Analysis of Buying Bitcoin Contract on Genesis Mining

Just read my conclusion (mark as *CONCLUSION*) if you don't want to see so many maths and words.

I am going to estimate the number of bitcoin mined for buying the contract on Genesis Mining.

Make it simple first:

• Assume the price of bitcoin is USD 2500 for a long time.
• According to the data from 4 Jul 2016 to 2 Jul 2017, we may assume that the difficulty will increase 4.55% every biweek (two weeks). The difficulty now is about 710,000,000,000.
• We buy the contract with 1 TH/s and the maintenance fee is USD 0.00028 for each GH/s.

Let’s calculate!
The bitcoin mined for first 14 days is about 0.00495831 bitcoin.
The maintenance fee of 14 days is 0.001568 bitcoin.
According to the above assumption, the difficulty keeps increasing and the bitcoin mined for the next 14 days will be about 95.648% of the previous 14 days.
Let n be the number of biweeks that bitcoin mined is still greater than maintenance fee (so the contract is still alive).
We have the following inequality:
0.00495831 * 0.95648^(n – 1) – 0.001568 > 0
After solving this, n is about 27. It means that the contract will stay alive for about 378 days (27 * 14 days).

In these 378 days, total bitcoin mined is:
(0.00495831 – 0.001568) + (0.00495831*0.95648 – 0.001568) + (0.00495831*0.95648^2 – 0.001568) + … + (0.00495831*0.95648^26 – 0.001568)
= 0.03732733 bitcoin (something about geometric sequence)
which is equal to USD 93.3 (1 bitcoin = USD 2500).
But the price of the contract is USD 150 for 1 TH/s.

It is even worse if the price of bitcoin drops. In this case, we’d better buy the bitcoin directly. USD 150 is about 0.06 bitcoin.

How can we get more bitcoin than directly buying it (> 0.06 bitcoin)?

The first possible way is the difficulty increases slower than expected but it is unlikely to happen.
The second possible way is the price of bitcoin keeps increasing.

Let’s say we expected the price of bitcoin will be double every year. (In 2018, 1 bitcoin = USD 5000; in 2019, 1bitcoin = USD 10,000; in 2020, 1 bitcoin = USD 20,000)
The maintenance fee paid by bitcoin will decrease and the contract can stay alive for longer period (about 900 days). Then total bitcoin got in these 900 days is about 0.0585…...still less than 0.06……

*CONCLUSION*
I must be honest. Sorry to say that my conclusion is unless the mining difficulty increases slowly or the price goes up rapidly (plus you buy more hash rate for a better price), it is better to buy the bitcoin directly. I mean, you may still get profit by joining the mining contract (because the price of bitcoin may go up a lot) but what is the point if we can buy it directly to get even more bitcoin? Of course, the real situation is much more complicated than above so whether to buy bitcoin contract is up on you.

If you want to buy the contract on Genesis Mining, I suggest you buy other altcoin contract such as Dash or Monero. You can get 3% discount on any contract using my promo code “S6ew4u” (and I will get a little bit hash power).

Thank you so much for reading this post.
I will appreciate it if someone donate some coin to me :)

My bitcoin address:
1AZGREs9nNBJf1i5aWqGfsQG2Fhz3movcr

My ethereum address:
0x3998b5eb1b30a642c6d4cccfef4fc2fb01d5ee0a

My zcash address:
t1ZdAvQup7iz6hUg1CdXQ1pwX59vdBDmvgv