Of late, cryptocurrency mining has gained a lot of attention. A number of cloud mining companies have cropped up, some promising higher returns than mining rigs. However, cloud mining has received lots of negative press as well, with most companies being described as scams. These underlying issues have led to many people asking one important question: is cloud mining worth the costs?
How does Cloud Mining work?
Cloud mining is based on a very simple concept. A cloud mining company purchases the expensive cloud mining equipment and rents the computing power of these machines to you. In exchange, you pay a fee. The fee is based on how long your contract runs and the hashing power you rent.
Basically, a mining rigâ€™s hash rate is the most important factor in cryptocurrency mining. A hash rate measures a mining rigâ€™s computing speed. The faster the hash rate, the better the machine in mining cryptocurrencies. The cloud mining companies store the mining equipment and handle maintenance.
Basic Terms Related to Hash power
- H/S equates to 1 hash in a second.
- KH/s equates to 1000 hashes in a second.
- MH/S equates to 1 million hashes in second.
- GH/s equates to 1 billion hashes in a second.
- TH/s equates to 1 trillion hashes in a second.
The cloud mining companies work every day, 365 days in a year. They run mining rigs with all sorts of computing power but pay members based on the hashing power they borrowed. While the concept of cloud mining looks simple, there are some concerns most people have.
- Why Pay People when you can keep all the Profits?
Cloud mining companies own mining machines. They take care of them and all of the costs. So, why share their profits? To start with, mining cryptocurrencies is expensive. Bitcoin mining consumes too much power, for example. This study estimates that bitcoin mining consumes 824 kilowatts of energy per every transaction verified. In a year, bitcoin mining consumes more power than 159 countries. To take care of such expenses, including maintenance and labor, cloud mining companies pay a part of their bitcoin earnings in exchange for your fee.
- Why not deduct Expenses from profits?
Another underlying issue with cloud mining is that people doubt their profitability. Cryptocurrency is supposedly profitable but these companies claim to charge to take care of their expenses. While this is a genuine concern, cloud mining companies aim to benefit from a series of factors in the industry.
- With more people subscribing to their services, all rewards from cryptocurrency mining are profits.
- As more people join cloud mining, competition in the mining industry lowers. The mining algorithm is only increased if there are more miners, and this lowers block rewards.
- By catering their expenses using membersâ€™ subscription fees, they avoid relying on volatile cryptocurrencies to handle expenses.
- Why do so many Cloud mining companies close down?
Another concern about cloud mining is the high failure of cloud mining startups. Every month, there seems to be a cloud mining startup that closes down. Some companies like, Ghash, have already suspended their cloud mining services. In most cases, cloud mining companies are scams. They are illegitimate companies that pay a few members as they capitalize on new membership subscriptions. After a while, they escape without paying most of their members.
Should try Cloud Mining?
Mining cryptocurrencies is a profitable business for the most part. A lot of people have become rich mining at home. People who seriously mined bitcoins between 2012 and 2014 by now have very high returns on investment. The value of the bitcoins they earned is worth a lot more than it was back then.
Today, however, buying a good mining machine is beyond most people’s capability. The cost of maintenance and the ever-changing mining algorithms makes conventional mining not worth the effort of everybody. Cloud mining, therefore, offers a seemingly better alternative to some people.
How different is Cloud Mining?
- No equipment needed to start earning.
- You earn on a daily basis unless the mining company is a scam.
- Little efforts on your side; the mining company does all the hard work for you.
- Legitimate companies are open about their contracts so that you know when it will be terminated and under what circumstances.
Is Cloud Mining Profitable?
The profitability of a cloud mining’s contract depends on a number of factors. For starters, the difficulty of mining cryptocurrencies increases as their value increases. Between 2014 and 2015, for example, bitcoinâ€™s mining difficulty went up 34 times. When this happens, the cloud mining company is unable to make profits and your contract is often terminated.
How to Join a Cloud Mining Company
There are several trusted cloud mining companies. The following 3 are the most trusted by users online.
#1: Genesis Mining
Probably the most popular cryptocurrency mining company, Genesis provides cloud mining services for more than one cryptocurrency. At the time of writing, Genesis supports DASH, Litecoin, ZCash, Monero, and Ethereum. The company used to offer bitcoin mining as well, but they have since terminated the option.
MinerGate may not be as popular as Genesis, but they are fast rising. The company has more than 750,000 members at the time of writing. Most of the members come from the Americas, Europe, and Asia. The company’s support team and low fees are its greatest strength points. MinerGate offers mining services for Bitcoin, Ethereum and a host of other cryptocurrencies. MinerGate generally enjoys positive feedback from their members and review sites. This review, for example, explains MinerGate in a broader perspective to potential investors.
Hashflare is touted as the most profitable cloud mining company on forums. The company is based in Estonia and offers mining options for Ethereum, DASH, ZCash, and Litecoin. Hashflare caps their contracts for one year because in most cases the mining algorithms change after a year. The company is popular for their active customer support team and zero maintenance fees charged.
Is cloud mining worth a try? The best answer you will get is that it all depends. There are a lot of factors to consider most of which you must evaluate personally. Research more about legitimate cloud mining companies and make the investment decision on your own.