Genesis Cloud Mining Review – It’s Not as Profitable as You’d Think

30

About every other Bitcoin question I get is “should I invest in cloud mining?”

I’ve talked a lot about Bitcoin investments in the past. One of the things I always tell people who ask me about cloud mining is that I think 99.99% of the companies who offer cloud mining services are probably scams.

Meaning, they don’t actually mine Bitcoins with the money you give them, they only use it to pay out other users until the owners run out of money and vanish. However there is 0.01% of companies who actually do run mining hardware and mine Bitcoins for you. Genesis Mining is one of them.

Genesis mining was founded in 2013 an is one of the oldest Bitcoin companies around. It’s definitely one of the most well known companies when it comes to cloud mining. Genesis has a publicly known mining farm set up in Iceland as shown in this video:

The miners on the farm are able to mine Bitcoin, Ethereum, Dash, Monero, Litecoin and Zcash. However all of the information I brought in this post up until know is somewhat general knowledge. Today I want to dig in deeper into the cloud mining business model and try to answer the question – is it profitable to cloud mine Bitcoins?

Since there are six different currencies that can be mined I want to focus only on Bitcoin cloud mining for the moment since I believe it’s the most popular product on Genesis Mining. Before I begin I just want to mention that I did a previous write up on this matter almost 2 years ago.

How does Genesis Cloud Mining work?

The idea of cloud mining is very simple. Instead of spending thousands of dollars on Bitcoin mining hardware, you can pay someone to lease their hardware and keep the profits to yourself. The company that rents out the miners takes care of the maintenance and all of the hassle of setting them up.

However, you are required to pay a fee for their service but we’ll get to that in a minute. To begin with, I wanted to determine what’s the difference in the ROI (Return Over Investment) between cloud mining and “normal” Bitcoin mining.

At the moment I have 1.19 TH/s with Genesis mining which would cost a new customer around $170 (0.139BTC at today’s exchange rate). This mining capacity generates around 0.00035BTC a day after maintenances are is removed. So at the current BTC price it will take me around 400 days to break even.

In the screenshot below you will see different BTC earnings from different contracts. It took me a while and several emails to the company’s support to understand exactly how revenues are calculated and displayed. I would appreciate it though if the fees were mentioned as well so I would be able to see how big they are in relation to the actual payouts.

genesis mining payouts

each line of BTC payout refers to a different contract. Some of the lines are totals of previous payouts so there are some duplicates listed here. If you’re having a hard time understanding this table (as I had) let me know in the comment section and I’ll do my best to explain.

The Bitcoin cloud mining contract on Genesis mining is “Open Ended” meaning it will run until it stops being profitable. If you take a look at their customer service page you find the exact definition for it:

In the event of a contract becoming unprofitable (i.e. the payout can’t cover the maintenance fee), the resulting daily payout will be zero. After that, the contract will continue to mine for 60 days. This means that we will take care of the maintenance fee in the hope that your contract becomes profitable again. This may happen if the mining network difficulty decreases and/or Bitcoin price increases. If the contract does not return to profitability in this period it will be terminated because the mining machines are consuming resources (electricity, cooling, hosting, servicing, etc.) which cannot be paid with their generated payouts.

I.E. the contract will run as long as it can cover maintenance fees which include electricity, cooling, maintenance work and hosting services. And I think this is the thing most people miss.

Bitcoin’s difficulty has been more than doubling itself every year for the past 3 years or so. In fact, between 2016 and 2017 it tripled. This means that if you buy a certain package expecting a certain reward, in a year or so you’ll probably be getting anywhere between 33%-50% of that reward. In my case I’ll probably be making 0.00014BTC per day a year from now.

Bitcoin difficulty

Bitcoin difficulty rate throughout 2014-2017

So my previous calculation of how much time it will take to recover my initial investment is actually wrong. It would take a lot more than a year, and that’s just to break even. There’s a fair chance my contract will stop becoming profitable before I earn any profits, or that the profits I earn will be very minimal.

Of course you could say that there’s the chance that Bitcoin’s price will explode during the next couple of month and then you’ll be profitable way faster. If for example the price goes up to $10,000 I will be able to get my initial $170 in a few months right?

Not so sure about that..

