Crypto-Currency Cloud Mining Startup

Table of Contents

1. Introduction

     1.1 So Want Is Cloud Mining?

     1.2 Why Is Cloud Mining Prefer Over Mining at Home?

     1.3 What Do Clients Get from Using Cloud Mining?

2. The Opportunity

3. Customer Needs

     3.1 Client Characteristics

     3.2 Pricing:

     3.3 Contract Profitability:

4. Sister Company for Donations

     4.1 Cares Donation Prices:

     4.2 Cares Contract Profitability:

5. What Your Support Does

     5.1 How Much Is Need to Start My Company

6. Does Your Support Buy Anything?

7. Scope and Limitations

     7.1 Scope of Initial Stage

     7.2 Scope of Subsequent Stages

     7.3 Limitations and Exclusions

8. Schedule

9. Background

     9.1 Profitability

     9.2 Mining

     9.3 Cloud Mining

     9.4 Coin Exchange Rates

1. Introduction

     Join the crypto-currency revolution! There are some unique opportunities that have recently opened up in the crypto-currency niche. My name is Bill Jones. I am a software developer, who has discovered these crypto-currency opportunities. I, along with Jason Brannon, the head of the steno pool,  my marketing partner, and social media liaison  need your help to start a cloud mining company. With your help I can start offering mining contract. Your donation will entitle you to one of those contracts, once we have the mining equipment.

1.1 So Want Is Cloud Mining? 

     Cloud mining is using someone else’s hardware to mine crypto-currencies. Similar to cloud computing some processors out on the web, do the work. In cloud mining, the miners are located at a miming farm somewhere else. 

1.2 Why Is Cloud Mining Prefer Over Mining at Home? 

     The three big reasons are expense, noise, and heat. Competitive miners are very expensive, often over $2000 per miner. Their fans can and often do make a lot of noise to cool the chips. All the heat from those chips now becomes part of your home, where it can add to you homes cooling costs. Cloud mining can share a miner between several people reducing the individual costs. And since the equipment is not in your home, noise and heat are no longer factors. Cloud mining also offers technical expertise that ensures the miner is running at its most efficient.

1.3 What Do Clients Get from Using Cloud Mining?

     Clients get the crypto-currency that is being mined. It is not really mining as much as competing against other miners to get a reward. The reward is offered by the crypto-currency itself in exchange for recording transactions. The reward is in new coins issued by the crypto-currency. Some also offer transaction fees as well. This is the successful model Bitcoin has been using since it started. I should mention, most cloud mining contract come with a daily maintenance fee that is automatically subtracted from the coins earned each day. This fee covers electricity and other costs of the farm.

2. The Opportunity

     My company sees three coins where mining contracts can be profitable.  First is with tried and true Bitcoin. While most cloud mining operations are centered on the efficient Bitmain’s Antminer S9 or similar, my company knows of an even more efficient miner. Other cloud mining companies do have other advantages, such as located nearer a polar cap where the cost of cooling is less or lower electrical costs.  While others have advantages, my company can still offer competitive contracts, just not the cheapest. Further the demand for application-specific integrated circuit (ASIC) miners, and cloud mining contract are above what can be produced. Currently, most ASIC miners take 3 months form order date to arrival. Beyond demand being high, as a startup my company can explore the use of new and different ideas from the GPU rig home hobbyists. One idea that will be tested is using negative air flow to expel heated air rapidly, while using outside air as a cool air source.

     The last two coins are Decerd and Siacoin. My company is aware of new ASIC miners coming to market, where no ASIC have been before. ASIC miners blow the current graphics processing unit (GPU) miners away, paying for themselves in just a few months at today’s rates. This is a short lived opportunity. My guess is within 8 months, their profitability will drop to where it takes close to a year or more for the miner to pay for itself, similar to the Bitcoin miners. And then I foresee a gradual decline in profitability after that as more efficient miners are introduced. Currently now 03/11/2018, the manufacture is taking order for the first production run to be shipped around 03/22-30/2018. Shipping is estimated to take 2 weeks. Making it mid-April before any of these miners are active. As other mining farms become aware of these miners, it is likely they will add them to their farm, and likewise cloud mining contracts for these coins are likely in the future. But for now, only my company has any plans to offer these coins for cloud mining contracts.

