Cloud Mining

Investing in Bitcoin & crypto-currency cloud mining: is cloud mining worth it?

How can you make solid profit with digital currencies: what is cloud mining and should you invest in it?


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Investing in Bitcoin & crypto-currency cloud mining: is cloud mining worth it? (c): Roman Bodnarchuk - Fotolia.com

13.03.2018

Bitcoins have received a great attention all around the world due to its fantastically rising value in the crypto-currency industry. What wouldn’t if the price jumps three times in a matter of few months? With individuals and businesses interested become involved, it is only reasonable to question what options are available out there when bitcoin trade is concerned. 
This article investigates one of those options as it grew in popularity in recent times – Cloud mining. Join the ride as we take you through pros and cons of contracted mining operations, and whether it is worth your time or not.





Cloud mining: what is it?

The concept of cloud mining is quite simple – you borrow hash power from a company which has a lot of it and use it to mine crypto-currencies, just like you would do with your own equipment. The hash rate borrowed comes from software delivered to you by the provider and you can happily compete for coin blocks.

Bitcoin Cloud Mining © "© Cybrain - Fotolia.com"

You basically borrow equipment from others without buying them and setting the mining operations by yourself. You purchase a contract limited to a period of time (monthly, yearly or some contracts even lifetime) and ride the program, making money by being paid by the provider for the mined BTC. This saves time for investors engaged in cloud mining, as well as nerves since someone else already did all needed configuration, trial, and error instead of you.

 

Cloud-Mining: purchase hash rate for monthly, yearly or even lifetime mining - depending on the contract.

 

The leased hash rate that would bring the payments based on the agreement between the hash rate lender and investor, depending on the coin mining difficulty, price and other factors.


How does it work?

The process starts with a decision to ditch highly expensive graphics card and its supporting equipment to try out new mining option. There are several platforms that you can make contracts with, which we shall present in later sections individually. Once chosen, you sign in a cloud mining program, pay an upfront subscription fee and rent has power through software you would get from the provider.

Bitcoin Cloud Mining © "scharfsinn86 - Fotolia.com"

The programs can differ in the hash power you wish to borrow, while the concept of mining stays the same – the more hash rate, the more money you will get from the provider. Below are terms related to hash’s power that you should familiarize yourself with, no matter if you want to mine coins classically or airily.

 

H / s

Hashes per second

1 hash per second

KH / s

Kilo hashes per second

1,000 hashes per second

MH / s

Mega hashes per second

1,000,000 hashes per second

GH / s

Giga hashes per second

1,000,000,000 hashes per second

TH / s

Tera hashes per second

1,000,000,000,000 hashes per second

 

The block would be awarded to those that use larger hash rate, thus programs would usually bring you more money if you choose larger packages.
Now, this might be slightly mind-boggling for many of our viewers; why would someone rent out the equipment to you and allow you to make money if they could keep all the profits with themselves by NOT renting it out?
And the concern is valid as these companies, in order to provide the required hash rate to many customers, would need to invest heavily in equipment, set it up and run it 24 hours in a day, 365 days in a year.
Now, there are issues that need to be addressed regarding mining difficulty. Although you do not mine directly, you are affected by the changes in the block mining awards, BTC value, and general market trends. The higher difficulty, the less BTC your provider will mine. The less they mine, the less they pay you, cutting out your revenues in the process.

Bitcoin Difficulty Price Chart © "https://bitinfocharts.com/comparison/difficulty-price-btc.html Screenshot"

As you can see, difficulty growth s usually higher than BTC price growth, with rare instances when the situation is turned around. That means that as time passes, if the trend continues, mining would become quite unprofitable to do, leading towards a cut in cloud mining services or in increased subscription price, lowering down your ROI.

Why do Miners Offer such Services in the First Place?

What many people do not realize, if your operations are large, cloud mining sales would be quite attractive for you to use instead simply selling the coins you mine.
Firstly, mining companies need funds to continuously fund their operations. Coin mining costs electricity, staff and other utilities, such as equipment & building maintenance, cooling, and other expenses. With fresh cash coming in daily, miners can pay out their expenses without stopping their operations or deal with debt funds that come with high-interest expenses.

Bitcoin Mining © "scharfsinn86 - Fotolia.com"

Another reason is that the cloud mining companies are effectively selling you their bitcoins. Although at some point, direct purchase and sale of cryptocurrencies might yield higher returns; the market is filled with volatility risks, as the value goes up and down frequently, while subscription programs bring a lot more stable income. 
These contacts, no matter what these providers might say do have an end and are not a lifetime, with many of them already limiting the duration of the contract for one year. Part o the mined cryptocurrencies would be left for normal exchange platforms while another part would be sold out for cloud mining contracts, thus many of the companies limit the number of subscriptions available.

Sold out contracts @hashing24.com:

Hashing24 sold out © "https://hashing24.com"

Lastly, and probably one of the most important yet hidden reasons why cloud mining companies want as many people to join them, is to lower down a potential number of competitors in the mining industry. Less mining operations mean lower difficulty, centralizing the power of few large companies that would win more blocks in the future.
If you have decided to get the equipment and enter the competition, your miner graphics cards would add the difficulty level, taking away a portion of a chance for these large players to win the block. They would win more blocks and earn more in the process.

