Re: ▁ ▂ ▄ ▅ ▆ Cloudmining 101 (ponzi risk assessment) ▆ ▅ ▄ ▂ ▁
Just a clarification about the much used term ROI (return on investment). I just want to make sure everyone's talking about the same thing.
Someone told me the other day that they had bought some hash contract for let's say 1BTC. It is not transferable or resaleable.
Its only value is its projected earnings. He was very happy to tell me that, over 4 months, he had cumulatively received back in small payments 1BTC and that his ROI was 100%.
I have a conventional fiat business background and said no, your ROI is 0%. The 'asset' that you paid 1BTC for has no fungible value so it is a -1BTC on your balance sheet, which also contains a +1 from your earnings, equalling zero, which is the ROI you would have if the contract stopped paying now.
Up until break even, you are just receiving your own money back.
No need for any abuse here (probably get it anyway), it's a serious question because I can see some newbies seeing claims of 150% ROI meaning 150% profit.
Someone told me the other day that they had bought some hash contract for let's say 1BTC. It is not transferable or resaleable.
Its only value is its projected earnings. He was very happy to tell me that, over 4 months, he had cumulatively received back in small payments 1BTC and that his ROI was 100%.
I have a conventional fiat business background and said no, your ROI is 0%. The 'asset' that you paid 1BTC for has no fungible value so it is a -1BTC on your balance sheet, which also contains a +1 from your earnings, equalling zero, which is the ROI you would have if the contract stopped paying now.
Up until break even, you are just receiving your own money back.
No need for any abuse here (probably get it anyway), it's a serious question because I can see some newbies seeing claims of 150% ROI meaning 150% profit.
You are technically right, but in this forum roi often means that you got your money back (since you lose them most of the time lol).
According to wikipedia
return on investment = (gain from investment cost of investment) / cost of investment
or
return on investment (%) = (Net profit / Investment) × 100
where:
Net profit = gross profit − expenses.
So if your cloudmining contract repaid itself, but did not generate any profit, it would be most accurate to say it was 0% roi, but it's no fun
