Jan 24, 2019 17:00 UTC
Jun 6, 2020 at 19:14 UTC
Investing in cryptocurrencies is steadily going mainstream in several countries. So, there’s no point of getting surprised if your aunt has an opinion on it.
Where many investors are aware of the different bitcoin exchanges in the country with some savvy investors into other coins, investing in Cloud Mining can be a profitable option.
It may not be so popular, but cloud mining offers an exciting avenue which you (as an investor) might want to try out.
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What Exactly is Cloud Mining?
There are numerous organizations that allow people to open an account with them and take participation in the process of cloud mining for the basic cost.
However, the process makes the mining easily accessible to a wider number of people across distant locations.
Each participant of the network has a rightful share of the profits in proportion to the hash power that has been allotted to them.
Since cloud mining is done through cloud technology, it negates issues like maintenance of equipment or energy costs.
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Pros and Cons of Cloud Mining
In case you are willing to invest in cryptocurrency mining with no hassle of managing hardware, then cloud mining is the choice for you.
Cloud mining implies using shared processing power run from the remote data centres. You only require a home computer for communications, optional local bitcoin wallets and so on.
However, there are certain risks associated with this type of mining which you (as an investor) need to give a thought to before making a purchase.
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Here’s why you should choose cloud mining –
- No constantly humming sounds
- No added electricity cost
- No equipment
- No ventilation issues with hot equipment
- Less chances of being let down
Here’s why you shouldn’t consider cloud mining –
- Risk of fraud
- Frosty mining operations
- Lower profits
- Contractual warnings
- Lack of flexibility and control
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Types of Cloud Mining
Generally, there are 3 forms of remote mining currently available –
- Hosted Mining: You can lease a mining machine hosted by the provider.
- Virtual Hosted Mining: You can create virtual private server and install your own mining software
- Leased Hashing Power: You can lease an amount of hashing power, without having a dedicated virtual or physical computer.
How Can You Determine Profitability?
Generally, the web services are designed to work with your hardware parameters, not cloud-mining parameters.
However, you can still use these calculators by thinking clearly about the costs involved. Profitability calculators usually ask for your electricity costs, and sometimes the initial investment in hardware.
Effectively, you are being asked for your current costs and your one-off investments.
Since the provider is paying the electricity bills, you can enter the monthly mining bill in place of electricity cost.
However, the conversion process is not actually straightforward.
In the case of hardware miners, you can work out the monthly running cost by multiplying your electricity charge by the the power consumption of the unit and by a conversion factor.
But, for cloud mining calculations, you have to do the exact opposite, since the provider gives you a monthly running cost.
Hence, you need to calculate a similar cost per kilowatt hour to feed into the mining calculator. This is something what’s done by dividing the monthly running cost by the conversion factor.
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Risk vs Reward
When engaging in any sort of cryptocurrency mining, there are risk involved. Profitability is possible when you make the right choices.
By now, you must have got an idea about deciding which way to go for Cloud Mining.
In your test calculations, you will most likely see that some cloud mining services will be profitable for a few months. But as the level of mining difficulty increases, you would probably start making a loss in four to six months and beyond.
A possible remedy to this situation is to reinvest the amount you have made into maintaining a competitive hashing rate. But this is highly speculative.
As mentioned previously, the risk of fraud as well as mismanagement is all too common in the cloud mining space. Investors need to invest in cloud mining when they are comfortable with these risks.
Before you invest in cloud mining, look into the social media channels, speak with former customers and ask pointed queries of operators.
Consequently, you should practice the same sort of due diligence that you would for any investment.
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