Saturday, January 4, 2014

CEX.IO - An Alternative to Buying Bitcoin ASICs?

I wrote recently about the expected ROI (Return On Investment) for purchasing a Bitcoin ASIC in the hopes of mining a bunch of coins. The single biggest problem with buying BTC ASICs is that there's no real way to jump in without spending a whole lot of money...and then waiting for your hardware. If you could buy 1THash of mining power today, you could expect to earn nearly $9000 per month! So when you look at Cointerra's TerraMiner IV that does 2THash for $5999, isn't that a great deal and shouldn't we all jump on board? The problem is that best-case you're looking at four months before you get the hardware in hand, so you're basically loaning $6000 for future potential profits. But is there a better way? CEX.IO thinks so.

Here's the basic scoop: you buy chunks of ~1 GHash/sec in mining hardware, via the CEX.IO exchange. The going rate as I write this is currently around 0.044 BTC per GHash. Translated into USD, that means you can buy 1GHash for $36.30 (at an exchange of $825 per BTC), which compared to buying 333MHash Block Erupter USB ASICs at $40 each is an absolute bargain -- one third the price! Even compared to the Block Erupter Cube, the price is pretty fair -- you get your GHash immediately and you can always trade it back for BTC.

The problem comes when you start looking at the bigger ASICs that are coming out in the near future. CEX.IO says that they're looking to make it easier and "fair" to buy into the Bitcoin mining market. That's only partly true, clearly, as the cost to purchase 2THash of mining power at CEX.IO would astronmical -- around $72000 at the current rate of ~0.044 BTC per GHash. Sure, there's no wait for the mining hardware to start working in your favor, but at best the 22 GHash you can buy with 1 BTC will break even in about four months. If you can break even in four months, you actually match the investment in a TerraMiner IV -- you have the same 2THash starting in May, the difference being that CEX.IO gets to put $72000 (or 88 BTC) into purchasing additional ASICs.

Since there's no cost to you in terms of power or maintaining the hardware (though CEX.IO does charge a 3% maintenance fee and 3% pool fee), the only real question is how far and how fast difficulty of mining BTC will rise. I suspect we're nearing a leveling off of difficulty for a bit. We saw a huge increase during Oct-Jan, but the current round at least is showing a mere 1% bump. We'll have to see if that holds....

But since you can trade your hashing power for BTC, it's not quite as risky -- at least that's the theory. I've gone ahead and decided to "play guinea pig" with CEX.IO, so I invested 1BTC into 22GHash of mining power (with 0.02853193 BTC left over). You can see my current hash rate along with my potential 3% referral bonus in the banner below (which will update in real time):


It's not guaranteed to break even anywhere near as quickly as buying GPUs for mining scrypt alt-coins, but as the biggest name in the cryptocurrency market Bitcoin is likely to be around a lot longer than, say, DOGE. I'll revisit this topic in a week to see where the current exchange rate is on CEX.IO as well as my profits from mining.

Finally, it's worth noting that CEX.IO is hardly alone in what they're doing; other companies allow you to purchase GHash for BTC (though not all will allow you to trade GHash like you can at CEX). They appear to be one of the more reasonably priced options in terms of fees, so I decided to give them a shot. Note also that I'll be at CES this coming week (you can follow coverage here), so don't expect any answers to emails or blog comments!

2 comments:

  1. I'm interested in joining a Multi-Pool, however my main concern is the companies integrity.

    Cyrptocurrency in general feels like a redlight district and is currently no-man's land so I'd like to join a profitable multi-pool but one that will not close up shop one day and stolen everyone's profit...

    Do you know of good multi-pools out there? Any of them automatically do the exchance for you to btc as well?

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  2. Nice Report, as always ;)

    i tried the CEX thing for about 3 weeks, pointet my payment of scrypt mining to my funding adress and all i can say is, that i burned 0.2 btc.

    i fundet around 0.54 btc over this time, bought extra ghs with the btc mining return (had at the end around 10 ghs there) and as the price drops from aroun 0.07 btc/ghs to 0.04 i pulled the trigger and withdraw the overleft 0.32 btc to my offline wallet.

    so for my oppinion this is not a good thing to deal with your btc.

    for the lost 0.2 btc i could have bought a new gpu to get extra hashrate at scypt.

    sorry for my bad english, i'm not a native speaker, but i think you understand my point of view

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