to be transparent I'm posting regular updates on this thread
https://bitcointalk.org/index.php?topic=671304.msg8537900#msg8537900
which shows our earning rates and the returns against a 1TH/s contract bought when we launched, thereby giving people a good feel to what's going on. In less than 3 months it's returned over 50% of the cost, despite the BTC:$ moving against us.

Finally, we are always happy to show off the kit that runs our service - we do it on here and on twitter
https://bitcointalk.org/index.php?topic=636096.msg7233984#msg7233984
https://twitter.com/MegaMineBitcoin/status/483641972490780672

It's real, it really exists, and once we've got the rest of the next order that's turned up we'll post some pictures of that as well (we are just about to double our capacity early next week).

As always happy to answer any questions.

[zdaz14]

I know my account is new but I've had some good experiences with GAW lately with their Hashlets. I've made back 20% of my initial investment in my first week with it and their customer service (which was lacking) has really been picking up in reply time to my tickets (I've had a few questions).

That said, I will hold further judgment over the next few weeks to see what they bring about.

[joust]

On the 'are we real, do we really mine' point often talked about - here is the latest delivery of miners to our data centre that turned up this morning.



The guys are rapidly unboxing and racking (time is bitcoins after all), so once it's all nicely running we'll do some more photos of these lovely new miners running. This is just the first in a whole batch of deliveries but hopefully gives people a bit more confidence that we really do exist and really do mine for our customers.

J
www.megamine.com

[bmoscato]

No matter how many times I look at this, I’m still confused.  If an individual, company or organization has the capital to purchase mining equipment as well as fund the operation of a facility, than, why are they offering a service of selling/renting hashing power?

Why wouldn't these entities just mine away and make their profit and be happy?

GAW/Zen made sense to me originally when it was used as a collocation type center, but, now they are doing the same thing as everyone else.

[zdaz14]

No matter how many times I look at this, I’m still confused.  If an individual, company or organization has the capital to purchase mining equipment as well as fund the operation of a facility, than, why are they offering a service of selling/renting hashing power?

Why wouldn't these entities just mine away and make their profit and be happy?

GAW/Zen made sense to me originally when it was used as a collocation type center, but, now they are doing the same thing as everyone else.

Less risk. Would you rather invest 1,000,000 into mining hardware yourself and risk that BTC falls off/the difficulty makes it non-profitable or would you rather sink 1,000,000 into hardware but sell hashes of it so that the risk is far less while still taking a cut from each hash as well/they pay for electricity/maintenance/etc.

[DrG]

No matter how many times I look at this, I’m still confused.  If an individual, company or organization has the capital to purchase mining equipment as well as fund the operation of a facility, than, why are they offering a service of selling/renting hashing power?

Why wouldn't these entities just mine away and make their profit and be happy?

GAW/Zen made sense to me originally when it was used as a collocation type center, but, now they are doing the same thing as everyone else.

Less risk. Would you rather invest 1,000,000 into mining hardware yourself and risk that BTC falls off/the difficulty makes it non-profitable or would you rather sink 1,000,000 into hardware but sell hashes of it so that the risk is far less while still taking a cut from each hash as well/they pay for electricity/maintenance/etc.

That's less risk for the company selling the hashes.  bmoscato was asking what is the benefit to the buyer of the hashes.

[jonnybravo0311]

No matter how many times I look at this, I’m still confused.  If an individual, company or organization has the capital to purchase mining equipment as well as fund the operation of a facility, than, why are they offering a service of selling/renting hashing power?

Why wouldn't these entities just mine away and make their profit and be happy?

GAW/Zen made sense to me originally when it was used as a collocation type center, but, now they are doing the same thing as everyone else.

Because the companies make MORE profit by selling to you at inflated prices.  These companies are just as capable of doing the mining calculations as the rest of us.  They've spent quite a bit of time analyzing things to come up with a price point that minimizes their own risk, and transfers it solely onto the shoulders of the consumers.  Let's look at the latest offering from Bitmain/Hashnest.  They are offering 0.00135BTC per GH/s, and $0.0032422/GHS/Day in maintenance fees.  If you break that down, you'll see it translates into the same thing as purchasing an S2 for 1.35BTC and paying somebody $98.62 a month to host it.  In order for you as the consumer to have a prayer of turning a profit, the network difficulty adjustments must be 5% or less consistently at current USD->BTC conversions.

This is the game they play, and how they transfer that risk to you.  They are betting the difficulty adjustments will be greater than 5%, and also that the fiat->BTC conversion does not inflate dramatically at present.  By purchasing such a contract, you are betting against the house and hoping that either the difficulty adjustments stay absurdly low, or that BTC increases dramatically in value at the beginning of your contract and then continues to trend upwards throughout the timeframe of your contract.

