First post under this account, but long time active member within the crypto community. BlockchainEconomics.io will be dedicated to analysis and insights on how the technology can transform our world. I’ll be building the blog in the coming weeks, so check back on the site if you’re interested in information about this space. In this first post, I’ll utilize my background in conventional financial securities analysis to discuss some thoughts on what I feel to be an under-recognized new offering: WTT.
Disclaimer: This is not to be construed as investment advice, simply my opinions on the Giga-Watt offering. Please consult with your financial advisor before making any investment decisions.
If you’re interested in getting involved in crypto mining, you should take a deeper look at this ICO. Giga-Watt claims to be the first full ‘turnkey’ mining solution. They offer a state-of-the-art facility, with custom engineered ‘pods’ designed specifically for housing mining equipment. They additionally facilitate group buys of miners, and install, maintain, and manage the equipment for you at no cost if you’re a WTT holder. They also state they will provide an interface to oversee your miners, along with the ability to rent out any unutilized capacity in WTT’s.
So what do you get for your purchase of WTT? The watt token (WTT) represents a 50 year right-to-property-use contract for 1 watt of energy, at a fixed all-in price of 3.3 cents per kilowatt hour (kwh). Essentially a 25%-50% discount over renting energy and space alone. Now, 1 watt doesn’t go very far in mining so you’ll need to consider your energy requirements if you’re looking at utilizing the facility to house your miners. For example, the PandaMiner B3 Plus (GPU Miner for Ethereum), consumes 1250W + 10% for energy draw variability, for a total of 1375W. Each. At the current rate of $1.05 USD per WTT, you’ll need to spend $1443.75 to purchase enough capacity for one Panda miner. We’ll take a look at some of the numbers shortly to determine if this is a good deal or not. One comment I’ll add regarding the 50 year lease contract is that it is largely marketing fluff. It’s unrealistic to assume you’ll utilize the facility for that time frame. The more likely scenario is 5 years, 10 years max, and are safer estimates to use in our calculations.
Let’s take a look at some of the math:
Scenario 1: Break-Even Analysis
WTT tokens enable the user to utilize the mining facility at an all-in cost of 3.3₵ per kwh. Ignoring the ability to resell the token at some point in the future, how long would it take to break even versus your mining costs at home (also assumes you have access to similar capacity)? Let’s use 10,000 watts in this example, and $1.075 per WTT given the current phase of the ICO (equal weighting $1.05 and $1.10):
|Local Cost per KWH||Savings per KWH||X10 KWH (10,000W)||Mining Hours for Break Even|
|.05 (Russia)||$.017||$0.17||63,235 (7.22 Years)|
|.10 (USA / China)||$.067||$0.67||16,044 (1.83 Years)|
|.15 (UK)||$.117||$1.17||9,188 (1.05 Years)|
|.22 (Japan)||$.187||$1.87||5,749 (0.66 Years)|
I used energy cost estimates directly from http://giga-watt.com, so I can’t personally ensure the accuracy by region, but the math is the same either way. It is already looking attractive from this perspective, and we also make the unrealistic assumption that the WTT token will be worthless in all time periods prior to the 50 year expiration. In all but the most aggressive (lowest native cost) regions, you can fully recover your WTT costs purely from energy cost-savings within 2 years. While you can still use their facility and rent out space at a modestly higher cost without WTT, the up-front capital expenditure can pay for itself relatively quickly. It does make a point that you should be considering your local energy costs and mining time frame prior to jumping into this.
Scenario 2: Discounted Cash Flows
This scenario directly considers the income generated from rented capacity, and also factors in several terminal value (sale price) possibilities in calculating a net present value (NPV). We’ll continue with our purchase of 10,000 WTT at an average price of $1.075/ea, for a total cost of $10,750. I’m going to use an ‘aggressive’ discount rate, since we operate in the crypto space with sizable return potential (should you decide to dedicate this capital to other crypto investments). The net rental income represents the hourly income due to you, after paying your 3.3₵ per kwh. We will use a 3 year holding period, discounting semi-annually. Rental rates are based on those available in the calculator on their site.
|Hourly Income Rate||Net Hourly Rental Income Rate||Net Hourly Rental Income||Discount Rate per Year||WTT Terminal Value (% of Purchase Price)||WTT Terminal Value||Net Present Value|
Generally speaking, the very broad conclusion we can draw from NPV is that any scenario with a positive value should be considered a viable investment option. Put another way, you could invest an additional amount at inception equal to the NPV value, and have a result of zero in the calculation. Any value larger than zero means you received a return greater than your required rate of return, which was 10% in our examples. It is important to point out that our first scenario with $.042 per kwh rental and $0.00 terminal value on WTT resulted in a negative value, indicating the return was less than 10% over the three year time frame. Nevertheless, the fact that the other scenarios all returned positive values is a good indication of the opportunity present. As I said, you’ll need to discuss these hypothetical examples, along with numerous other individual factors, with your financial advisor to determine if this is a suitable investment vehicle for you.
Bear in mind that this analysis does not consider mining profitability, nor the cost of your equipment. This is strictly an analysis of the WTT token’s value. A brief summary of pros and cons below:
- Tangible facility with experienced team
- Claim they will fully maintain and manage your equipment on-site, 24/7
- Positive cash flows on rented tokens – 2-3 year ROI based on estimates
- Discounted mining if you have access to hardware
- Potential to resell tokens later at a premium, should mining rewards justify a higher expense
- Significantly higher capacity that you could undertake at a private residence
- Limited diversification in coin mining types (for now)
- Cost of energy as a whole can decrease
- POW style mining becoming less prevalent in ‘token’ types
- Limited access to owned miners due to facility location
I hope you found this review helpful in your decision making. If you decide the Giga-Watt facility and WTT tokens are a good option for you(ICO running until July 31st), the following referral link will give me a 5% bonus off any purchases you make: https://cryptonomos.com/?r=HO7Jurj8qOkHQc7NJU8SEyiH (which I’d greatly appreciate!) Otherwise you can go straight to their ICO site at: https://cryptonomos.com/wtt
BTC Tips: 12iDikKKYgj8u6dV5R1otD4627YpGqtKyA
LTC Tips: LUrqkoC54M93UqigCuh172yQAWfZNNuiju