Cloud Mining for Beginners: All about it | Pros, Cons, Scams and so on

Any platform (cryptocurrency, token …) based on Blockchain needs to process thousands of transactions every day.


In order for this process to be carried out efficiently and safely in each project, there are the so-called miners who are in charge of verifying and adding to the chain of blocks each and every one of the operations carried out in each network.

This process is what, in the ‘crypto’ world, is known as mining.

Each time these miners perform this task, they receive a reward in the form of the corresponding cryptocurrency (Ether in the Ethereum network, bitcoin in the Bitcoin network, etc).

This reward is given to the miner to compensate for the resources they need to consume to carry out the process.

What does a miner need to mine?

To carry out the mining process you need, among other things:

  • Hardware: Depending on which cryptocurrency you want to mine, the necessary hardware could be CPUs (what we commonly know as microprocessors), GPUs (graphic cards) or ASICs chips, which are the specific application circuits used in Bitcoin mining.
  • Software: These are the necessary computer programs for mining to be carried out. These are the ones that, with the help of the hardware, perform all the mathematical calculations necessary to verify blocks and receive the rewards.
  • Electricity: Without this factor in abundance, the rest of the process fails. It is vital for the operation of computers and mining machinery.

These three necessary tools in mining bring with them some inconveniences such as:

  • The High cost of machinery: Build a mining platform can go from several hundred to several thousand euros and dollars. Both CPUs and, above all, graphics cards or ASIC chips have a high cost, so it is necessary to have a certain economic level.
  • Space to store machinery: In order to succeed in mining cryptocurrencies, it is necessary to buy a lot of machinery, that is, the more we obtain, the more likely we are to obtain the reward in cryptocurrencies. Although this hardware is not very large, when you buy a lot, you will also need a large space such as industrial warehouses, which are also expensive to buy or rent.
  • Heat released by the machinery: The hardware, when it works at maximum performance, tends to overheat. That is why it is usually accompanied by fans. However, when we have a mining platform with several dozens of devices running 24 hours a day, 7 days a week, the fans that each machine brings with them are not enough. Special expensive ventilation and liquid cooling systems are necessary to help us maintain the temperature of the equipment between stable values. This will help its correct maintenance over time and its operability is desired.
  • Cost of electricity: Each computer consumes electricity. When it comes to lots of equipment, the expense skyrockets. And if we also add the ventilation systems and the fact that these devices are connected and working at full power 24 hours a day during each day of the year, the electricity cost goes to very high figures that must be taken into account before entering cryptocurrency mining.

These are the main reasons why mining from our own home, in most cases, is not currently viable or profitable, unlike a few years ago.

But do not be discouraged!

Luckily, there are other ways to mine cryptocurrencies without buying expensive equipment or paying huge electric bills.

What would you think if I told you that there is someone willing to mine for you and give you part of their cryptocurrencies?

Welcome to the world of ‘ Cloud mining ‘!

WHAT IS CLOUD MINING?

Cloud mining is the process of mining that takes place in a remote data center with shared processing power, so we do not need to have the necessary machines for mining in our home.

This type of mining allows users to mine different cryptocurrencies without having to worry about installing any software on their computer, or having the right hardware, even for the electrical cost.

All they have to do is ‘rent’ some mining power to companies that own such hardware.

The mining platforms are acquired by investors or large companies, and are housed in facilities prepared specifically to carry out the mining process.

Therefore, we could say that cloud mining is a service offered by some companies through which users can obtain cryptocurrencies simply by renting mining power to these companies.

The concept is clear, but …

HOW DOES CLOUD MINING WORK?

Cloud mining works in such a way that the user, through a platform that offers these services (such as those we will see later), acquires a mining contract through which he obtains mining power or also known as ‘ hashing power’ or power of hashing.

Remember this word because we will use it later several times:

Hashing power = Power of mining

The platforms that offer these services can be ‘mining pools ‘ (mining pools, in which each member shares their processing power and receives a corresponding reward) or companies that dedicate themselves to mining but want to reduce costs and have liquidity to acquire new equipment.

When the user contracts this “Hashing power“, he is acquiring a part of the power that the company uses to mine cryptocurrencies.

Therefore, when the company receives the reward of mining, the user will be given the proportional part, which will depend directly on the mining power that they hired.