If price goes up so does difficulty since more people start mining. This means that the Bitcoins you’re making will be worth more but you’ll be making less of them. That’s exactly what happened in 2016 and why the difficulty more than tripled. Here’s the change in price vs difficulty for the past 3 years:

2014-2015 Bitcoin difficulty vs. price

Bitcoin price: down 2.45x

Bitcoin difficulty: up 34x

2015-2016 Bitcoin difficulty vs. price

Bitcoin price: up 1.36x

Bitcoin difficulty: up 2.5x

2016-2017 Bitcoin difficulty vs. price

Bitcoin price: up 2.29x

Bitcoin difficulty: up 3.05x

As you can see the difficulty is always going up, no matter what’s happening with the price. And for the past 3 years it’s been going up more than what the price itself has.

So should I mine Bitcoins at home instead?

If you mine at home with the same hash rate at today’s difficulty you’d be making twice as much (according to our Bitcoin mining calculator). However, you will be paying for the hardware, cooling and maintenance for yourself. So it’s not safe to say that mining at home would be profitable as well.

In the past I’ve written a very detailed post that discusses Bitcoin mining profitability. For now let’s just say that if you don’t have any access to cheap electricity and cooling systems I suggest to avoid mining in general and just buy coins instead.

What other users are saying?

As part of my research for this review I tried to find as many user reviews as possible to get different perspectives. Most, if not all, of the positive reviews I found were accompanied by a promo code. Promo code reviews are questionable in my opinion since the user reviewing gets a commission if you sign up with his promo code, so they have an incentive to write a positive review.

One interesting review was from a guy who actually used Genesis Mining to buy Ethereum. He states as follows:

I bought a 1 year contract for 1MH/s ETH mining. I’ve paid 0.11BTC for it (equivalent of 45$ at the time). In one year, Genesis gave me back 2.38ETH (equivalent of 69$ now), so you could say that I’ve made a profit. But you would be wrong!!! That’s just because the price of ETH is high now (29$ versus 12.5$ one year ago).

If I would have kept my 0.11BTC, now it would be worth 135$.

If I would have bought ETH with the 0.11BTC back then (I would have gotten 3.66ETH, that’s 1.3ETH more than what they gave me back), now it would be worth 106$.

So even though he could have made a better deal by not investing in Genesis Mining he still made a profit. Please keep in mind that his profit was with Ethereum mining and not Bitcoin mining. In this post I concentrate mostly on Bitcoin mining. Some other altcoins may still be profitable to mine, but I will review them in a different post.

There are also several BitcoinTalk posts about the company. It seems that most people claim that you can’t make a profit with their contracts however few supply evidence of actually trying. Bittrust shows some positive reviews but I will let you judge for yourselves on their legitimacy.

Genesis Mining – The bottom line

Finishing up my review about Genesis Mining all I can say is this – The company seems legit but I doubt if it’s a good investment. Seems like I would be much better off just using my money to buy Bitcoins instead of using it for cloud mining contracts. If Bitcoin’s price goes up – I would be making more money, and if it went down, I would be losing less.

The one thing that really bothered me though is that Genesis Mining doesn’t seem to share a lot of info regarding my mining performance. I’d except a company that is serious about making money for their investors to supply additional information such as:

  • Cloud mining calculators
  • Service fee statements
  • Which blocks were mined and how much was earned on each block (including mining fees)

One might suspect that these pieces of information aren’t supplied in order to keep the questionable profitability of cloud mining obscure. If you are invested in Genesis Mining I urge you to contact their support and try to get answers for this (they answer fast from my experience).

On a final note, this review is about Genesis Mining but I think you can probably copy and paste its characteristics to most legit cloud mining companies out there. The not so legit mining companies will probably show greater profits because they usually hold stop paying at some point.

Keep in mind that this review was made especially for mining Bitcoins, other currencies may still be profitable in these cloud mining schemes.

Find the best exchange to buy Bitcoins


Ofir Beigel

Owner at 99 Coins ltd.
Blogger and owner of 99Bitcoins. I've been dealing with Bitcoin since the beginning of 2013 and it taught me a lesson in finance that I couldn't get anywhere else on the planet. I'm not a techie, I don't understand "Hashes" and "Protocols", I designed this website with people like myself in mind. My expertise is online marketing and I've dedicated a large portion of 99Bitcoins to Bitcoin marketing.

