Topic: Serious qestions about CEX.io and other cloud mining services - page 2. (Read 18563 times)

So very true. No one wanted to believe TradeFortress was not trustworthy 6 months ago, when the writing was on the wall. Now he is nowhere to be found and his "true believers" were left with slack jaws.

cex.io will most likely meet the same sort of end.

@OP Sure someone can convince you that the whole thing is not an huge 'scam' however noone can't convince a believer of anything.

I couldn't agree more.

If the price would only be 10$/GH. But is 0.07 BTC right now , which makes it almost 60usd/GH.
I honestly don't understand why somebody would buy this , unless he has no clue about math.

Yes, actually it is not necessarily a scam and it's called PMB (perceptual mining bond).

Pretty much just to echo what other people have said already...from a financial perspective pretty much all of these services will lose you money. They are for people who don't do the calculations. I mean when you first hear "$10 for 1GH/s for a year" it sounds pretty good, but when you add in their maintenance fees and realize that BTC difficulty is only going to keep jumping up then you still won't break even in the end. If you are betting on the price of BTC skyrocketing then you should just buy BTC instead. That way you at least know exactly how much BTC you will get for your money instead of just an estimate based off of hash rate and predicted difficulty.

I would look at some of the group buys where they host the machines for you, and you get a share of the hash. I have a few shares with DZ.

The price of GHS/BTC depends on BTC/USD only by its effect on the difficulty. Since GHS/BTC is denominated in BTC and it earns BTC, USD does not have a direct affect on it.

When BTC/USD drops, mining becomes unprofitable for the marginal miner, and he will stop mining. The difficulty will rise more slowly (or even drop in the extreme case), and that will result in rising mining revenue (in BTC) for the miners that remain, causing GHS/BTC to rise.

Note that operating costs are currently very low, and BTC would have to drop quite a bit before high operating costs would make mining unprofitable. On the other hand, falling prices would discourage people from buying mining equipment until its cost adjusts lower. This will cause the difficulty to rise more slowly temporarily.

I also want to point out that GHS/BTC is not a commodity because it earns income and its value is based on the amount of income it earns.

Okay I went and looked as this is interesting. Here is the chart for GHS/BTC




I haven't quite figured out the multipliers so if you break it down for me that would be awesome. The chart is clearly nothing like BTC alone, unless the multiplier is extremely high and that minor deviation is dramatic. What is the scale? In other words what is the high of .145 on 11/4 and the low .067 on 11/28... does that mean the widest fluctuation in value  was .078 BTC?

Problem as I see it remaining, you're still in a vacuum, in relation to USD etc. So it's not really a hedge. But it is something...past my bedtime I will sleep on it, thoughts welcome.

That is counterintuitive... if BTC crashes, lots of miners would stop, but wouldn't that also drive the price of GHS lower also? Like GHS/BTC at 4/3 become 3/2 (making up numbers here). Looking at the long term GHS/BTC chart looked very flat over the last month given that BTC was parabolic, I assume that means GHS was essentially parabolic also.

If that is the case then not a hedge, but please correct me if I have that wrong.

(edit- I think actually you may be correct upon contemplation for a few minutes. The chart DOES appear to be flat, if that is correct, and you can buy GHS/BTC or BTC/GHS, then that would be the first effective hedge I have seen in bitworld. You won't profit off the decline, you just won't lose your open gains in BTC. Does this sound right? If so cex ought to get to marketing it....much needed I believe.)

As for the premium, you're probably right but it's totally normal. You'll have to forgive me I've been a commodities trader/hedger for a long time so I have to use those terms, but when you are trading futures you create what is called a basis. Basis breaks away from cash values as speculation in the futures moves higher or lower from real world prices. I get the impression cex is more focused on the futures business. When you are using that as a vehicle you don't really care what the basis is. This is why most futures contracts are settled against the commodity on a specified date, so that it does not drift eternally away from the underlying product.

I don't know if that is what you are seeing here, I have some more homework to do, but ultimately futures exchanges trend towards having nothing really to do with the commodities they represent (I've never really seen a yen but I've traded a few billion of them, mostly true for soybeans and the rest).





  

What are some viable, reputable alternatives to CEX?

The actual title of this thread explicitly has the words "... and other cloud mining services"

Ok, I'll bite. What are you referring to?

In the past couple hours I confirmed that the top 3 pools (by number of blocks submitted to the bitcoin blockchain in the past 4 days) are currently still still:

• ghash.io (cex.io's pool)
• btcguild
• eligius
  .
• Source: https://blockchain.info/pools?timespan=4days

Could you please qualify those statements?

Which alternatives?

Which new one specifically is creating a buzz?

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As an aside, perhaps are you suggesting that one of the top 3 largest pools is simply as-yet unidentified by the tool(s) used by blockchain.info for identifying blocks, and therefore most of these unidentified blocks listed under the "unknown" section of the pie chart is actually coming from a cloud-hosted mining operation? (which, admittedly, if most of that "unknown" section is coming from one pool, it means that the top 3 pools I'm listing is technically wrong)

This is an interesting observation. So purchasing the GHS/BTC on CEX is effectively a form of hedge for long term bitcoin holdings? The question is what would it cost in BTC to fully hedge your holdings? And is that cost worth it to you if you think there is a bubble in the current price of BTC/USD?

Complicated but I intend to smoke a doob and think on it some more.

Cloud mining *can* turn a profit but the problem with cex is not their hardware or the site itself, it is the site management which likes to jerk around users and change there TOS on a whim. There are several alternatives to cex.io, I hope the new one that is creating a buzz eventually forces cex lower on the scale.

