Cloud Mining: An alternative way to earn cryptocurrencies
Cloud mining services allow you to earn cryptocurrencies without having to worry about the hassle of having to purchase or manage your own software. It allows you to outsource all that to providers with huge data centers. A portion of the shared processing power is allocated to you based on how much hash power you purchase.
Signing up for cloud mining is extremely easy. You simply head over to a provider's website, select what type of package you want (the more hash power the package has the more expensive it is), and you pay for the purchase. Most providers will give you the option to select which cryptocurrency you want to mine, and you'll be asked for the wallet address you want to receive the coins you earn.
Available cloud mining options
The three types of cloud mining options currently available are:
1. Hosted mining
This involves leasing a miner that is hosted by the remote mining service. The service is responsible for maintaining the hardware, while you get to keep the coins earned by it.
2. Leased hashing power
You also have the option to lease an amount of hashing power out of a cloud mining service's shared processing power. It's the easiest way to get into mining as it doesn’t require any technical knowledge on your part. You simply make a purchase and start earning coins.
3. Virtually hosted mining
This is a DIY form of cloud mining. You rent a private server, then you install and program any mining software you choose.
Figuring out if a cloud mining service is profitable
When you decide to sign up for a cloud mining service, one of the first things you should do is figure out how profitable your investment will be. Given the fact remote mining is a relatively new service, most mining profitability calculators are only configured for traditional hardware miners. It's only a small inconvenience though since you can easily work around that by figuring out what your monthly leasing costs are, then entering that as your monthly energy costs. Your provider takes care of all the energy costs and other expenses associated with maintaining the hardware when you opt for cloud mining services.
Something else you also need to keep in mind when trying to figure out profitability is how much the difficulty of any coin you decide to mine will increase over time.
Perhaps, the most important thing when it comes to calculating the profitability of any mining venture is what you think the value of the cryptocurrency you're mining will be over time. For example, let's say you pay a hundred bucks a month for a cloud mining service that will earn you an average of 0.001 BTC per month for a year. At the end of the year, you have .012 BTC earned from the contract at a total cost of $1,200. On the surface, that doesn't look like much profit, but, if you held on to all your coins and the price of bitcoin rose to $30,000, you would have tripled your investment.
You'd have even more profit if you had reinvested all your payouts and purchased more hashing power. There are certainly opportunities to make money with remote mining services if you do your homework.
The ugly side of cloud mining
Cloud mining services allow you to earn cryptocurrencies without having to deal with the hassle of maintaining hardware, but that doesn't mean things always go smoothly. There are Ponzi schemes masquerading as cloud mining services all over the place like Bitcoin Savings & Trust which ended up defrauding its customers out of over 700,000 BTC.
Ouch!
The way Ponzi/pyramid schemes work. A company pretends to be a legitimate business that offers a service. In this case, a cloud mining service. Customers sign up for their services and receive their cryptocurrency payments regularly. Everything looks legit.
Unbeknownst to them, the payments they receive come from new customers, not miners. The new customers are also sent payments that come from those who sign up after them. And on and on it goes until the pyramid collapses when there are no more suckers signing up.
It's better to invest in reputable cloud mining services like Genesis Mining which has established a solid reputation in the cryptocurrency community. Investigate any provider you decide to go with. Where are their datacenters? Is there any proof it even exists? Internet forums and social media can be very helpful when it comes to figuring out which remote mining services are legitimate enterprises.
As is the case with other investments, only invest an amount you can afford to lose.
To sum things up, here are some benefits and disadvantages of cloud mining services:
Pros
- No need to bother with noisy ventilation systems
- You're not stuck with obsolete equipment when mining is no longer profitable
- Your energy bill stays the same
- No need to deal worry about excessive heat from your equipment
- No need to purchase a humidifier
- No need to spend months chasing down mining hardware suppliers
Cons
- You might end up getting scammed
- Most mining operations aren't transparent
- It takes out the fun that comes with building your own rigs
- Less profit since your provider needs to charge you enough to cover costs and turn a profit
- You are not in control. You can only mine the cryptocurrencies your provider offers
- Your provider will often reserve the right to cancel your contract depending on the price of the cryptocurrency that's being mined
