I made this comment earlier but I decided it's worthy of it's own post.
There's people out there promoting cloud mining offering you discounts or bonuses to sign up with their affiliate link. You may look at these guys and think, "Well, if they're making money from it, then so I can I".
Before you purchase a cloud mining contract, do some research into mining and you'll quickly find that cloud mining contracts aren't profitable. For example, take Genesis Mining's Bitcoin "Max Profit" Diamond Plan.
Cost: $1950 (0.78 BTC at 2500 USD/BTC)
Hashrate: 15 TH/s
Maintenance fee: 0.00028 USD per GH/s per day
Maintenance Cost: 15000 * 0.00028 = 4.2 USD/Day
You can calculate your theoretical payout using the equation:
Payout = Hash Rate * Block Reward * TimeSpan * ((65535 / 2^48 ) / Difficulty)
The current difficulty is 804,525,194,568, so for 15 TH/s the theoretical payout would be 0.00468823 BTC/day. At 2500 USD/BTC, the maintenance fee comes to 4.2 / 2500 = 0.00168 BTC/day. So, that gives a daily profit of 0.00300823 BTC/day. At that rate, it would take 260 days to beak even.
The problem, is that difficulty isn't static, it pretty much always increases. The difficulty is recalculated every 2016 blocks to try and make the average time to find a block equal 10 minutes. If the difficulty was static, a round would last for 14 days on average. So, let's look at what a 5% increase per difficulty round would do.
To save with the calculations, we can just use one of the many sites that do this for you. By plugging the above values into this site we get the following:
| Date | Difficulty | Revenue | Profit | Return |
|---|---|---|---|---|
| 2017 | -0.78 | |||
| 7-21 – 7-31 (11 days) | 804 G | 0.03196 | 0.03196 | -0.748 |
| 8-1 – 8-31 (42 days) | 844 G | 0.07955 | 0.07955 | -0.6685 |
| 9-1 – 9-30 (72 days) | 931 G | 0.06389 | 0.06389 | -0.6046 |
| 10-1 – 10-31 (103 days) | 1026 G | 0.05394 | 0.05394 | -0.5507 |
| 11-1 – 11-30 (133 days) | 1188 G | 0.04115 | 0.04115 | -0.5095 |
| 12-1 – 12-31 (164 days) | 1310 G | 0.03276 | 0.03276 | -0.4767 |
| 2018 | ||||
| 1-1 – 1-31 (195 days) | 1444 G | 0.02392 | 0.02392 | -0.4528 |
| 2-1 – 2-28 (223 days) | 1592 G | 0.01464 | 0.01464 | -0.4382 |
| 3-1 – 3-31 (254 days) | 1756 G | 0.009347 | 0.009347 | -0.4288 |
| 4-1 – 4-30 (284 days) | 2032 G | 0.002723 | 0.002723 | -0.4261 |
| 5-1 – 5-31 (315 days) | 2241 G | -0.002876 | -0.002876 | -0.429 |
So, if the difficulty increases by 5% each round, the miner would become unprofitable in May 2018 and you would only earn 0.3539 BTC which is only 45% of your money back. Even with a constant difficulty increase of just 2.3% it's still unprofitable. Now, if you look at this site, you can see the historical bitcoin difficulty changes. For this year they are:
| Date | Difficulty | Change | Hashrate |
|---|---|---|---|
| Jul 14 2017 | 804,525,194,568 | 13.53% | 5,759,015,666 GH/s |
| Jul 02 2017 | 708,659,466,230 | -0.43% | 5,072,782,052 GH/s |
| Jun 17 2017 | 711,697,198,174 | 4.85% | 5,094,526,985 GH/s |
| Jun 04 2017 | 678,760,110,083 | 13.90% | 4,858,754,124 GH/s |
| May 23 2017 | 595,921,917,085 | 6.42% | 4,265,775,241 GH/s |
| May 10 2017 | 559,970,892,891 | 7.28% | 4,008,427,786 GH/s |
| Apr 27 2017 | 521,974,519,554 | 0.22% | 3,736,439,151 GH/s |
| Apr 13 2017 | 520,808,749,422 | 4.24% | 3,728,094,244 GH/s |
| Mar 30 2017 | 499,635,929,817 | 5.03% | 3,576,533,297 GH/s |
| Mar 17 2017 | 475,705,205,062 | 3.24% | 3,405,230,497 GH/s |
| Mar 03 2017 | 460,769,358,091 | 4.54% | 3,298,315,540 GH/s |
| Feb 18 2017 | 440,779,902,287 | 4.41% | 3,155,225,442 GH/s |
| Feb 04 2017 | 422,170,566,884 | 7.43% | 3,022,014,630 GH/s |
| Jan 22 2017 | 392,963,262,344 | 16.64% | 2,812,940,600 GH/s |
| Jan 10 2017 | 336,899,932,796 | 6.05% | 2,411,623,656 GH/s |
Rather than purchasing cloud mining, you would have been far better off just purchasing the coins directly.
Now, these guys advertising their affiliate links, they know full well that these services are unprofitable and that you're going to lose money by purchasing a contract. Furthermore, they're profiting directly from your loss. Take Genesis Mining's affiliate program for example:
Your affiliate code is the key. Share it with family, share it with friends, share it with the world! Anytime someone uses your code, you’ll both receive rewards – a 3% discount on the referral’s purchase, and an upgrade of 2.5% hashpower – or more – for you. Higher tiers give better rewards, and hashpower isn’t all you can earn: there’s special gifts to be earned.
So, you get a 3% discount and still lose half of what you paid. Meanwhile, the person whose affiliate link you used gets an extra 2.5% hash power. Imagine how much a trusted person with a lot of followers could make by swindling people who don't understand this.
If you've been unfortunate to lose money in cloud mining, please share your stories.