To understand it more easily we will give an example:

Let’s say that a car brand has 99 machines in its factory for the assembly of its cars. To you, that you love that brand of cars, you would like to invest in it.

That’s why you give them the money to buy one more machine: the machine number 100.

In return, the factory will grant you the proportional part of your benefits at the end of each month.

What will be the proportional part that you will receive?

1 machine “yours” divided among the 100 that the factory has: 1/100 = 1%

That is, when they obtain benefits, you will receive 1% of those benefits.

In cloud mining, it works in the same way:

Let’s say that a mining pool has machinery whose power is 100 Tera Hashes ( THs , is a measure of performance) per second for Ethereum mining.

We decided to buy 1 THs of power.

When they get a reward in the form of Ether, we will have the proportional part, which will be -as in the previous example- of 1% (1 Terahash our divided among 100 total Terahashes).

It must be said that, as we acquire more mining power, the greater the profitability …

…in theory.

I say in theory because reality is something different. Later we will explain why, but now let’s see first the different forms of cloud mining.


TYPES OF CLOUD MINING IN THE CLOUD

Today there are three different ways to mine cryptocurrencies remotely.

1. Hosted mining

It is one in which the user has purchased their own hardware for mining, but does not want to perform the process from their own home, so it sends this hardware to a company that is dedicated to mining.

This is done to save -or rather reduce- the corresponding electrical costs, but it is also done so as not to have constant noise and suffocating heat in your own house 24 hours a day.

It is also recognized as hosted mining when the user does not buy, but rents one of the physical machines that the company has previously acquired.

From the time of lease, the user signs a contract for a specific time, through which it is certified that said machine and the rewards obtained with it will be his property.

 

2. Virtual hosted mining

It is the same as hosted mining, but instead of renting a physical machine itself, we pay for a virtual private server, that is, a computer that we access remotely via the Internet.

When we connect remotely to this virtual computer, we have total control over the mining hardware that we have agreed with the company, deciding the software used to mine, the cryptocurrency we want to mine, the time it is mining, etc.

 

3. Hashing power rented

This is the most common type of mining within what is known as cloud mining. In fact, most people think that this is the only type of cloud mining.

Through this method, the user can rent ‘ hashing power ‘ or mining power without having to rent one or several pieces of hardware or without having a physical or virtual computer dedicated to it.

The user, through a temporary contract, acquires a certain amount of that ‘hash power’ in exchange for a certain amount of money.

During this agreed period, the user will receive daily a quantity of cryptocurrencies proportional to the acquired power, which can be withdrawn in his own purse or wallet of cryptocurrencies.

As we have seen, this type of mining in the cloud is not the only one, but it is the most used one, and it is on which we will base ourselves for the rest of the article in general and for the next section in particular.


CLOUD MINING CONTRACTS

In the three types of mining in the cloud, but especially in the latter we have just seen, what we are talking about is renting hash power.

When we rent something from someone, we usually pay an amount of money to that ‘someone’ in exchange for a good (tangible or intangible) for a certain time.

And this is done through a contract.

It also works like that in cloud mining.

Suppliers that offer cloud mining services -which we will see later- propose different types of contracts.

To know which to choose, we must know each point of a contract, which we explain below:


Cryptocurrency

It refers to the digital currency that we are going to undermine through the contract. The most common are Bitcoin, Ethereum, Litecoin, Zcash and Dash, but many more can be mined depending on the provider we choose.

Algorithm (Algorithm)

Hiring hash power does not mean that we can undermine all the cryptocurrencies, but we will have to choose the correct algorithm to undermine the cryptocurrency we want.

Before even acquiring hash power, it is necessary to choose the algorithm for which we want that mining power. The most common algorithms are:

  • SHA256 for Bitcoin
  • Scrypt for Litecoin
  • Ethash for Ethereum
  • Equihash for Zcash
  • X11 for Dash

In short, if we want to mine Bitcoin we must choose to mine the SHA256 algorithm, and if we want to mine Ethereum we will choose the Ethash algorithm.

Power of Hash (‘Hash rate’)

This power of hashing is the angular point of mining in the cloud since it is what we rent to obtain cryptocurrencies.

In cryptocurrency mining, you need to solve difficult mathematical problems to validate blocks and receive rewards in those currencies. For this we need machines that do a lot of mathematical calculations per second.

The ‘ hash ‘ we could say is each of those complex mathematical operations, and the ‘ hash rate ‘ is what would be the rate of mathematical operations per second (or hashes per second).

