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A Beginner’s Guide to Bitcoin Cloud Mining

Anca F. by Anca F.
October 29, 2018
in Crypto 101, Cryptocurrencies

Are you looking for a way of mining Bitcoin without having the necessary funds and time to manage your own hardware? Cloud mining offers investors an alternative way of producing Bitcoin without having to purchase expensive hardware or have any technical knowledge. Due to these advantages, bitcoin cloud mining has opened up a new possibility of making Bitcoins for people that are not that good with hardware.

What is Cloud Mining?

Cloud mining is the process of mining cryptos by making use of shared processing power that comes from a remote datacentre. However, this mining method comes with several risks that have to be researched thoroughly before purchasing such services. Follow the rest of our guide to find out what risks are involved.

Bitcoin Wiki

What Does Bitcoin Cloud Mining Involve?

The main feature that sets apart cloud mining from other mining methods is the issue of who houses and manages the hardware that mines the Bitcoin. Regular mining options involve that the user has to buy, set up and manage his equipment.  This means that the owner must have technical know–how more than the average person, proper ventilation for cooling and a lot of money for an exorbitant electric bill. It’s no secret that ASIC hardware requires high amounts of electric power to function.

Cloud mining has the mining rigs stored and maintained in a facility that belongs to the mining company. For a customer to access such services, he must register for an account and set up a mining contract. These contracts come into effect almost immediately and the user earns the profit on a regular basis.

Types of Remote Mining

Remote mining can be divided into three categories:

  • Hosted mining – the mining hardware is leased by the provider.
  • Virtual hosted mining – the private mining software is installed on a virtual private server
  • Leased hashing power – the processing power is leased without owning a dedicated or virtual computer.

Profitability Issues

Cloud mining providers differ in their services, thus generating different earnings. The first thing you must take into consideration is the mining company’s reputation. A company that is known to have solid security measures and few negative reviews is a safer option. Do your research and scour the threads on Bitcoin forums and reliable review sites for feedback from clients (or former clients) that have used the service of the cloud mining company you’re interested in.

Also, the cloud mining hash – GH/s (Gigahash per seconds) –  that you’ll be paying for comes at varying prices. If the prices are ridiculously expensive, then it would not be a good investment in that service.

The profitability of these services is also influenced by mining difficulty and Bitcoin’s price, which dictates how the market moves.

Mining calculators are used to giving an estimate on how mining earnings will be affected by increases in mining difficulty. However, these estimations are generated by inputting hardware parameters, not cloud-mining parameters.

The conversion process has a higher degree of complexity. Hardware miners can calculate their monthly running cost by multiplying it with their electricity charge by the power consumption of the unit and by a conversion factor of 0.744.  When it comes to cloud mining, the calculations are done in reversely, because you are given a monthly running cost. Instead, the monthly running cost is divided by the conversion factor of 0.744.

Risks and rewards

You have probably heard that certain cloud mining services have generated profitable earnings for the first few months, but seeing as mining difficulty constantly increases, losses are bound to occur at a certain stage.

Advantages

As you do not physically own the hardware, there are no installation or setup costs. Also, you do not have to deal with the heat and noise generated by the cooling fans. You also do not have to do the required maintenance or have to invest in extra equipment to have your mining hardware running.

Disadvantages

While not having to own the hardware does save you the trouble of having to worry about maintenance and the like, you cannot resell the equipment to gain some part of your investment for the same reason- it’s not yours.

There are many sites that claim that they have the best servers and equipment that will get you BTC in no time. But be extra careful, as there is a high risk of fraud and scams which are just waiting to run off with your money.

By renting the equipment and power of a mining service, you automatically receive fewer profits that you would have normally earned mining on your own. If the mining operations have a very low profitability rate they can be ceased by the service.

Once again, you do not have much control over what the service does and runs its hardware and operations, leaving you with little flexibility.

You cannot direct your hashrate at the mining pool you want.

Bitcoin mining is still as risky as any crypto endeavor, so approach this investment method with as much caution as you would have with the others.

Tags: BitcoinBTCcloud mining
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Anca F.

Invest at your own risk notice : The information on this website and the links provided are for general information only and should not constitute any financial or investment advice. We strongly recommend you to conduct your own research or consult a qualified investment advisor before making any financial decisions. We are not responsible for any loss caused by any information provided directly or indirectly on this website.

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