3. Customer Needs

     My company will provide an affordable way to easily make crypto-currency without many of the downside a home miner faces. Many people are interested in crypto-currency, but do not know where to start. One of the functions of my company’s website will be to provide some basic knowledge of how crypto-currency work, are mined, and how the coins get back to the user. Below are some basic characteristics of the potential clients.

3.1 Client Characteristics

• Many people know Bitcoin is hot and want to cash in on Bitcoin.
• Many people do not know how to cash in on Bitcoin.
• Many people are not fully aware of altcoins (all crypto-currencies except Bitcoin).
• The cost of entry into crypto-currency mining is high.
•      Mining hardware is expensive.
•      Mining hardware is scarce.
•      Mining hardware is noisy.
•      Mining hardware produces lots of hot air.
•      Mining hardware requires some technical knowledge.
• Many people are not aware cloud mining even exists.
• Cloud Mining has been source of many scams, so those who do know are wary of new untested sites.

     My company as a startup cannot attempt reach the public as a whole and educate them. In fact there is no point in my company advertising until it has a website setup and a miner or two mining. My company will come up with a marketing strategy once it is a going concern. In the meantime, my company can establish prices for mining contracts and show ETA s of when and how things will happen.

3.2 Pricing:

Coin        Package      GH/s      Price              Daily Maintenance Fee Decred    Starter             5           $45.00                   $0.00165 / GH/s     Decred    Prospector    40         $350.00                   $0.00165 / GH/s     Decred    Digger          100         $850.00                   $0.00165 / GH/s     Decred    Miner            250      $2,040.00                  $0.00165 / GH/s     Siacoin    Starter            16           $46.00                  $0.00125 / GH/s     Siacoin    Prospector   128         $358.00                  $0.00125 / GH/s     Siacoin    Digger           320         $870.00                  $0.00125 / GH/s   Siacoin    Miner             800       $2070.00                  $0.00125 / GH/s   Bitcoin     Starter           144            $45.00                 $0.00027 / GH/s Bitcoin     Prospector  1150          $350.00                 $0.00027 / GH/s   Bitcoin     Digger          2880         $850.00                 $0.00027 / GH/s   Bitcoin     Miner            7200       $2,000.00                $0.00027 / GH/s      *Note Bitcoin Cash can be offered at the same prices as Bitcoin. 

3.3 Contract Profitability: 

(Profitability is only an estimate. Actual results will vary and are influenced by the coin’s difficulty and exchange rate.)

                                  03/11/2017 Est.                                                      Coin        Package    Annual Return           Calculator                

Decred  Starter              $298.50 WhatToMine Profitability Calculator  Decred    Prospector    $2,396.38 WhatToMine Profitability Calculator  Decred    Digger           $5,993.52 WhatToMine Profitability Calculator  Decred    Miner           $14,989.43 WhatToMine Profitability Calculator  Siacoin   Starter              $137.06 WhatToMine Profitability Calculator  Siacoin   Prospector    $1,271.08 WhatToMine Profitability Calculator  Siacoin   Digger            $3,169.73 WhatToMine Profitability Calculator  Siacoin   Miner             $7,923.34 WhatToMine Profitability Calculator  Bitcoin    Starter                $24.21 WhatToMine Profitability Calculator  Bitcoin    Prospector       $195.61 WhatToMine Profitability Calculator  Bitcoin    Digger               $487.32 WhatToMine Profitability Calculator  Bitcoin    Miner             $1,217.65 WhatToMine Profitability Calculator   *Note it is very unlikely the estimate annual return on Decred and Saicoin will be realized. As more ASIC miner starting mining these coins, the profitability will drop.

4. Sister Company for Donations

     My company will spawn a sister company, my company-Cares. My company-Cares will provide an untapped way to make donations. Instead of just giving the money to the charity, by giving the money to my company-Cares, the charity will receive ongoing donations from the mining contract. The contract donation, over time, should far exceed the initial donation to purchase the contract. There is at least one site trying to make donation directly with Bitcoins. However, so far I have not seen any sites offering a donation service such as this.

