Genesis Mining to Clients: Upgrade or Leave

An announcement from cloud mining service Genesis Mining late this week indicated that some of the company's clients would have to upgrade their subscriptions or else lose their services, according to CoinDesk. The startup, which is based in Iceland, indicated in a blog post that it is planning to end open-ended contracts for customers not earning enough to offset regular maintenance fees. These contracts will end in approximately two months as a result of the continued decline of the cryptocurrency market.

Clients Choose: Upgrade Accounts or Lose Service

Those clients currently holding open-ended subscriptions but not earning enough will be faced with a choice: either upgrade to a new premium account with a five-year subscription, or else lose service. Genesis explained its decision by pointing to the increased difficulty and energy requirements associated with mining. As a result, the company said, it was forced to reconsider its policies.

The new five-year contract will not have an option for early termination, although the company's fee for every trillion hashes per second will drop from $285 down to $180.

Crypto Plunge Behind the Change

In its blog post, Genesis stated that "unfortunately, bitcoin went into a downward trend around January. This trend combined with the heavily rising difficulty around April and May reduced mining outputs even further. As a result, some user contracts are now mining less than the daily maintenance fee requires to be covered, and thus they entered the 60 days grace period, after which open-ended contracts will get terminated."

Genesis is the latest mining firm to report that some of its customers have proven unprofitable; Hashflare announced that it would shut down its bitcoin mining arm for similar reasons in June. In the case of Hashflare, user contracts were canceled and the bitcoin mining operation shut down because "the payouts were lower than maintenance for 28 consecutive days."

To those who have long predicted a collapse of the cryptocurrency bubble, announcements such as these likely come as no surprise. For clients of these cloud mining services, however, the change in contracts and services may mean lost income.

Investing in cryptocurrencies and Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns bitcoin and ripple.