Cloud Mining gives the same yields as ASIC Mining. Mining calculator and more!

[OmarBessa]

Hello,

Sorry for being iterative, I've been researching a bit on bitcoin mining; and I thought that since many people liked the previous article this might be interesting to you.

I've got an AI that I developed for quite some time now, and I use it regularly to infer mathematical models; I've been plugging it to bitcoin mining data (on-the-cloud), and the results were mildly interesting. However, since that article a kind member of bitcointalk provided me with ASIC mining data. I cross-checked it, and so far I've found out that:

* Cloud mining and off-cloud mining are apparently the same.
* There's a way to determine earnings per day, and it involves the golden number.
* There's a maximum amount of BTC that can be earned per gigahash.
* You can estimate how long will a miner be productive.

For more details read:

http://omarbessa.com/is-this-the-truth-about-mining.php

Thanks for reading!

[OmarBessa]

There was a small mistake on the href of the calculate button. Fixed.

[WBTC]

thanks for your spam

[OmarBessa]

WBTC you're very welcome.

[philipma1957]

Hello,

So far I've found out that:

* Cloud mining and off-cloud mining are apparently the same.
* There's a way to determine earnings per day, and it involves the golden number.
* There's a maximum amount of BTC that can be earned per gigahash.
* And there's more.

Learn those, and the other findings at:

http://omarbessa.com

Thanks for reading!

  ??

[OmarBessa]

philipma1957, mmm yes? what is it?

[SMB-2525]

I have a spreadsheet that I load with the current difficulty and then it iterates to an answer with assumed difficulty increases. This result shows the payback in BTC of one terra-hash of mining power put into production today. The spreadsheet assumes the specified difficulty increase occurs every 12 days. If you keep your miner (local or cloud) in production 100% of the time, you should be within a few one thousands of a BTC to these numbers. I put the end date when the miner is accumulating less than 1/1000 BTC every 12 days (bump period). Average difficulty increase has been about 13% for the last ten bumps.

What this table tells you is if you can get a 1000 THS miner in production today and difficulty increases are 13%, then it should produce roughly 1.510 BTC for you between now and 4/23/2016. Depending on your situation, you should certainly not pay more than 1.5 BTC for the miner (or in dollars, roughly $600 today). Instead, you can buy and hold the BTC and be at the same place today. Similarly, at 13%, a 480 GHS miner will produce 0.725 BTC in its productive life time.

If you think the difficulty increases will slow down to 10%, then your result will be in between, but not more than 1.908 BTC/THS.

[OmarBessa]

SMB-2525, god that would be awesome data to have. O_O

[SMB-2525]

PM me an email and I'll send you the spreadsheet.
I have tried to think through a way to do this as an equation and I come up empty. Of course, I took differential equations 28 years ago.

This goes for anyone.

[OmarBessa]

SMB-2525, done!!!

[jonnybravo0311]

Omar,

I've read both of your articles and like what you've done.  I'm hoping you can help explain the model behind your formulas.  For example, whenever you're trying to predict an end-of-life scenario, or answer the question of, "how many BTC will this hardware mine?" how are you accounting for variable shifts in difficulty?  Also, when you discuss profitability, how do you model the variance for BTC:fiat?

The problem with every single online calculator and prediction engine is the assumption they inherently make with their calculations.  Even your calculator at the bottom of your article does the same.  It asks the user to input a value for BTC:USD.  All of these models will fail simply because the conversion rate directly impacts the effect of electricity costs, and thus the longevity of the hardware.  For example, if you assume $0.10 per kWh and have a miner that uses 1kW, that miner will cost you $2.40 per day to run.  Again, this is assuming you have consistent power costs.  Some places have varying costs there as well (peak usage fees, summer vs winter, etc).  Anyway, let's assume this is a fixed cost.  If the difficulty increases 5%, but BTC:USD increases 6%, the net effect on the miner is that even though he's now making 5% less BTC, he's actually making 1% more overall USD, which means his miner will last that much longer.

Cloud mining contracts come in two basic flavors: the fixed rate contract and the variable maintenance-fee contract.  The first type is what Justin offers with MegaMine.  You pay a fixed rate up front for a hash rate over a pre-determined period of time.  Right now, BTC:USD is about 1:400.  The 12 month 2TH/s contract is $1800.  So, you have a choice: you can purchase 4.5BTC with your cash, or you can purchase a contract.  The beauty of this kind of contract is that it becomes nothing more than a bet on difficulty increases.  If you believe that difficulty increases will be under x%, purchase the contract.  If you think difficulty increases will be greater than that x%, purchase the coins.