     My company-Cares will take time to organize. The application for non-profits takes about 6 month to process. Once my mining company’s limited liability corporation (LLC) is established, my company-Cares LLC and non-profit application will be filed as soon as I am able to do so.

4.1 Cares Donation Prices: 

Coin        Package      GH/s      Price               Daily Maintenance Fee Decred    Starter           0.56       $5.00                   $0.00165 / GH/s     Decred    Prospector    2.3       $20.00                   $0.00165 / GH/s     Decred    Digger          12        $100.00                   $0.00165 / GH/s     Decred    Miner            30       $250.00                   $0.00165 / GH/s     Siacoin    Starter            1.7        $5.00                   $0.00125 / GH/s     Siacoin    Prospector     7.2      $20.00                   $0.00125 / GH/s     Siacoin    Digger           37       $100.00                   $0.00125 / GH/s     Siacoin    Miner             97       $250.00                  $0.00125 / GH/s     Bitcoin     Starter          16            $5.00                  $0.00027 / GH/s     Bitcoin     Prospector    66         $20.00                  $0.00027 / GH/s     Bitcoin     Digger          339       $100.00                  $0.00027 / GH/s     Bitcoin     Miner            900       $250.00                 $0.00027 / GH/s            *Note Bitcoin Cash can be offered at the same prices as Bitcoin. 

4.2 Cares Contract Profitability:

 (Profitability is only an estimate. Actual results will vary and are influenced by the coin’s difficulty and exchange rate.) 

                                 03/11/2017 Est.                                                       Coin        Package    Annual Return           Calculator  

Decred    Starter                $30.92 WhatToMine Profitability Calculator  Decred    Prospector       $131.34 WhatToMine Profitability Calculator  Decred    Digger              $684.17 WhatToMine Profitability Calculator  Decred    Miner            $1,713.20 WhatToMine Profitability Calculator  Siacoin    Starter               $16.19 WhatToMine Profitability Calculator  Siacoin    Prospector        $71.33 WhatToMine Profitability Calculator  Siacoin    Digger              $365.56 WhatToMine Profitability Calculator  Siacoin    Miner              $959.02 WhatToMine Profitability Calculator  Bitcoin     Starter                $2.56 WhatToMine Profitability Calculator  Bitcoin     Prospector       $11.03 WhatToMine Profitability Calculator  Bitcoin     Digger               $56.25 WhatToMine Profitability Calculator  Bitcoin     Miner              $150.68 WhatToMine Profitability Calculator     *Note it is very unlikely the estimate annual return on Decred and Saicoin will be realized. As more ASIC miner starting mining these coins, the profitability will drop.

5. What Your Support Does

     Primarily your support along with others will be used to purchase miners and needed assets to get them working. Some of the support will be used to establish the LLC and company website. I will receive a small part of the support as compensation for my time in setup the miners and making them operational. 

     5.1 How Much Is Need to Start My Company

     Buying each miner is the driving force, behind my company, so this is what I need for each miner:

               Coin           Funds needed per miner:

               Decred         $15,730.00

               Siacoin          $8,325.00

               Bitcoin           $4,100.00

     The $28,200 goal is how much will be needed to by one of each miner.

6. Does Your Support Buy Anything?

     Yes, but only after the successful filing with the SEC. Thw contract awarded will be based on the pricing structure above in section 4.2, your support will earn you the related cloud mining contract, once available. The estimated profits are in section 4.3. As this is a startup, any contracts awarded to donors will not start until the miner that donation is paying for is in place and mining. It is possible a donation will be split over two miners. 

7. Scope and Limitations

     This is the startup phase of my company and my company-Cares. The focus will be on growing the companies from nothing to a warehouse space with one full rack actively mining. My company is looking to seize opportunities that are currently available. Opportunities into coins already offered by other cloud mining site will be explored later. Bitcoin and other coins using the same algorithm are the only place my company is looking to be in direct competition with other cloud mining services. And that is only due to the popularity and clear structure of Bitcoin. 

