Cloud Mining – An Overview
Traditionally, mining cryptocurrencies involve investing in the relevant equipment and personally overseeing the mining process. In addition to the costs associated with the hardware, investors need to understand how to manage and manipulate the equipment in such a way as to reap profits. The costs associated with hardware acquisition and electricity often reduce the investor’s profit and in certain instances, lead to losses.
To cut on the hassles related to mining, investors who do not prefer to invest in the relevant hardware often go for the option of cloud mining. The process refers to using shared processing power operated from a remote data center hosted by a third party and accessed by many users. The technology enables the users to mine bitcoins or other cryptocurrencies without worrying about hardware management issues.
The only requirement if using cloud mining is to register and sign mining contracts with the mining company. And, or, you need to get a personal computer to facilitate communications and a wallet for their bitcoins or other cryptocurrencies of your interest.
Cloud mining has numerous advantages. However, it also does have flaws. Your decision for or against cloud mining might be influenced by its merits and demerits, which are:
● It is hassle-free; you can invest in a mining venture from the comfort of your home.
● You do not get to incur electricity costs.
● It relieves you of acquiring equipment and footing the costs of maintenance. Besides, the extra baggage of disposing of equipment when the venture becomes unprofitable is not yours to worry about.
● You get to earn without enduring the noise and ventilation problems associated with mining.
● You do not have contractual obligations between equipment suppliers and miners that you need to worry about. Every aspect of the venture is handled on your behalf.
● You do not need to have in-depth knowledge of mining or skills to operate the requisite equipment.
● The risk of fraud and mismanagement is common in this space.
● The Mining operations are opaque because you don’t control them directly.
● If you are the kind of person who enjoys putting the system up from scratch, then cloud mining robs you of the pleasure of doing so.
● The probability for lower profits is high because the operators have to cover their costs before considering your payout.
● Contractual warnings about the possible cessation of your mining operations due to the poor price of the digital currency are rampant. The instabilities that arise from such arrangements make the ventures a little less attractive.
● You are deprived of the control and flexibility of your mining operations.
The disadvantages here seem to overwhelm the advantages. However, there are many measures you can put in place to earn from cloud mining. As in any other investment opportunity, due diligence is necessary. Prior research and analysis of the industry and the possible investment scenarios will provide adequate information for an effective investment plan.
You can carry out your investigation on social media, talk to former as well as current customers of the mining companies you are scouting, and read relevant publications. Also, you must compare the returns from mining different digital currencies, and then choose the most profitable mining option.
Ideally, you need to evaluate the different types of cloud mining services or contracts on offer from the different service providers in the industry. At the moment, the following three types of cloud mining are available:
Hosted mining requires that you lease a mining machine that is hosted by your preferred service provider.
Virtual Hosted Mining
This type requires you to create a virtual private server in which you will install your own mining software. Make it a general purpose server.
Leased Hashing Power
This is the most popular of all cloud mining methods. Individuals that prefer this method lease an amount of hashing power, which is not necessarily dedicated to a physical or virtual computer.
Once select the right type of cloud mining, you need to choose a reputable cloud mining firm. It is advisable that you pick one that enables you access information about their mining centers, agents and addresses. Considering the high-risk level in this investment space, you need this information to enable you to take action in case you are scammed.
Then, you need to consider if the type of cloud mining contract that is most suitable for you. Cloud mining contracts may be open-ended; meaning they are valid as long as they are profitable. Otherwise, they can be periodic for the various digital currencies. For instance, you can get a 2-year Bitcoin, Ether or Monero mining contract.
For you to maximize profits from your cloud mining venture, you should know about every fee charged. Some cloud mining service providers offer contracts charge two kinds of fees: An upfront fee and a maintenance fee. The upfront fees (appraisal and purchase costs) apply at the start of the contract while maintenance fees (fuel and upkeep costs) apply in the course of the contract.
Some cloud mining contracts are profitable for the first few months. As the difficulty of mining the digital currency increases, you may start to make losses. You can remedy this situation by reinvesting what you have already earned so that you can maintain a competitive hashing rate. However, this is highly speculative.
What makes or breaks a cloud mining contract?