Normally, in mining contracts, there is usually talk of either Hases per second (H/s), Kilo Hashes per second (KH/s), Mega Hashes per second (MH / s), Giga Hashes per second (GH / s) or Tera Hashes per second (TH / s).

As happens when we measure the capacity of a hard disk, each unit is a thousand times the previous one, that is, 1 Tera Hash is 1,000 Giga Hashes, 1 Giga Hash is 1,000 Mega Hashes and 1 Mega Hash is 1,000 Kilo Hashes and 1 Kilo Hash are 1,000 Hashes.

As each platform (Bitcoin, Ethereum, etc) has a different mining difficulty , a different hash rate will be needed to mine.

In other words, what for a network to mine at a rate of 10 Giga Hashes per second (10 GH / s) can be very low power for another can be a lot of power.

Contract period

Basically, it is about the time that we can exploit that mining power of which we have spoken.

Some time ago, some contracts had an unlimited duration, which meant that you could have quite high returns on investment over time. However, at present, these types of contracts are practically non-existent.

The most common contracts usually last around one or two years, although there are also some platforms that offer contracts from 24 hours to 5 years.

Maintenance fee (‘Maintenance Fee’)

It is very normal for cloud mining companies to add a maintenance cost to their contracts to reduce the high electrical costs that these companies have to deal with.

This maintenance cost is usually given in contracts for the mining of Bitcoin and Litecoin – not so much for the rest of cryptocurrencies.

It is usually given at the rate of a few cents for each hash unit hired and for every 24 hours:

0.0035 $ / 10 GH / s / 24h

Which means that for every 10 Giga Hashes we have rented, they will charge us 0.0035 US dollars per day.

So if we want to hire more mining power and we have the duration of the contract, we can calculate what they will charge us during the whole contract in maintenance costs.

Hardware

It refers to the type of machine that will be used to perform this mining. 

For example, if they are own machines or machines of other brands, or if it is through hardware CPU, GPU or ASIC.

 

Type of payment (‘Payout’)

This refers to how the payment will be received. Normally, if we are mining cryptocurrencies, we will receive payment in cryptocurrencies, not in fiat currency such as dollars or euros.

What’s more, if we are mining Bitcoin, we will most likely receive our payments in Bitcoin, or if we are mining Ethereum, we receive payments in Ether.

 

Withdraw of money (‘Withdraw’)

This field is quite important because what it will show us is from what amount of cryptocurrency we can make a withdrawal to our own wallet.

For example, if we have the minimum withdrawal of 1 Ether, until we have mined that amount, we can not withdraw it to our Ethereum wallet.

Most likely, this part of the contract is not known until we have paid, that is, until the contract has been formalized.

 

Contract price

Another important factor When we hire a certain power of Hash, it will have a price per unit.

That is, a contract could have, for example, a price of $ 2.20 for every 10 GH / s.

If we want to acquire 100 GH / s, the price will be $ 22, or if we want to acquire 1 TH / s (1,000 GH / s) the price would be $ 220.

The price of the contract is a very important factor to take into account when investing in the power of mining in the cloud.

In order to save an extra money or acquire more mining power for the same money we wanted to invest, it is vital to investigate and know the different providers of these services, which we will see below.


CLOUD MINING PROVIDERS

There are currently a large number of companies that offers cloud mining as one of their most demanded services. Next we will talk about the most important companies in the sector.

 

1. Genesis Mining

Genesis Mining, founded in 2013, is one of the oldest mining centers, as well as one of the largest, as we can see from the videos on its website showing its data centers:

In addition, they benefit from the fact that these data centers are based in Iceland, a country in which geothermal electricity is extremely cheap and easily available.

The mining contracts offered by Genesis Mining are technically available for the main cryptocoins of the market (we say technically because many times their products are sold out and we have to wait).

Once a certain mining power has been acquired, the user can distribute it as he likes between different cryptocurrencies, for example, 70% of the power for Bitcoin and 30% for Litecoin.

Normally, Genesis Mining has pre-established commissions for Bitcoin mining, however, they can be variable when extracting Ethereum or other cryptocurrencies. On its website you can see the prices.

The most likely thing is that the coins we have mined have to reach a minimum in order to transfer them to our own wallet.

