Bitcoin mining has now assumed such enormous proportions that it has become tough to make profits, especially with the type of high-end investments needed in hardware and software. Not to mention the technical hassles and the noise and heat bound to be generated from the machines humming at your place. So an alternative called bitcoin cloud mining is doing the rounds these days, helping people mine without all the machines and worries. This technique of mining, due to negligible investment in equipment and no intricate knowledge requirement, has opened the doors of the Bitcoin Mining for those who do not have much expertise in technology. This makes it even more essential to understand what this cloud mining bitcoin entails and how it could affect you.
Cloud mining Bitcoin basically involves companies which ‘rent out’ their mining equipment to the investors. So, the company gives out a part of their operations along with the hardware, for rent, to the investor and mine for them. This is done via mining contracts. The processing power is shared while using a remote datacenter. It’s a lot like outsourcing a part of your business for a specific time frame that you do not have the time for or which can be conducted in a more profitable way by others. Profitability of cloud mining depends on the current bitcoin price and the cloud miner’s hash rate. The bitcoin cloud mining company takes its cut of the fee and releases the rest to the investors.
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Advantages Of Bitcoin Cloud Mining
- No upfront investment in hardware, shipping charges and other fee
- No delay in supply of equipment
- No maintenance, uptime management
- Less risk
- Low electricity cost
- Quieter place
- Higher profits
Disadvantages Of Bitcoin Cloud Mining
- Serious risk of scams- many such companies are not legit and are nothing but big fat Ponzi schemes
- Returns can be much lower due to the cost of mining operations
- Lack of control
- Less flexibility
- Passive mining- less fun
How Can Bitcoin Cloud Mining be a scam?
There are tons and tons of companies acting like they’re the future of the world and how you can become an overnight millionaire by investing in them. One of the most common ways is when the companies offer cloud mining as a front and pay out money to older users, window dressed as profits from cloud mining, while in reality got by enticing new investors to join in- i.e. a ponzi scheme. A new way of scamming is by launching a new exchange or pretending to be a Bitcoin trader. Another popular way is by launching a new currency with the claims that it was all set to conquer the world and take over Bitcoins.
You should remember that if it’s too good to be true, then you’re probably right. A basic thumb rule is- if the company’s claims of hashing power cannot be reconciled with an address having enough coinbase inputs, it should not be trusted. There are ways to find out more about a business. Whois.com gives you the owner of the website. If the name and address aren’t real and have been deflected, that is enough reason to be suspicious as the owner doesn’t want you to know who they are. Be sure to research thoroughly if the source of income is what they make it sound to be.
The best bitcoin cloud mining services include HashNest, Genesis min, HashFlare etc while the latest cloud mining services to have been suspended are Bitknock, mining Sweden and HashOcean. For more information, check this out.
Take it with a pinch of salt
Essentially what you’re doing is making money from work done by others from the hardware they own. This money is the balance of the fees paid out vs. the payout earned. So it all depends on the fees and the belief that the mining company will not siphon off any funds. The reason you should be wary is if the mining process is actually more profitable than the fees earned from investors, why did the mining company start this in the first place? They already have the equipment. Why not just mine with the hardware and keep all the profits for themselves. These questions are very logical and beg wariness while investing. Thus it is always prudent to be skeptical. Better safe than sorry.
One of the best and genuine examples of Cloud Mining is by Genesis Mining. The company is based in Hong Kong possesses its own mine and rents it out in terms of the hardware to third parties. They have a facility at Iceland and also provide a live camera feed to it along with many videos at their site. It offers a variety of plans- Gold, Platinum and diamond- all with different hashing powers but providing lifetime contracts.
Types of Hosting
Buy Hash Power: Most preferred method of cloud mining. All you need to do is buy a certain amount of hash rate for a specific time period, sit back and enjoy a beer. There isn’t any need to own any machine in this case. Hashing power can also be traded by the user. There are relatively more chances of a fraud and one needs to be wary although the quantum of investment is lower and entails lower charges.
Hosted Mining: This method is preferred when you either own a machine or lease one. This is then given to a company which handles all the necessary requirements like electricity, cooling, management etc. the investment involved as well the monthly fee here is higher because you’re buying the hardware and have to maintain it. But it is less prone to scams although it is still strongly advised to still do a thorough check
How to choose a Bitcoin Cloud Mining Service?
There are a plethora of companies offering this service nowadays. Keeping this is mind, a few pointers would go a long way in helping you find out which one suits you the most:
- Reputation of company: when did it commence operations, reviews, the amount of transparency it shows with respect to its members, their qualifications etc
- Security issues: Are the funds secure? Is the company expected to continue operations in the future? What happens in case of a wind up? How safe is the site in term of dealing with attack attempts.
- The costs involved: including the GHS for cloud mining. How long would it take for you to at least break even?
- Freebies: beware of sites offering free trials because that is just not logical. A free trial would mean giving away money for free. Most importantly, do not share any information related to payment.
- Payment method: usually, the companies accept credit cards, paypal, bitcoins etc. But in case of bitcoins, one needs to be extra cautious as payment done this way cannot be reversed
- Virus threat: There have been cases of viruses being transmitted via malwares. These then force the computer to mine bitcoins using its own power.
- Mining difficulty: Impacts directly the entire profitability question. As the difficulty level would only go up in the future, would you still earn a decent amount of profit? How would the market price of the bitcoin impact your profits?
Answers and comments are usually available on forums, threads etc. overall, the user should be aware of the hash rate cost, durability of the service, mining contract flexibility etc. Cloudminingreport.com is a good place to check the reliability of companies.
Overall, cloud mining is a high risk game and should be dealt with very care.