Arctic Drop in KnC Cloud prices

When KnCMiner launched its new Cloud mining service at the start of this month, it enabled users to rent a mining rig for a six month period at a fixed cost. The contracts were priced at $2,000, $5,500 or $9,000 for 1 TH/s, 3 TH/s or 5 TH/s of computational power respectively. For the most expensive contract, this meant a client would pay $1.80 per GH/s. With the network hashrate at 215,000 TH/s, Digiconomist determined the value of the contract given expected mined coins as below:

Old Contracts

For the second scenario of an increasing network hashrate increments of 1,833,333 GH/s per day were applied. But even under an unrealistic scenario of an equal network hashrate the contract would result in a loss. As clients are required to pay the rent upfront, they would be better off by simply buying Bitcoins. But not even three weeks later, KnCMiner started offering 400 GH/s for six months at just $250, or $0.63 per GH/s. This equals a price drop of more than 65 percent per GH/s, even though the price of a Bitcoin dropped just 15 percent (from $475 to $400) over the same period. As the network hashrate had gone up to 245,000 TH/s when KnCMiner started offering these new contracts, the same calculation as before would now yield the following:

New Contract

As the price per GH/s was cut tremendously, the contracts could now actually be beneficial to the client even if the network hashrate continues to follow its trend. This discount would be justified by the fact that the client still has counterparty risk on KnCMiner due to the upfront payment, while this obviously would not apply if coins are simply bought and held in a private wallet. For new clients this is a nice development, as it turns the contracts into something worth considering. But to those that already got in initially it implicitly seems to confirm they indeed paid too much.

In a response to the question why the rates changed this much over a short period, and what this meant for initial clients KnCMiner would only state that they “can’t disclose the business rationale behind these offers at these particular points in time,” and only “point to a very fast changing landscape within mining and the fact that we intend to stay competitive.” On the official website it noted that the drop in price was due to falling temperatures and lower operational costs as a result. This makes little sense, as all contracts run for six months and the contracts that were sold three weeks earlier overlap in 90 percent of the rental period. But given these statements, it certainly does not look like KnCMiner is very willing to offer some compensation to the unfortunate ones that got in early.

  • Steven

    KnC are using this review as a promo on Twitter.
    If this is the best review they can find – they are in deep trouble.

    • It seems so. I’m certainly a bit surprised..

  • Proudpak

    Bitcoin price at the time of article published is hovering under $400 which makes paying cash non-profitable. Also if paid in bitcoin there is no ROI.

    A person has to be dumb and stupid enough to invest in Knc Cloud mining contract.

  • Steven

    I have yet to see 1 happy batch 1 Titan customer, and yet KnC seem so proud of their efforts so far. They don’t think that they have any responsibility to ship them all before the end of Q3(Against Swedish Law) – or even Q4, now that they have shipped a few and ‘met’ their shipping ‘Timeline’. I’m still wondering how they are going to spin the Titans not performing at the ‘Guaranteed’ hash rate.
    They can’t even mine at multipools or do Scrypt-N as advertised.
    I hope Digiconomist will do a full review of KnC as a whole, and list all the deceptions and falsehoods so far – The Cloud wasn’t the start.
    I would be happy to make a list…I have a few hours spare.

    • I was thinking about spending some time on reviewing mining rig manufacturers, only I hadn’t decided yet on the criteria. Any input is welcome 🙂

      • Steven

        You could write a book on the ones that have let people down – KnC have turned to the dark side for sure, but they have a way to go to be the worst. They do seem to be putting in a LOT of effort to make it to the top though.
        You should title it Digicon’s best cons. 🙂

        • Good one! 🙂 The problem with manufacturers is that it’s tempting for them to move to what you call “the dark side”. There is a clear conflict of interest for all of them plus how can there be good competition when they’re effectively selling nothing but promises. This is why I warned for pre-odering ASIC miners in general: http://digiconomist.net/beware_of_asic_pre-orders/ Things like this Cloud Mining service prove that they are putting very little effort in creating added value for their clients. They’re mainly taking good care of themselves only.