Another of the factors to mention of Genesis Mining is that sometimes it has not been able to satisfy the demand of the mining contracts, exhausting its stock in a short time. This is due to its intuitive user interface and its great reputation within cloud mining companies.

Without a doubt, Genesis Mining is one of the best places to start mining in the cloud and soon we will write an article dedicated to it.

2. Hashflare

Hashflare is the other major company within the cloud mining providers.

From the same creators of Hashcoins, a manufacturer of mining hardware for Bitcoin that has been present since 2013, Hashflare offers us the opportunity to mine several currencies such as Bitcoin, Litecoin Ethereum, Zcash and Dash.

On its website, we can find a detailed summary of the mining centre of the company, including some photos, although they do not indicate its location.

Through the Hashflare contracts we can rent ‘hashrate ‘ for a period of 12 months – previously there were unlimited contracts.

We must also include that in the contracts in which the algorithms SHA256 (Bitcoin) or Scrypt (Litecoin) are mined, there is a fixed maintenance expense for each unit of Hash used and per day, which does not happen with the other currencies ( Ethereum, Zcash and Dash).

Currently, for Bitcoin it is 0.005 $ / 1 MH / s / 24h and for Litecoin 0.0035 $ / 10 GH / s / 24h. This means that if we hire, for example, 10 MH / s of power for Bitcoin during a year, the expense would be the following:

0.005 $ x 10MH / s (every 24 hours) = 0.05 $ per day

$ 0.05 per day x 365 days = $ 18.25 per year

An amount to take into account when calculating our profitability.

Another thing to take into account is that Hashflare, since January 2018 has temporarily suspended new Bitcoin withdrawals due to a large number of unconfirmed transactions. While the company plans to resume withdrawals once this is resolved.

In summary, together with Genesis Mining, Hashflare seems to us one of the most valid and recognized options in the world of cloud mining.

 

3. Hashnes

Hashnest is a company founded in 2014, which was launched by another company, Bitmain, one of the largest manufacturers of ASIC equipment dedicated to cryptocurrency mining.

While it is based mainly in China, Hashnest has mining farms across the globe, benefiting from the low electricity costs of some countries.

The Hashnest website currently offers an accelerated payment cloud mining contract called PACMiC – which comes from its acronym in English ‘ Payout Accelerated Cloud Mining Contract ‘ -.

This translates into 6.0TH / s of hash power in exchange for 1 Bitcoin, which is the minimum to invest. Hashnest assures that the profits for each block validated in the blockchain of Bitcoin go to a reason of a 14% of ROI (return of the investment).

Apart from the PACMiC contract, it is also possible to acquire mining power from the different models of its Antminer hardware, such as the S9 that has a power of approximately 125 TH / s.

Hashnest is a very feasible and reliable option, but it is usually for people willing to invest several thousand euros, so it is not for everyone.

 

4.Hashing24

Hashing24 is a company backed by one of the big providers of Blockchain technology worldwide, Bitfury, which is part of the so-called Blockchain Alliance, a formation of companies united to combat criminal activities in the block chain.

One of the striking options of Hasingh24 is that it has a demo mode, in which you can simulate a Bitcoin mining contract to see how much you could win with it, even before making the first payment.

This is a good way to help the user understand how cloud mining works and how to operate once the service has been contracted.

On the other hand, Bitcoin can only be mined and there is only one type of contract of 36 months in which you can acquire 100 in 100 GH / s.

That is, you can acquire 100, 200, 500 … 1000, but never 150, 225 or 575, for example. The contract has a fixed rate of $ 0.00033 per GH / s per day that must be taken into account as explained above with Hashflare.

Hashing24 is a very good and quite honest option because it is supported by a company like Bitfury. It also fits any pocket (your minimum contract is 100 GH / s for € 55).

So if you are clear that you want to mine Bitcoin in the cloud, this option may interest you.

 

5. Eobot

Eobot is an American company registered in California, which has been standing since 2013. It is somewhat anonymous, as its owners have decided so and that is why there are no photos or data from their offices or their data centres.

If we enter your website, it may seem a bit simple and austere. However, when we register we have a method of authentication of two factors activated by default, which requires that to access our account, we need to provide a code sent to our e-mail address, apart from our usual password. A very safe and widespread method within the world of cryptocurrencies.

The contracts offered by Eobot are varied in time: they can be from 24 hours to 5 years. In each contract, the user acquires some hash power but also includes maintenance fees, which we can easily understand thanks to the explanation included here.