7.1 Scope of Initial Stage

     The first step is to get at least one miner mining, and all related setup. My company will need a shelving rack for the miner, a power distribution unit (PDU), a network switch, 240v outlets, all the cables, creation of the website, an LLC to make my company a real entity, the SEC filling, and legal advice on the wording of the contracts. The initial location of the miners will be in my residence.

7.2 Scope of Subsequent Stages

     After my company is a going concern, my company-Cares will need an LLC and a non-profit application to file with the IRS. My company will need additional hardware, and electrical outlets. And soon a warehouse space for the racks. My company’s website will need upgrades and improvements. And my company-Cares website will need to be created.

7.3 Limitations and Exclusions

     Mining ability is limited by the number of miners. While contracts are priced to allow the purchase of more miners before hashes have been committed, to a contract, this may be limited in a slow startup where funding may go to salaries instead of growing assets.There will be a limit to how many miners can be run in my home before a warehouse space must be utilized. It is assumed up to 36 will be acceptable. A clearer answer to this will be forth coming once an electrical professional is engaged and can define the limit of my household electrical availability.

8. Schedule

     The schedule is closely tied to when capital becomes available. As soon as capital for a miner is available, an order for that miner will be placed. Some crowd funding sites, like Indiegogo can take up to 15 business day to release funds, after the project has reached its goal. Fundly allows funds to be withdrawn immediately.

     Most ASIC miners are being preorder at this time, as demand is higher than supply. Orders place now, in March 2018, for Bitcoin miners will not be shipped until May. The Decred and Saicoin miners have a current ship date of March 22-30. 

     The miners are coming from China with an estimated 2 week shipping time. The delay at customs is unknown at this time, but believed to be short as the miners are free to import. Once on location, configuring the miner and putting it to work producing on the contracts, should take less than a day. 

     During the time from ordering to arrival of a miner, the minor’s new home can be prepared – racks installed, PDUs installed, electrical outlets installed, etc. Further, after the very first miner is ordered, the my company’s LLC can be formed, and development of the website can start.

9. Background

9.1 Profitability

     Bitcoin which provided the template to the many cryptocurrencies, has been profitably mined for many years. Many cryptocurrencies also are being mined profitably. There is room for new miners to join those miners already hard at work. However, to be the most profitable, a miner has to be the most efficient. This caused an evolution in mining with Bitcoin from mining on central processing units (CPU) to GPUs to now the ASIC devices. CPUs and GPUs consume too much power and produce exponentially fewer results, making them unprofitable compared to ASIC miners.

     ASIC miner for altcoins are just now appearing on the market. Many altcoins are still being mined by GPUs. This creates a profit opportunity with new ASIC devices in altcoins, that have not had ASIC mining before now. For example one GPU card produces 6.5 GH/s consuming 250W of power. An ASIC on the same coin, produces 160 GH/s consuming 410W. Over 26 time the production for less than double the power costs. 

     ASIC do have a downside in that they can only mine one or a very select few algorithms. Some coins do use the same algorithm, but there are many algorithms in the altcoin world. GPUs have an advantage here, as they can easily switch to another algorithm by running different software. The cost of many ASIC miner starts around $2000 and goes up. Thus entry into mining with an ASIC miner is cost prohibitive.

9.2 Mining 

     Mining is done by recording blocks. Blocks are like a page in a ledger, once written are a permanent record of the transactions. To win the right to record the block, miners compete by using a complex mathematical formula that produces a hash. If that hash is lower than an undisclosed value, the miner wins the right to record the block and claim the reward. Currently for Bitcoin the reward is 12.5 Bitcoins. Using a $10,000 exchange rate, to keep it simple, 12.5 Bitcoin are worth $125,000. At the time of this writing, Bitcoins are running closer to $9,000. The complex mathematical formula makes it effectively random which miner solves or claims the right to record the block.