Genesis Mining

Varies
Genesis Mining
6.6

Profitabliity

5/10

    Transparency

    6/10

      Support

      8/10

        Reputation

        8/10

          Pros

          • Fast support
          • Easy to set up
          • Reputable company

          Cons

          • Doesn't seem to be profitable in the long run
          • Doesn't supply full information to users

          30 Comments

          1. Profitabliity

            1

            Transparency

            1

            Support

            7

            Reputation

            6.5

            Hi All, I recently took 2 contracts from Genesis Mining. For around 1900USD each. I did open because some workmate talked to me about them. Payments are actually coming daily. But the payments are ridiculously low. I receive around 5USD per day per contract. no matter the price and fluctuation of the coins which is strange. (it will take more than a year only to see my money back if the incomes are stable) It seems the rate of payments are fixed and there is nowhere we can get the calculation details about the payment we receive in coins. Then I know that the incomes can only reduce because the difficulty of gaining coins increases regularly, so the incomes will be smaller and smaller months after months, until contracts die due to non profitability….
            Finally we cannot see actually how many coins GM are really mining in total on daily base nor the total hashrate they use for mining. so we never know exactly how much coins they mine and how they divide the incomes between all their customers. This is a lack of transparency.
            In my opinion, the day I signed up the contract, I should have better bought Bitcoins and ethereum with the same amount of cash and keep them for couple of years… But it’s done, now I have 2 contracts still generating some dust of cryptocurrencies and I am not sure I will get one day my money back… I like gambling anyway ;) Good luck!
            If you are still willing to take contract from GM after reading that then you can use my code to help me and you get 3% discount : AF9urI

          2. William Teh on

            Profitabliity

            8

            Transparency

            5

            Support

            7

            Reputation

            9

            Genesis is genuine, and I actually support investing in Genesis. I’ve been doing research and calculation on genesis payouts for few months already and after investing in it myself, I’ve calculated a prediction of annual return of investment is more than 75%. To me is a good long term investment.

            • Zsofia - 99Bitcoins support on

              Hi William, thanks for sharing your experience, please note we do not allow affiliate links, so I have removed that from your comment. If you can, could you please share how did you calculate the 75% annual return?

            • Profitabliity

              2.2

              Transparency

              0.9

              Support

              7.9

              Reputation

              1.9

              They pay out according to the contract, but the contract itself in not profitable for BTC … If you don’t want to lose money do not invest in BTC mining. It can be profitable if you abuse the affiliate system and bring other people in the shi…

              May be profitable for DASH at the moment though.

              • Zsofia - 99Bitcoins support on

                Hi Aljosa, thanks for sharing your view. If you want to share, why do you rate the reputation and transparency so low for Genesis? I understand the profitability part.

          3. I’ve been looking at Genesis Mining for a while, one guy I follow a lot who’s been with Genesis Mining for some time said he had stopped promoting it because is not profitable enough for him, it took him 18 months for him to break even. Another guy said he broke even because he got a lot of people to use he’s Code, but if you look at it is not profitable if it would require you to promote your code.

            Another concern is that Genesis Mining does not tell us how many blocks they have mined, for a company that is been there since 2013 it should now show their blocks on blockchain

            • Zsofia - 99Bitcoins support on

              Hey, thanks for sharing your view, we agree that it just takes too much time to get to the breakeven point, if you even manage to reach that because of the continuous difficulty increase,.

          4. Profitabliity

            4.7

            Transparency

            5.4

            Support

            2

            Reputation

            5

            I use genesis mining for ETH and find it is profitable

            • Zsofia - 99Bitcoins support on

              Thanks for the feedback Sunny. If you can, could you please share with us what type of contract are you in that is profitable for you?

          5. One rather important point is how much it costs to actually spend the bitcoins you get.

            Genesis Mining pays out daily to _a lot_ of customers in each transaction.
            This drives up the transaction fee because your transactions need to refer to _many_ input transactions, and those transactions are huge since they go to so many customers.

            And who benefits from this? The miners, of course!
            It is actually in Genesis Mining’s best interest to pay out as often as possible, because their mining will get some of the bitcoins they gave you back.

            Your money is much better spent on buying actual bitcoins.
            If you want to invest in a cloud mining operation, find one that lets you specify when to pay out.

            • Ofir Beigel on

              Interesting point, however Genesis can’t know for sure they will receive miner fees on transactions you spend since they can’t be sure they will succeed in mining those future blocks. I agree with the fact that you’re better of buying coins but I don’t think there is any profitable cloud mining op out there.