Another addition that Eobot offers is that it allows the mining of several cryptocurrencies, not only Bitcoin is reduced but it can be mined, among others, Ethereum, Litecoin, Ripple or Dash.

It also adds an estimator to calculate the daily gains with respect to the acquired mining power.

One of the negative points is the payment system to acquire said mining power. The fact that the owners wish to remain anonymous to comply with the law means that deposits through a bank account are not accepted.

You can only buy the contracts with Bitcoin and through a credit card in US dollars ($ USD) using the Epay system.

Eobot, despite having a less intuitive and more rudimentary interface and despite the difficulties in the payment system, is an option that can be quite attractive for users seeking long-term contracts who want to undermine less standard cryptocurrencies.

 

6. MinerGate

Minergate is not so much a cloud mining company but rather a ‘ mining pool ‘ or mining pool, that is, a group of miners who unite their hash power to increase their chances of getting the rewards in cryptocurrencies by undermining the blocks.

Founded in 2011, Minergate was one of the first to provide cryptocurrencies based on the CryptoNote algorithm.

It is also the first pool that serves the merged mining, that is, while mining inside the mining pool, the user can also mine other cryptocurrencies simultaneously.

The growth of Minergate has been remarkable over the years and on the Internet you can find thousands of articles about this platform. In fact, we already have a guide that teaches you to mine Ether with Minergate from your own computer.

Regarding their cloud mining contracts, they currently only have Bitcoin and Monero, with the possibility of mining Ethereum in the near future.

Acquiring mining power is very simple: once registered, the user must move a sidebar to select the power he wants to acquire, click on ” Buy ” and pay in Bitcoin.

Minergate, as a cloud mining platform, is not the most complete or the one that gives you the most options when choosing different cryptocurrencies, but it allows you to use the cloud mining service while you can use the nuclei of the microprocessor of your own computer to add your mining power to your ‘mining pool’.

A double way of receiving cryptocurrencies simultaneously that can be very interesting.

 

OTHER CLOUD MINING PROVIDERS

Apart from those already mentioned, there are many other mining companies and pools that offer cloud mining services:

  • NiceHash is a special mining pool, since it allows users to extract any hashing algorithm and sell it in its own hash power exchange to users who wish to buy a profitable mining contract.
  • CCG Mining is another company dedicated to cloud mining. Founded in 2016 during the ‘ boom ‘ of cryptocurrencies, CCG Mining seeks to satisfy users who want to mine in the cloud from very little money and with the option to mine different cryptocurrencies.
  • Mining Rig Rentals is a somewhat particular company, since its main idea is to create a faster and more direct way to rent mining equipment among members of its community.
  • Cryptomining Farm is a cloud mining company registered in Thailand that wants to offer its users high-quality mining with guaranteed benefits. They are offering virtual mining contracts with payments in bitcoin.

We could still add more companies that are dedicated to mining in the cloud, the problem is that a very high percentage of these companies are ‘ scam ‘.


THE ‘SCAM’ INSIDE THE MINING IN THE CLOUD

If you personally do not know what the word ‘ scam ‘ means, you will surely know several of its synonyms in Spanish: scam, cheating, scam, theft … you can call it whatever you want.

Unfortunately, one of the biggest drawbacks in cloud mining is that the vast majority of companies are pyramid schemes or also called Ponzi schemes, which we will understand better in the following image:

 

These companies offer a system to easily generate succulent economic gains in a short time in exchange for an investment, with the intention of taking people’s money and then disappearing with it.

In short: companies that seek to rip people off.

In the specific case of cloud mining, it is said that 99% of companies are scams. Companies that close their website suddenly and stop paying without notice.

The reason why there are so many cloud mining scams is because there is still no regulation on the part of most governments and it is relatively easy for anyone in the world to set up a website and invent a story about the objectives of the cloud. the company and its data centers.

The company can legitimately act by sending initial payments to its customers, but after a while, the company will stop paying and will keep the mined cryptocurrencies and the money of its customers.

Cloud mining companies that do not pay

The list is quite broad, but here we have the last 10 companies that stopped paying without notice ( here you can see the list updated at all times):

 

We can know at any time, through the Cloud Mining Monitor website, both the companies that pay and those that no longer pay and the services that are not currently registered.

 

How to identify if a cloud mining company is a scam?