     The reward is always in the coin being mined. The undisclosed value is changed after every recorded block based on the difficulty for that coin. The difficulty is a reflection of the network hash rate. For Bitcoin, difficulty is adjusted every two weeks based on the average hash rate of the last two weeks. This effectively ensures blocks are recorded one every 10 minutes. Thus the more miners mining a coin, the higher the network hash rate, which increases the difficulty, and reduce the chances of solving blocks and wining the reward.

     The chances of any one person, miner, or device solving a block are extremely small. This had led to the formation of pools, that share the block reward with all miner that helped solve the block. Because pools direct different members to mine for different potential hashes, they act like one giant miner, decreasing the changes of a lone miner solving a block. Pools also smooth out the peaks and valleys of solving a block, and then a long wait before solving another block. Some pools offer a steady payment for hashes supplied for a high fee, instead riding the peaks and valleys the pool has with winning blocks.

9.3 Cloud Mining

      Running GPUs or ASIC devices for home mining do have some drawbacks. For one the fans needed to cool the chips can be very noisy. Two, the heat produced adds to the cooling bill. Three, the miners are more efficient with a 240v power source than the standard 120v outlets in most homes. Also, there is some technical knowledge required to set up the miners. Thus companies have created mining farms, where customers can purchase the mining power, usually shown in a hash rate, like Giga Hashes per second (GH/s). 

     Cloud mining is often an open-ended lifetime contract for as long as the device is profitable. Most offer Bitcoin mining. Some do offer some other altcoins. Most charge a daily maintenance fee which is automatically subtracted from any coins earned by the device. The maintenance fee covers maintenance, power, facility, and other operational costs incurred by the mining farm. The maintenance fee is what causes a contract to stop making a profit. Most cloud mining providers allow 3 to 60 for the contract to become profitable again, before canceling the contract. During the time of unprofitability, often the mining cloud provider will cover the short falls on the maintenance fee.

9.4 Coin Exchange Rates

     Aside from difficulty and costs, the next big thing to affect profitability is the coins exchange rate. Often altcoins are converted to Bitcoins and then to feat or local government issued currency. Thus many altcoin exchange rates rise and fall in a similar way Bitcoin does, however just because Bitcoin moved up or down does not mean the altcoin will do the same. It is just a tendency. 

     Bitcoin and all the altcoins are often treated very much like stocks where speculators can drive the price way up or way down. Therefor all exchange rates are very volatile. If you look at Bitcoin for the last half of 2017, you will see a wild ride up and over $19,000. In the beginning of 2018, Bitcoin has come to rest closer to $9,000. This is still significantly high then Bitcoin was in July of 2017 where it was closer to $650.

     I am not an investment professional. Nothing provided here should be taken as investment advice. These are just my layman observation. I do not attest to the numbers provided being 100% acute, but only a best attempt at being representational.

     The fact miners are paid in the coin they mine, helps to offset the effect of the volatile exchange rates. As prices for a particular coin go up, more miners start mining that coin, causing the difficulty to go up, meaning fewer coins per miner. However, because the coin is worth more, the miner is getting relatively the same value. 

     From the chart above you can see as difficulty (blue) increases, Bitcoins (Cyan) awarded, and percentage network hash rates (purple) decline. Total network hash rate would be similar to difficulty. Now if you look at the reward value in USD (red) until about May 2017 it is relatively stable between 4 and 6. In April 2017, you see Bitcoin’s value (green) drop slightly while difficulty increased, making reward in USD take a larger hit. But then the difficulty remained stable as the value of Bitcoin increased, allowing the reward USD to recover. After May 2017, the increasing Bticoin price drove higher USD rewards. In June and July Bitcoin’s value stabilized, and you can see the USD reward decline seeking a new stable range. After July Bitcoin went up over 4 times its value, while reward USD only did a little better than 2 times its value. While the reward USD does fluctuate and is affected by difficulty along with Bitcion price, it is not as dramatic as Bitcoin’s value.

     Again I am not an investment professional, and am not giving investment advice. Nor is the chart 100% accurate as that items in chart have been manipulated to get them all using the same relative range of numbers. This is information purpose only.