How Does Cloud Mining Bitcoin Work?

If you want to invest in bitcoin mining without the trouble of managing your own hardware, there are other alternatives. You can use cloud to get your coins.

Simply put, cloud mining means using (generally) shared processing power that is run from a remote data center. One only needs a home computer for communication, an optional local bitcoin wallet and so on.

However, there are certain risks associated with cloud mining that investors need to understand before buying.

Pro
This is why you might want to consider cloud mining:

  • Quiet and cool house - no fan continues to buzz
  • There are no additional electricity costs
  • There is no equipment for sale when mining stops profitable
  • There is no problem with ventilation with hot equipment
  • Reduced opportunities to be let down by mining equipment suppliers.

Cons
This is why you might not want to consider cloud mining:

  • Risk of fraud
  • The mining operation is opaque
  • It's not fun (if you are a geek who likes to build systems!)
  • Lower profits - operators must bear the costs
  • Warning the contract that mining operations can be stopped depends on the price of bitcoin
  • Lack of control and flexibility.
  • Type of cloud mining

In general, there are three forms of remote mining currently available:

Hosted mining
Rental of mining machinery hosted by the provider.
Virtual hosted mining
Create a virtual private server (general purpose) and install your own mining software.
The power of rented hashing
Rent a number of hashing power, without having a special physical or virtual computer. (So ​​far, this is the most popular cloud mining method.)
How to determine profitability
shutterstock_123406111 We previously discussed ways to calculate mining profitability. However, offered web services are designed to work with your hardware parameters, not cloud-mining parameters.

Even so, you can still use this calculator by thinking clearly about the costs involved. The profitability calculator (for example, The Genesis Block) often asks for your electricity costs, and sometimes the initial investment in hardware. Effectively, you are asked for your ongoing costs and one-time investment.

Therefore, because the provider, not you, is paying electricity bills, you can enter monthly mining bills in lieu of electricity costs.

The conversion process is not entirely easy. In the case of hardware miners, you can calculate your monthly operating costs by multiplying your electricity costs (i.e. $ per KWh) with unit power consumption and with a conversion factor of 0.744 (ratio of seconds per month to joules). energy per KWh).

However, for the calculation of cloud mining, you need to do the opposite, because the provider gives you monthly operational costs (effective). Therefore, you need to calculate equivalent costs per kilowatt hour to be entered into a mining calculator. This is done by dividing (not multiplying) the monthly operating costs by the conversion factor of 0.744 mentioned above.

Risk vs. reward
When involved in all types of cryptocurrency mining there is a risk, but profitability is possible if you make the right choice. In this article, we have given you some instructions on how to decide where to go.

In calculating your test, you might see that some cloud mining services will be profitable for several months, but, when the bitcoin difficulty level increases, you may start to suffer losses in the next four to six months.

A possible remedy for this situation is to reinvest what you have made to maintain competitive hashing levels, but this is very speculative.

As mentioned above, the risk of fraud and mismanagement is too common in the cloud mining space. Investors can only invest in cloud mining if they are comfortable with this risk - as the saying goes, never invest more than you want to lose.

Investigate social media channels, talk with ex-customers and ask operators sharp questions before investing. In the end, you must carry out the same due diligence that you did for any investment.

Disclaimer: This article may not be seen as support from one of the services mentioned. Please do your own research before considering investing any funds through this service.

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