Below we will list some clues we can follow to identify scams within the cloud mining industry:

  1. Web domain: Add the domain in the WHOIS page and distrust if the data appear as hidden and you can not see the name of the person who registered it.
  2. Company registration: On fake websites the registration is usually done in cities of certain prestige, such as London, to make it look more reliable. Not being the company in a big city has to be true.
  3. Registration of the directors of the company: Many times the directors of the company register as foreign residents, since in their countries of origin the identity can be easily falsifiable.
  4. Anonymity: Do not trust if the creators of the company are anonymous, both with the company’s data and with the machinery they own. The safest thing is that they do not show photographic evidence on their website about the mining centers where they operate (because it is more likely that they do not even exist).
  5. Initial Legitimacy: The company reserves the funds deposited by customers to pay them periodically in cryptocurrencies. This generates a sense of respectable and honest company, which in turn generates more customers. In addition, they show a Bitcoin address from which they make payments to customers … until one day that address stops paying.
  6. Payment in cryptocurrencies: Normally, so that there is no record of bank accounts and everything is more anonymous and difficult to trace, the mining power is rented through payment in Bitcoin or another cryptocurrency. I did not like it if they do not allow any kind of bank transfers or credit cards.
  7. Agreements with comparative pages: In many occasions, these companies pay to websites that compare mining services to advertise in them, without them proving the credentials of the company. The comparison websites ensure that the site is legitimate and honest in exchange for a percentage of the money cheated by the company.

These previous points are important points to start recognizing if a cloud mining company is legal or not.

It is advisable to research and make a good search on the internet about these companies. Read opinions, reviews, forums, articles or watch videos on YouTube of people who have already tried that service will help us to get rid of doubts and not lose our money.

However, the best option is always to be safe and hire some of the mining services we have mentioned above and that have been operating without problems for years.

Once the taboos are removed, we will move on to answer that question that has been hanging around our heads for a long time:

IS THE CLOUD MINING PROFITABLE?

The answer is it DEPENDS.

“And what does it depend on?”

(We will not answer “… depending on how you look …” although it is tempting)

It depends on a much simpler factor: the money you are willing to invest.

At the beginning of the article we mentioned a phrase that we were going to explain later. The phrase was this:

… as we acquire more mining power, the greater the profitability …

…in theory.

As well. Now we will explain why this rule is not 100% met.

Most people who invest in cloud mining lose money and then say that companies are scams, when it is not always the case.

Many of them underestimate the maintenance fees charged for services rendered, which markedly decrease our benefits.

There is also a tendency to underestimate the ‘ halving ‘ factor of some cryptocurrencies. The ‘ halving ‘ is the fact that, with the passage of time, the rewards received by mining are reduced by half.

And this happens almost always!

To give a concrete example, in the Bitcoin network, every 210,000 blocks mined – approximately every 4 years – the reward is reduced by half.

It started with 50 bitcoin per block, to pass the first 210,000 mined blocks to 25, and is currently 12.5 bitcoin per block. An extremely important factor to underestimate.

Finally, the growing increase in the difficulty in mining cryptocurrencies over time is not taken into account either.

This means that more and more power is needed to obtain the same rewards that we obtained before, dedicating less mining power.

We must mention that an increase in the difficulty in mining is usually accompanied by an increase in the value of the currency. Therefore, although we obtain fewer rewards, these will have more value, that is, the rise in the value of the cryptocurrency will compensate the difficulty of its mining.

However, if we put these three factors together ( maintenance rates, halving ‘and the increase in difficulty ) we can see our chances of having profitability by mining in the cloud is very much diminished.

So…

CAN MONEY BE GAINED WITH CLOUD MINING?

YES.

“Perfect, but, how, is there a strategy to succeed in mining in the cloud?”

The answer again is YES.

In addition, this strategy is simple to implement:

Reinvest your earnings.

In order to compensate for those factors we just talked about, what you should do is reinvest the profits obtained to buy more hash power.

In this way, we will increase our mining power while we will increase the profits we obtain. It is what is called in interest compound interest.

For this method to be successful and you can generate profits by mining, it is essential to invest heavily.

If all you can invest is less than € 200 it is best not to start, because it will not be worth it. Keep in mind that if you go to invest in cryptocurrency mining you have to enter big time.

Of course, without forgetting our great premise:

Never invest more than you would be willing to lose

Let’s explain it with a practical example so that it is better understood.