          6. Jaap bantje on

            Thanks Ofir. I have more or less the same results. Here are my numbers
            Genesis mining
            start 25/12/2016 0.7 TH/s for $ 100 invested
            12/04/2017 0,026 earned
            so i might be BE after 1 year

            fortunately I have a far better system making almost 150% p.a. , that runs risk free on profits only.

          7. I view this as a buy versus mine decision. You can only engage in this analysis after deciding to invest a certain amount of USD in Bitcoins.

            As I write this BTC stands around $1,180.

            If you decide to invest:
            – $105 in BTC you can buy 0,088983 BTC or a 0,7 THs mining contract (cost per THs: $150)
            – $1050 in BTC you can buy 0,88983 BTC or a 7,5 THs mining contract (cost per Ths: $140)
            – $5200 in BTC you can buy 4,40678 BTC or a 40 THs mining contract (cost per Ths: $130 which is the cheapest rate in Genesis)

            In order to compare alternatives, you must decide how much compensation you require for taking the risk of not receiving you BTC immediately. The mining contract can go on forever but take a clue from Genesis altcoins contracts and just assume it will run for 2 years.

            If you decided to invest $5200 you would get 4,40678 BTC with an outright purchase. If you mine, and you require a 50% return over 2 years, you want to get mining payouts of at least 6,61017 BTC over that period. If you require a 100% return, then your threshold is 8,81356 BTC.

            Using your mining calculator to make a rough estimation, a 40THs contract yields 0.60393677 BTC per month. Over 24 months that would amount 14.50 BTC. That is obviously inflated but it still gives you a 5,69 BTC cushion above the required 100% return.

            • Ofir Beigel on

              Thanks for this calculation – am I wrong or did you forget to take the maintenance fee into account? Seems like it’s almost 50% from the revenues.

              • Yes, I did not input any costs. And of course the monthly return is expected to dwindle. Also, if you buy BTC outright you can lend it out in Bitfinex, Poloniex, or other and earn interest. Not an easy call, but the decision should be preceded by a decision to change an X amount of fiat into BTC.

              • Two fees – depending on what is being mined – upfront and maintenance. Even if you get a maintenance free contract they sometimes increase the rate of the upfront free so you end up in some cases paying more than 50%. The mining difficulty will most likely increase over the term reducing the profit even more, as you’re committed to paying gm an upfront fee – The contract does state all this which is fair enough but I don’t think you are going to great return – unless your coin surges exponentially during your mining term, which you can’t predict – better off buying and holding.

          8. chike chukwuma on

            Thanks for your review my question still is how can those of us in Africa succeed in these bitcoin investment and i will like you to use your expertise look into this product

          9. Elio-David Di Iorio on

            Profitabliity

            7

            Transparency

            10

            Support

            10

            Reputation

            10

            What is not mentioned considered is that price per unit of hashrate goes down significantly on higher priced contracts, so contract for $100 may not be profitable, but one for $2000 is a completely different story,

          10. Profitabliity

            9.8

            Transparency

            9.8

            Support

            9.7

            Reputation

            9.6

            Hi Ofir , great article! I too became interested in BTC about 3-4 years ago. Thanks for the information on Mining…..I’m glad I found 99Bitcoins, I like the way you try to teach us what you have discovered about Bitcoin.

            Thanks, Good Luck!

          11. Kulder Zipke on

            Good write up, but analysis is much more simple.
            When you invest in cloud mining – say 100$ look at the the at that time Bitcoin price. – so you can buy X Bitcoin immediatly for your 100$
            Currently Bitcoin value increase (despite volatility) over the Mining return is way superior,
            As indicated in the article, mining return tends to decrease due to difficulty increase.
            You are much better off to buy Bitcoin directly.

            • Zsofia - 99Bitcoins support on

              Thanks for the feedback, indeed, you can also view profitability in a simpler way. The article captures multiple aspects of the topic.

          12. Glenn Arcaro on

            Hey Ofir. Thanks for the article. Good information. I’d also like to add that I noticed that contracts for mining bitcoin in Genesis seem to be ridiculously high. Having said that, do you think it’s more profitable to mine dash for example where the contracts are much much cheaper for the hash rate?

          Leave A Reply