My advice is do not trust cex.io or Jeffrey Smith AT ALL.

WRONG!!!

• BFL 65nm process silicon ASICs are 4 GH/s per 12.8 watts (3.2 joules per GH)
• BitFury 55nm process silicon ASICs are 25 GH/s per 16 watts (0.64 Joules per GH)

New calculation using same energy costs from the above case studies (30 & 33 cents per kilowatt hour):

A = ( 3.2 * 30 )
B = ( 0.64 * 33 )
C = A / B
D = 6 billion * C

6 billion * (96 / 21.12) = 27.27(272727...) billion

CORRECTED profitability threshhold shows that the "hosted commodity hashpower" is actually much much more sustainable than mining with older hardware

... such as 65nm BFL ASICs (assumes BitFury 55nm process silicon ASICs operating at 0.64 Joules per GH)

---

Edited to add:

Note that the above case studies were assuming bitcoin exchange rate of $500 per bitcoin.

In your calculation you assumed a given change of difficulty for the next few months and you also assumed that people buying these shares are rational beings like you and pay only a reasonable price for this. If these assumptions of yours are correct then you are right, it is not worth. Personally I think that your assumption about the difficulty is qualitatively correct, but the second assumption might not hold. If that were true, share prices on cex.io would have fallen much more, reflecting the increase in difficulty.

Your description fits all the so called "perpetual mining bonds". They could make a lot of profits because people do not understand how to sum a geometric series. These people have in mind "mining forever..."

Yeah, it might be a scam, but consider three little words:

CEX.IO sells hardware

They explicitly let you trade and redeem your hashpower in the form of a physical bitcoin mining rig, and then run it at home yourself if that sort of thing is more appealing to you... Everyone's preferences and skill level is different.

Another thing, consider the fact that their hashpower / pool is large enough to show up on this chart as one of the top three:

http://blockchain.info/pools

Just sayin'

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Maybe it's a waste of money too. Nobody knows with 100% certainty. The projections for when bitcoin mining becomes unprofitable are diverse and varied in their models and methodology.

I don't have a crystal ball to say WHEN it will happen, but at some point the older, less-efficient bitcoin ASIC mining hardware will stop being profitable, including the currently available CEX.IO cloud-hosted hashpower.

---

Case study comparing cloud-mining to my own bitcoin ASIC mining hardware:

• Consider the efficiency specs of BFL 65nm ASIC hardware
• Assume australia's electricity rate and paying about 30 cents per kilowatt hour for electricity.
• Assume exchange rate settles at around $500 per BTC...

Under those conditions, the less-efficient 65nm ASIC hardware will hit a profitability threshhold at which point:

"price to buy bitcoins on the market" VS "cost of electricity to mine bitcoins"

will be roughly equal, or in favor of buying bitcoins at or around a bitcoin network difficulty of 6 billion...

---

Now consider the more efficient mining hardware used by, for example, cloud-mining company CEX.IO / GHASH.IO:

• More energy efficient 55nm silicon process for bitfury ASIC chips.
• Commercial / institutional electricity used by CEX.IO is much cheaper,
  but after datacenter / maintainence fees, it is quoted at $0.30 USD (equiv. $0.33 AUD)
• Consider identical exchange rate at or around 500 per BTC...

This hosted commodity hashpower hardware will reach the profitability threshhold at about the same 6 billion difficulty, but there's are several differences:

• You can't order tiny amounts of butterfly labs 65nm ASIC hardware because the smallest order is their 5 GH/s model, AKA "Jalapeno", and you can't easily scale up incrementally to something in-between the Jalapeno and "25 GH/s little single" without buying in full 5 GH/s increments
• Hardware production & shipping delays push you further into the next bitcoin difficulty increase(s) & profitability decline
  (compared to the "instantly available and hashing" for cloud services)
• The aftermarket for used bitcoin mining hardware is rather unpredictable
  (versus having the ability to both conveniently, and instantly sell your commodity hashpower to get some of your money back)

---

Now let's consider what if your existing hardware on-hand is a less-energy-efficient "avalon" bitcoin miner or "USB Block erupter", and therefore your profitability threshold will happen at some point before bitcoin even hits the 6 billion difficulty which affects these two case studies ...

Now let's say what if you can't afford to buy new hardware, or maybe you don't feel like looking for a local buyer or trying to figure out shipping costs associated with selling your next set of new hardware once THAT TOO becomes obsolete after N months or years (or maybe you simply don't want to wait in line for shipping... regardless, you have a reason for not wanting hardware) and after considering all the pros and cons, you still want to mine bitcoin...

It might not be for everyone, but there are legitimate circumstances under which a purchase of some cloud-hosted commodity hashpower might be attractive to some bitcoiners or investors...

Consider all your options.

That's all I'm saying.

I don't have a crystal ball, so I can't predict how long it will take for the bitcoin network to reach the "6 billion" difficulty target, or whatever the relevant profitability threshhold is for [hardware X at exchange rate Y and electricity cost Z] (though there are some pretty well-made mining profitability calculators out there, particularly community favorites such as http://mining.thegenesisblock.com/)

For that matter, there's always the possibility that somewhere down the line some company will start selling hosted commodity hashpower at a cheaper [hosting, maintenance & electricity] price, or maybe cex.io will upgrade their fleet of ASIC hardware to something more efficient.

Again, I don't have a crystal ball.

Let's see if it stays this way, I see lots of auctions on Ebay these days asking crazy prices for old Block Eruptors, and most seem to be selling. Looks like everyone is jumping on bitcoins to get a piece of the action.

Also, even if you don't want to do it yourself, you can find reputable group buys on here that include hosting for much less than CEX.