In our example, we will be based on a 2-year contract for mining in Monero, with a power of 5000 H / s.

For this we will use a profitability calculator of the many that exist on the Internet. In this specific case we will use the Coinwarz, where we can calculate the return that our investment will have, that is, our ROI.

To do this, we must fill in the cells with the required information.

In the cell “Hardware Costs (USD)” we put our investment made through the contract of mining in the cloud, which in this case would be 4,000 US dollars.

In the fields “Power Cost ($ / kWh)” and ” Pool Fees %” we set zero, since we are not going to spend electricity, nor are we going to pay a percentage to a mining pool (these costs are included in the purchase price in Genesis Mining , for example).

We would have something like this :

 

And this would be the result that gives us:

 

In the mining problem of the example, we would find ourselves without losses at the end of the first year and doubling our investment in the second year.

However, the difficulty is not constant but variable and usually increases over time. So the most likely is that the ROI is lower.

However, with the increase in difficulty, we usually have an increase in the value of the mined currency, which helps offset many losses due to changes in difficulty.

This is where the compound interest technique comes in.

As we can see in the image, the monthly income would be 420 dollars (USD).

With this amount we can acquire another 500 H / s of mining power in that month, increasing our Hash rate to 5500 H/s. This would raise our monthly earnings to $ 462.20, increasing that gain by $ 42.20 from the previous month.

If we continue doing this every month we would be increasing our monthly performance and we could keep ahead of the changes of difficulty, while in turn our currency gains in value over time.

The strategy is to maintain the reinvestment until we earn approximately $ 1,000 a month or more (depending on the goal of each one).

After reaching that target level, it would be important to reinvest 80% of the profits and withdraw 20% , since each new reinvestment in power would have the same duration as the initial investment: 2 years.

This strategy would allow us to create a stable monthly income that eventually becomes as high as our initial investment and continues to pay us each month.

We must not forget that in this example, the initial investment was $ 4,000 to obtain those results, that is, to greater initial investment, greater and faster benefit with this strategy.

It is possible that, with the passage of time, the currencies have to be changed or the strategy modified, but it is perfectly possible to generate passive income with mining in the cloud.

 

PROS AND CONS OF CLOUD MINING

After having explained the ins and outs of mining in the cloud, let’s put them in order and let’s get the pros and cons of this service.

Pros

 

  • It is not necessary to purchase expensive mining machines that, over time, can become obsolete and lose their value.
  • We do not have to waste time installing complex mining programs on our computer.
  • We will not pay large bills for the cost of electricity.
  • We can enjoy a home without high temperatures well above normal and without the constant hum of fans.
  • The profits generated with this service are optimized to the maximum by the providers that offer it.
  • The overall risk is less than if we were mining from home: no installations, no configurations, noise, fires or problems of that kind.

Cons

 

  • By not interacting with mining equipment and mining software, some people may find it a little amusing method.
  • There is a lack of control in terms of profitability, since the price of cryptocurrencies is very volatile and “the milkmaid’s account” can go very badly for us.
  • When mining through an intermediary, we must think that this intermediary has to earn with his service. Therefore, this method offers fewer benefits than if we removed the intermediary.
  • Contractual warnings may be given in the event that the Bitcoin price changes radically. After all, companies have the power over their services.
  • It is possible that losses are generated in this process if we do not properly perform the relevant calculations and if we do not follow an appropriate strategy.
  • High risk of fraud. Most companies are scams and it is relatively easy to fall into them.
  • The biggest problem of all is when too many miners have an abundance of hashrate in one currency.  The more hashrate in use the higher the difficulty, meaning the less you will earn.

 

CONCLUSION

As we have seen, we must be very careful where we invest the money since, not only in the mining in the cloud but throughout the Internet, there are many scams.

For this, it is vital to investigate in depth about the different suppliers and the conditions of the contracts they offer. It is also very important to read reviews and opinions, be close to the community, be users on websites like Reddit or social networks and never stop asking until you are sure that our money is safe.

However, in spite of the risks that exist when we go into mining services in the cloud, we think that it is a very valid method to generate our first cryptocurrencies and even to generate a passive income over time.

From here we encourage you to try this service. Or if you are impatient, you can always buy cryptocurrencies by buying them yourself.

Anyway, any option is good as long as you do it with a head and when you do not put in more money than you would be willing to lose.

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