Quote from: Genesis-Mining on July 07, 2014, 11:48:05 PM

Quote from: Bonobo on July 07, 2014, 08:52:38 PM

Marco, you are not in the hardware sales business - you are a service provider. I have a contract (actually three) which says exactly what the terms are, and you are perfectly within your rights to stick to the letter of the contract. On the other hand, as a service business, GM will live or die on its reputation. The way things stand every single contract in the past, and certainly every contract you make in the near future will expire with negative returns. You may not admit this publicly, but I am sure you are an intelligent fellow and you can see what the numbers are. I am not saying that exploding scrypt mining difficulty is your fault, but having dozens or hundreds of pissed-off customers telling everybody who will listen to stay away from GM is surely not in your best interests if you truly want to build a long-term business. Not only is it annoying for us customers to lose money, but ultimately it is dangerous for the survival of GM. You say GM is operating on a tight margin and cannot afford to upgrade 'old' contracts. But you are also boasting about opening a huge new data center in Europe. I think this does not come cheap. Maybe you should think about re-balancing your priorities. Better for your long term business survival to expand a little more slowly and gain a reputation for doing the utmost to look after your customers.

I have made this suggestion before, and I am making it again. Make it your policy to upgrade EVERY customer by a meaningful amount when you drop hash prices. If that means fewer data centers and a few more years before you buy your megayacht then it is a small price to pay for survival.

We are offering a package of hardware + services. This actually saves quite a lot of money for a number reasons (no shipping, no VAT, economy of scales, etc). For example, if a client pays us 100$ we purchase hardware for 70$, pay for electricity/warehouse etc. 25$ (example numbers, but not that far from reality). If the next hardware generation is out there are two options for us:

(i) we keep the price artificially high and use some of the income to upgrade old users
(ii) we give old clients a small increase of their hashrate and keep the prices on a competitive level.

Even if we would go for (i) it would not help anyone, since no one would be buying from us in this competitive environment. We only can sell hardware + services if the prices are on the same level as (or lower than) our competition (in particular to hardware sellers). By the way: strong competition in this field does not allow us to make a huge margin (so no yacht).

It is our policy to do the best for our clients! As you correctly pointed out it would be suicidal for us to not act in the best interest of our customers. We knew that (i) vs. (ii) is a debatable decision, but actually the market gives us not much choice. The investment in a new farm is part of staying competitive (cheap electricity and cooling).

In my opinion, the weakness of payouts is mainly a problem of the weakness of scrypt coins vs. BTC. In particular LTC lost more than 50% of its value against BTC in the last few months (and this is certainly not the fault of any service provider / hardware seller). The whole situation would look completely different if the LTC/BTC level would stay on the previous level or would have increased. Things would quickly improve if LTC gets stronger again or if new interesting scrypt coins are developed.

We will continue to work on new ways to increase the profitability, e.g., by offering new coins and hashing algorithms. A common request of users is to have longer contract terms and we will offer an option for this, as well. Going forward a vibrant altcoin community is probably the key.

Cheers, Marco (mk)

Thanks for explaining this. I hope genesis mining can successfully cope up with the increasing mining difficulties for better profitability.