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.

Thanks.

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!

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.

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

I'll get that done for you.

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.

Sorry, seems the link 'times out'.

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

J

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.

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.

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

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.


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)


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

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