The other type of cloud mining contract allows you to purchase some amount of hashing power for a low upfront cost, but charges you an ongoing monthly maintenance cost.  I'll use hashnest as an example here.  You can purchase 1GH/s for 0.00135BTC.  So, to equal the MegaMine contract's 2TH/s would cost you 2.7BTC.  At the same conversion of 1:400, that's $1080.  So, you saved yourself $720 right out of the gate.  The problem is the maintenance fee.  As cex.io has proven, those can be changed at will at any time.  Thankfully, in the case of cex.io they were nearly halved, so the consumer benefited here.  Currently hashnest charges you $0.0032516 per GH/s per day.  So, for our 2TH/s, that's $6.5032 a day, or $197.8057 a month.

This contract very quickly exposes the same type of problem I described earlier: BTC:fiat conversions directly impacting the longevity of your miner.  Hashnest very cleverly charges you maintenance fees in USD at a fixed rate, but charges you hashing power in BTC.  They even explain to you in the ToS that once the fees are equal or greater to your earnings (based upon the BTC:USD rate) for 10 days or more your contract is over.  As of right now, fees to earnings is 56.02%.  That's right, you're paying 56.02% of your mined BTC in fees on hashnest.

Wow, I've rambled on for a while, so I'll end it by stating that whether your are a home-based miner with your own hardware, someone who co-locates his hardware or an investor in cloud mining, you are facing quite an uphill battle if you expect to generate profit for yourself.  Further, the results you obtain from online calculators must be taken with a grain of salt because at best they are semi-educated guesses.

[OmarBessa]

Hello jonnybravo0311,

Thanks for the detailed answer and reading my articles. I'll try to be as specific as possible.



1) "For example, whenever you're trying to predict an end-of-life scenario, or answer the question of, "how many BTC will this hardware mine?" how are you accounting for variable shifts in difficulty?"

The variable shifts in difficulty are embedded into the model. The divisor of the equation is representing it, it has very little deviation mapping its variables; what I mean, it is that it accounts for the variability in difficulty. I've modeled the difficulty function before, but this model uses another data. My previous difficulty model was:

y = 8154638 + 0.00189782218745504*x^5 + 2.30690254039052*(10^-12)*x^8 - 659.311924843281*x - 3.39747197204999 (10^-6)*x^6

The problem with it, is that early on its not as precise as one would want. After some values, it gets more accurate. However, this model is not being used in the earnings function.



2)  "Also, when you discuss profitability, how do you model the variance for BTC:fiat?"

Sadly there's no modeling for BTC:fiat variance in the calculator. I might make a model for this, although I'll recommend to take with a grain of salt. The calculator is mostly a convenience, to save time in solving the equations in the article.



3) "The problem with every single online calculator and prediction engine is the assumption they inherently make with their calculations.  Even your calculator at the bottom of your article does the same.  It asks the user to input a value for BTC:USD.  All of these models will fail simply because the conversion rate directly impacts the effect of electricity costs, and thus the longevity of the hardware. "

Yes, you're right. Without a model for the BTC:fiat variance, sadly, that's the easiest thing to do.



4) "Cloud mining contracts come in two basic flavors: the fixed rate contract and the variable maintenance-fee contract. "

I didn't know this. Interesting.



5) "Further, the results you obtain from online calculators must be taken with a grain of salt because at best they are semi-educated guesses."

You're right again. 100% agree.



Perhaps I'll have to improve the explanation of what my AI does in my website, but I'll try to shed some light on it.

What I do when I use my AI, is giving it my data, and asking it what kind of model should it find, like f(x) = earnings(day). To create the models in the articles, I just asked the AI to map income per GHS per day to the amounts I was accumulating, in so doing it figured out several models which have different margins of error; what I do is pick the one which I feel most clearly represents the situation. Sometimes the most relevant formula has a higher margin of error than others, which has very likely been a result of overfitting in the other equations.

Again, thank you very much for your detailed answer. And if you have insider knowledge on mining, I would very much like to pick your brain if you don't mind.

And if it serves as a disclaimer of sorts, I barely do bitcoin mining; I'm much more interested in the math of it. This is so cool and innovative.

[jonnybravo0311]

...snip...
Again, thank you very much for your detailed answer. And if you have insider knowledge on mining, I would very much like to pick your brain if you don't mind.

And if it serves as a disclaimer of sorts, I barely do bitcoin mining; I'm much more interested in the math of it. This is so cool and innovative.

My pleasure, and thanks for providing the explanation of how you're factoring variable difficulty.  If by "insider knowledge of mining" you mean do I know how mining works, and do I have experience mining, then yes to both.  While I haven't been in the game as long as some on these boards, I've spent quite a bit of time educating myself.  You're welcome to pick my brain and I'll do my best to answer your questions.