Why You Should Avoid Kodak's Bitcoin Scheme

Just like your friend from university who won't stop posting about it on Facebook, Kodak is really into cryptocurrencies. During CES 2018, the company announced a two-pronged blockchain strategy: 1) Its own cryptocurrency called KodakCoin designed to improve image rights for photographers, and 2) a Bitcoin mining scheme called KashMiner where customers can rent equipment and allegedly make money over a two-year period.

Viktor Nagornyy/Flickr

That first one isn't a terrible idea. It uses blockchain technology to solve a legitimate issue, and Kodak's well-established brand could help popularise the idea of a public ledger for image rights to ensure that photographers get paid for their work. However, the second announcement is quickly being written off as a scam and proof that the Bitcoin bubble is dangerously close to popping.

Here's what's wrong with KashMiner, and why you should probably avoid it at all costs.

On the surface, Kodak's claims almost seem to add up. Essentially, the company is asking you to pay $US3400 ($4351) as an upfront investment to buy a Bitcoin mining rig. Spotlite, which is licensing the Kodak brand for this business, will cover upkeep costs and you'll split the profits. The company estimates that you'll earn $US375 ($480) per month ($US9000 [$11,518] total over two years) based on the current value of Bitcoin and current mining rates, but that's exactly where this entire scheme falls apart.

One of the basic tenets of Bitcoin mining is that it becomes more difficult over time. So the rate of Bitcoin production for one of these KashMiners will drop significantly over the next two years. It's possible (likely, even) that the value of Bitcoin could go up at the same time, but there's no guarantee it will be enough to even out the investment.

According to one "Bitcoin economist", the final profits could actually come to just $US2457 [$3144]. That's way less than the $US5600 [$7167] (that is, $US9000 [$11,518] minus the initial $US3400 [$4,351] investment) Spotlite and Kodak promise.

That's pretty far from what's being promised up front, and considering how volatile Bitcoin can be, you could end up off even worse. The only real winner here may be Kodak's stockholders, who saw the company's value jump 60 per cent after this week's announcements.


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