You can easily compare your revenue against other markers if you comprehend the fees your miner charges. The cloud mining contract you sing up for, for instance, is only sustainable if the revenue it generates covers at least the maintenance costs. Otherwise, your venture will be non-profitable.
The gradual but expected increase in the difficulty of mining certain coins can also lead to losses. Most algorithms that available miners use can determine this difficulty automatically and with near-perfect precision. Since this difficulty determines the amount of a specific digital currency that can be mined worldwide, a good miner should either provide provisions to switch its clients to better coins or hold on the mining before clients incur losses.
Some miners opt to end the contract when the mining difficulty spikes even though experience indicates a high correlation between price and mining difficulty. Such a heightened correlation boosts the possibility of sustaining a contract longer than expected because the price gains compensate for the drop in the volume mined. The daily revenue remains almost the same, while the amount of digital currency reduces daily due to increased mining difficulty. Although fluctuations are bound to occur, the average value tends to level off over time.
Note that the maintenance fee is almost always presented in dollars. The price of digital currency and the level of difficulty increase over time, as such, keep the daily maintenance fee almost constant to the daily revenue. This may maintain the contract at the same rate of revenue per day for a long time, thus assures investors of a stable source of passive income. Ultimately, this relationship minimizes the risk of revenue reduction or sudden termination of the contract. The narrative may change if the cloud mining firm denominates the
maintenance fee in another currency other than the dollar, or if it varies them in a fresh contract.
The Best Cloud Mining Firms to Consider
The success of your cryptocurrency mining venture is partially dependent on the cloud mining service provider that you choose to use. You will need to do your research well and choose a firm carefully.
Genuine cloud mining providers should prove the existence of their data centers and can easily get endorsements from reputable industry players. Many of these mining firms either procure their own hardware or develop it. Most have their data centers in countries or jurisdictions that sell electricity at competitive rates.
Here is a list of the mining firms that are worth looking at:
Genesis Mining easily is the most popular cloud mining services provider worldwide. It is well-established with verifiable data centers. The company offers mining contracts for several cryptocurrencies that include Bitcoin, Ethereum, Dash, Monero, and Zcash. Its data centers are based in Iceland and China where electricity is cheap and readily available.
For each of the six cryptocurrencies that the mining firm deals in, it provides four plans; three fixed arrangements and a custom plan where you can alter the specifics depending on your preference.
This cloud mining outfit was established by Bitman in 2014, the China-based manufacturer of ASIC mining hardware. The company has verifiable data centers around the world and provides mining contracts for Bitcoin, Bitcoin Cash, Dash, and Zcash.
This cloud mining provider gives you multiple cryptocurrency options. The company is a subsidiary of HashCoins Blockchain Technologies, which like Bitman, also manufactures Bitcoin mining equipment.
The mining company offers contracts for mining of Ethereum, Litecoin, Bitcoin, Dash, and Zcash. Their charges are easily the most flexible in the market since they give customers a chance to pay for speeds of as little as 1 hash per second (1 H/s).
Hashing24 does not own data centers. Instead, it partners with providers such as BitFury whose hardware it leases for its customers. Its key selling point is the demo mode, a feature that simulates a mining contract. New customers can see beforehand, what a mining contract can deliver even before they register. The firm has two options for its customers; the structured mining contracts that are often sold out and an auction model where customers can flesh out the kind of contract they want with the specifics they prefer.
Eobot is not a cloud mining portal alone; rather, it is also a faucet and a cryptocurrency exchange. This company was registered in California in 2013. Its mining contracts range from extremely short-term (24 hours) to considerably long-term (ten-year arrangements). It has the largest possible diversity of coins that a customer can mine at any one time. The most prominent of these include Bitcoin, Ethereum, Ethereum Classic, Monero, Lisk, Litecoin, Bitcoin Cash, Dogecoin, and Facto, among twenty other altcoins.
Cloud mining is a viable business. Despite the risks of fraud, mismanagement, and possible premature termination of contracts, the venture is promising in many ways. It is handled by specialist service providers, meaning most of the investor’s operational costs, equipment handling, expert knowledge and experience among other contributors to successful investment are taken off the shoulders of the customer.
The customer can opt for a number of alternative mining contracts. It gives customers a chance to put their money in an arrangement that gives them residual income for the period of the contract.