Differences from CPU mining

Here are some of the differences between cloud mining and your own CPU mining operations that you should be aware of:

  • cloud mining does not require equipment to start;
  • no configuration of your devices or internet search for pieces of advice on the mining start and maintenance;
  • if not a scam, cloud mining is a sure way to earn money on a daily basis;
  • requires a simple internet connection and average computer.

Are there any Hidden Fees?

Apart from the program, all of the cloud mining companies charge “Utility fees”, also known as electricity costs that they incur and you would have to pay for. They are calculated on daily basis, with some companies charging you a flat rate or variable rate, depending on whom you choose to work with.
These fees can be charged by the bitcoin balance you would need to keep on the provider’s website or by fiat charges expressed in USD or EUR.

Profit Calculation

There are many calculators out there that can help you determine the profit margins from cloud mining. The crux of the matter is to understand what factors impact the profit you can make from subscriptions and how changes in the market can affect the calculation. We have designed a simple yet effective calculator for beginners to use when evaluating different clouding programs but you are free to make your own or use any other available online.
The example uses bitcoins but it can be implemented on all other altcoins as long as you follow the description of the process below the calculator.

 

PROGRAM 1

PROGRAM 2

PROGRAM 3

Program Price

$220

$1 000

$4 000

 

 

 

 

GH/S Program

1 000

5 000

25 000

 

 

 

 

Cost per Hash

$0,22

$0,20

$0,16

 

 

 

 

Utility Fees/Daily

$0,00025

$0,00025

$0,00025

Utility Fees/Monthly

$7,50

$37,50

$187,50

Utility Fees/Yearly

$90,00

$450,00

$2 250,00

 

 

 

 

 

 

 

 

"Awarded" Bitcoins/Monthly

0,0056

0,028

0,14

"Awarded" Bitcoins/Yearly

0,0672

0,336

1,68

Bitcoin Current Value

$6 500

$6 500

$6 500

"Awarded" Value/Yearly

$437

$2 184

$10 920

Profit Yearly

$126,80

$734,00

$4 670,00

Profit Monthly

$10,57

$61,17

$389,17

 

 

 

 

ROI

-42,4%

-26,6%

16,8%

 

You can put it in excel and play with numbers to get the accurate calculation. The known variables from the cloud mining subscriptions are program costs, how much hash power they provide as well as “Utility fees” that you will be charged on daily basis. The entire calculation is done on yearly basis.
Now, the variables that would need a little bit research on your side is the bitcoin you would get from the provided hash power if you were to mine by yourself. There are a lot of calculators out there on the internet that can provide you with information free of charge, so simply find the mined bitcoins for given hash amount and put it in “Awarded” BTC section.
Put the industry average price of bitcoin and voila! You will get the ROI for that particular program.

Who are the providers?

Many Cloud Mining Companies turn out to be complete scam schemes, mostly organized in pyramid system, in which they take invested funds from the first subscriber, offer him affiliation programs that would pay him or her out if they bring new people in. The funds received would then be used to make small daily payments to the customers, keeping up the scheme while attracting more people in. It is thus important to work with companies that have been proven to possess large mining operations but be warned that even they might close their companies in future if something goes wrong.
The known providers that you should check out are Genesis Mining, Hashflare.io and Tresorio.

 

Genesis Mining

Genesisi CM © "Genesis-mining.com"

Probably the largest Cloud mining subscription platform, where you get to work with different cryptocurrencies, such as bitcoin, DASH, Ethereum, Litecoin, Monero and Zcash. The company has one of the largest bitcoin farms in the world, though the location is kept as a secret due to the security reasons. The maintenance costs are charged on daily basis with flat rate payout expressed in BTC.

 

Hashflare.io

Hashflare CM © "hashflare.io"

Based in Estonia, this European Cloud mining provider offers bitcoin, DASH, Ethereum, Litecoin and Zcash cloud mining programs. The programs are priced per 1 MH/s with 5 different subscription options available for clients. The contracts are expressed in a period of one year while Ethereum, Zcash and DASH do not have any maintenance fees. 

 

Tresorio

Tresorio CM © "tresorio.com"

Tresorio is run by a small French company based in Metz, France. The programs offered are concerned with Zcash, Ethereum, and Ethereum Classic, while there are three distinctive subscription deals you can take. Contracts are limited to one year while payouts are expressed in cryptocurrencies, paid out twice a week to your wallet address.

 

Is it worth investing in?

Putting everything in one place, we can definitely say that cloud mining can be profitable – if you have several factors in your favor at the end of the day. The difficulty for coin mining might increase or decrease in the future, which could be said the same for the value of different coins. Bitcoin cloud mining, for instance, might not be the best option for you if the price continues to decrease as you purchase a contract on current value.
You also have to put in account the maintenance fees and program costs, though we can say that most of the time, small contracts will not pay out positive ROI. Only bigger contracts would yield a significant return, provided that cryptocurrency’s value grows over time.



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