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.

Take a second to support Digiconomist on Patreon!
Become a patron at Patreon!

Comments (7)

  1. Steven September 30, 2014
    • Digiconomist September 30, 2014
  2. Proudpak September 30, 2014
  3. Steven September 30, 2014
    • Digiconomist October 1, 2014
      • Steven October 1, 2014
        • Digiconomist October 2, 2014