Yesterday, I received my 8th weekly payment from LTCGear and yesterday is when I broke even on my initial investment. If you want more info on LTCGear, read the review I posted a couple of weeks back.
I bought my shares with them on October 1st and purchased some additional shares two weeks after that. No other shares were bought. I did get some additional shares through referrals (I opted for commissions to be paid in shares rather than dollars), which added about 13.5% additional shares into my account. Without those, ROI would have taken a week longer.
Factors Affecting Payouts
1. Network Difficulty – this is a technical topic beyond the scope of this article (there’s a good explanation of it here). However, the general trend is upwards though there is volatility which means that difficulty can drop sometimes for a short period. Rising difficulty over the long term serves to reduce payouts. Essentially, the reward for mining gets less over time for the same amount of work performed.
2. LTC/BTC Exchange Rate – Litecoin (LTC) shadows Bitcoin (BTC) fairly closely but not on a 1:1 basis. Litecoin is roughly 100th the value of Bitcoin but varies a few percentage points around that value.
Last Week’s Payout
The payout I received last week was quite a bit lower than expected. That’s because there was a double-whammy of a large rise in Litecoin difficulty that week and a bad exchange rate between LTC and BTC.
One way to combat the LTC/BTC exchange issue is to opt to be paid in LTC directly and then sell the coins on an exchange some time later when Litecoin’s value has risen. If you opt to get paid in BTC, the Litecoin’s mined that week are converted to BTC using the exchange rate on payout day, so it can work for you or against you.
There’s nothing you can do about network difficulty. It will continue to climb long-term; you can only ride the rise and fall on a weekly basis and take things as they come.
Compensating For Network Difficulty
Chris, the owner of LTCGear provides a share multiplier every 45 days or so which amounts to share owners getting a lump of free shares. The purpose of this is to counteract the rise in network difficulty in the preceding period. Previous share multiplications provided about 35% additional shares. The recent one (on Nov. 10th) provided a smaller 25% (my first share multiplication).
Yesterday’s payout was the first to fully account for the additional 25% of shares I received and put payout on a par with October 31st’s payout (i.e. it was good). So the share multiplications do offset the reductions that payouts would otherwise suffer over time.
Where To From Here
Well, I’ve got my intial investment back plus a bit. That bit covers the 4.99% transaction fees I had to pay when I initially bought Bitcoin to invest on LTCGear, plus the losses due to buying shares when the USD/BTC exchange rate was bad.
At today’s USD/BTC exchange rate, I’m seeing a return of about 110% on the initial USD investment. In terms of BTC alone, the return to date is 103%.
From here on out, it’s all free money. Share contracts last 1 year and I’ve 44 weeks left to run on mine. I do expect payouts to decline somewhat over that time but even if I never lift a finger with LTCGear again, I don’t think it’s unreasonable to anticipate getting a return of 200-500% on the investment.
If you want to know more about Bitcoin and how it’s likely to affect the world (especially the world of finance), then read the free The Bitcoin Tipping Point report you can get from the sidebar of this site.
Filed under: Litecoin Mining