Other cloud mining providers offer a fixed rate contract.  They're doing the very same thing, except charging you everything up front instead of amortizing the "maintenance" fees over time.  As an example, let's look at MegaMine.  They are charging $3100 for a 12 month contract of 2TH/s.  That's actually a bit cheaper than the same from HashNest (2TH/s at HashNest = 2.7BTC@$479 + 197.24*12 = $3660.18).  Regardless, the outcome is the same: you are betting against the house (in this case, you're betting that MegaMine is wrong in their predictions).

[joust]

Because the companies make MORE profit by selling to you at inflated prices.  These companies are just as capable of doing the mining calculations as the rest of us.  They've spent quite a bit of time analyzing things to come up with a price point that minimizes their own risk, and transfers it solely onto the shoulders of the consumers.  Let's look at the latest offering from Bitmain/Hashnest.  They are offering 0.00135BTC per GH/s, and $0.0032422/GHS/Day in maintenance fees.  If you break that down, you'll see it translates into the same thing as purchasing an S2 for 1.35BTC and paying somebody $98.62 a month to host it.  In order for you as the consumer to have a prayer of turning a profit, the network difficulty adjustments must be 5% or less consistently at current USD->BTC conversions.

You are of course entitled to your own opinion, but that is not reflective of our business model.

We operate the same way I've run businesses over the last 20 years, that the economies of scale of large operations mean we can divide it down into chunks that make sense to other smaller people, and essentially arbitrage the fact that whilst you could do it yourself, it doesn't make sense.

Having built, bought and run data centres with over 10MW of capacity in the last 20 years with thousands upon thousands of servers in them it's a business we know well.

It's just like in the early days of the Internet you could run your own mail server to do that funny 'email' thing. Then people like us built massive servers, sliced them up, and sold them to small business and end users and eventually no-one ran their own mail server any more because the total cost of running them didn't make sense.

This is the game they play, and how they transfer that risk to you.  They are betting the difficulty adjustments will be greater than 5%, and also that the fiat->BTC conversion does not inflate dramatically at present.  By purchasing such a contract, you are betting against the house and hoping that either the difficulty adjustments stay absurdly low, or that BTC increases dramatically in value at the beginning of your contract and then continues to trend upwards throughout the timeframe of your contract.

Again, we don't agree.

We are just taking delivery of our Neptunes which take around 1500W at the mains. If you run one of those in the UK at 12ppkWh the electricity bill for the year is $2600 for 3TH, and you would have paid somewhere around $9995 to be in a position to have that kit now. Even if you assume that price is half because of the KNC 2:4:1 offer (which ignores the fact that the free one is some weeks/months away) compared to doing it yourself we feel our costs are highly attractive, so lets be generous and say $5k for kit, so that's a total year cost of $7200.

Even if you can get power at, say, $0.10/kWh somewhere else in the world, then that just means your electricity bill is $1300 per year for 3TH, so let's say $6300 including kit.

So '1TH' worth is somewhere between $7200/3 = $2400 and $6300/3 = $2100.

Of course this ignores the following

• Outages (we guarantee service)
• Low Pool luck (we guarentee 100% luck with 5% pool charge (=95% luck with no charge)
• Variable hashing rate over time (we give you exactly your %age of the global hash rate)
• PSU capital cost
• Cooling cost (maybe you can get away with it depending where you live)
• etc. etc.

and the cost of the space (but if you are doing it at home, maybe that's free)

Other cloud mining providers offer a fixed rate contract.  They're doing the very same thing, except charging you everything up front instead of amortizing the "maintenance" fees over time.  As an example, let's look at MegaMine.  They are charging $3100 for a 12 month contract of 2TH/s.  That's actually a bit cheaper than the same from HashNest (2TH/s at HashNest = 2.7BTC@$479 + 197.24*12 = $3660.18).  Regardless, the outcome is the same: you are betting against the house (in this case, you're betting that MegaMine is wrong in their predictions).

1TH is $2100 for a 1 year contract. $2400 for a 3 year contract.

So we are the 'same' as the $0.10 case, and cheaper than the 12p/kWh case of the UK, with many benefits above the DIY.

If you take the 3 year view, then it's no competition. 1xNeptune in the UK over 3 years (keep the $5k for kit) is $12800 all in, we are $2400.

So are we mad? No, of course not, because it's like selling a 1 year or 3 year's worth of cloud storage on the same basis. Sure, today 1Tb of hard disk costs 'X', but in 3 years time it will be probably 1/10th of X - and the overall storage system will have been upgraded at least twice so the costs all work.

Similarly 3TH will cost you around $5k in hardware, but in 1 years time it's going to be a fraction of that, because we'll probably be buy 16nm or smaller kit running at 20-50TH 'per box' so a 1TH slice of that will be very cost effective. Because of who we are backed by we can therefore take these 2/3 year views, which is another reason we don't just mine ourselves, because then we'd need to take those views on both BTC:USD and global hash rates. We might be good, but we aren't that good, but one thing we do know is Moore's law does apply to hardware, so that's a good bet.

So how can we do this. Simple, our costs are much lower because we forward buy massive amounts of kit, we have Hydro power, we host in the middle of nowhere where it is cold, and we have built huge automated systems that keeps everything alive and working all the time.

Just like those email servers all those years ago. Then web servers. Then Internet transit. Then voice minutes. Then [insert your favourite telecoms arbitrage analogy]

So, why do we sell contracts? Because we believe that:
a) we can better the pricing that people can do it themselves when they take the full costs into account (of course if people get free electricity, or just run a miner in their bedroom then that may not be right)
b) Our scale gives us inherent advantages, and by offering a compelling product then we can build a sustainable business that enables us to continue those advantages
c) We don't have to sell the bitcoins generated, which helps everyone as distributing amongst end users means they will use a variety of methods to monetise them (including spending them as bitcoins, not fiat)

Yes, customer's are taking a risk, but then so are we, because who actually knows what is going to happen in a years time, never mind 3 months. This again is no different that buying any sort of service from a large company - sure, you might be able to wait a few months and get those hard drives, processors and everything else that makes up a server to run your email cheaper, but then there might also be a factory fire which pushes the costs up massively.

As I've said on this thread and elsewhere, we aren't interested in making any wild claims about what may or may not happen, we just build the best possible service we believe we can, price it at what we believe is a compelling price point, and then provide as much information that we can to ensure customer's can make an informed choice.

Hopefully we also provide a balanced view across the views, because given the examples where our costs are below kit+electricity, if it's "mad" to send money to us, it's "madder" to buy kit and do it yourself.

Thanks for informing the debate though.

Justin
www.megamine.com

[lionelpaul]

Thanks DrG for this amazing post. Interesting, useful, and confirming my own experience. Tried a few cloud mining services and the least I can say is that you need to be careful...

[joust]

No matter how many times I look at this, I’m still confused.  If an individual, company or organization has the capital to purchase mining equipment as well as fund the operation of a facility, than, why are they offering a service of selling/renting hashing power?
Why wouldn't these entities just mine away and make their profit and be happy?

Because then you have a mining operation. Not a business.

And the problem with a mining operation is your "customers" are the people willing to give you fiat currency for your mined bitcoins to pay your building, electricity, sub contractor and generally staff costs because none of the aforementioned yet accept bitcoins, and even if they did they'd use something like BitPay to turn it into fiat immediately (so you may as well do it and cut BitPay out of the loop).

So you become totally reliant on the 'spot' price of BTC.

So we decided to build a business that essentially offers a contract that gives the customer a bunch of benefits over buying and running mining kit themselves (after all, if they just wanted bitcoins they could just go and buy them, although mining may be a better way for many than just buying them) as well as giving them an earning stream that the customer can take a view on.

It's the difference between buying stocks, and buying futures against a stock where you 'borrow' someone elses stock and hope down the line that the stock is actually cheaper and so you can make a margin by buying the stock from someone else (the 'stock short' as people will generally know it as). The latter may seem mad to some people, but it works for both parties, the person lending the stock (the mining company) gets a known return, whereas the person doing the 'lending' (the person buying the mining contract) gets upside if his view is better than the loaning company.

So people do say 'why do people loan stock, why don't *they* just sell it and buy it back later and make the profit that the other person did'? Well what if the other person is wrong, or that the person with the stock is taking a much longer term view of the stock performance than the person that wants to borrow it for a few months, or maybe a year.

So we essentially sell you a slice of our hardware because then we get a known return, and if difficulty or BTC:USD doesn't go the way we think, but the way you think, then you can get the upside of that. We don't mind, because we have got the return that makes our business work (and the kit will earn whatever it earns, so we don't take a BTC risk), and we also have an engaged customer base.

If you run a business then you have a customer base that you can provide more services to over time. Businesses succeed because of customers, not because of operating in a wholly insular way, and so we are building a customer base that has trust in our offerings which then we can add additional services on (more of that soon with some forthcoming announcements).

So, you could say that we are 'passing risk', but we are also 'passing upside'. Some 'risk' we'll take, but as we guarantee to never have contracts that we don't have kit for, we also are 100% transparent about that risk.

Hope that helps?

J
www.megamine.com