Cloud Mining – Mining 101

So a friend of mine asked me last week about what was the best way  to mine. He’s interested in mining but not ready to just feet first into the initial investment of GPU or ASIC mining. This article is not an endorsement for any particular service and names of specific mining contracts are here to help serve as comparisons.

I though I might be able to give him a head start and do some initial research for him on Cloud Mining. It allows small investments into “rented” power. You can literally buy time on a rig and see what its like to mine crypto-currency. 419Mining has always recommended NiceHash (www.nicehash.com) but I wanted to take a look at the other cloud options again and see where they ended up.

One of the concerns people have with NiceHash is that its not a direct seller of mining power, its a true marketplace. Miners with extra “power” offer their rigs up to NiceHash and list in the general market, buyers then come in and “bid” on the power. Its a simple model of supply and demand, the lists are simple and the concept is easy to understand.

Another option would be a direct buy of hashing power from a full running mine. Genesis Mining is one of these such places. You pay an upfront cost for a set amount of hashing power/month and in return, they split the profits with you. The problem with this model is the initial upfront costs and potential profitability are hidden when investing in hashing power contracts like Genesis Mining. Until you actually invest you have no what of knowing what your ROI will be.  There is an interesteing read on Medium about that actual topic you can read further here. https://medium.com/@spreadstreet/is-genesis-mining-worth-it-a-genesis-mining-profitability-calculator-youll-actually-use-a06d916bf7bc

Finally, you can actually rent full mining rigs. Rig builders build and maintain these for you and you pay a percentage of profit for the rig builder to host. This is the type of service we offer to our clients, but only the hosting portion, our clientele are responsible for the upfront cost of the equipment.

Now, please please please, keep in mind, cloud mining has its pros, no upfront cost for hardware or electricity, no struggle with getting the best performance out of your equipment and no loud heat producing rigs.

BUT, there are alot of cons
Here’s why you might not want to consider cloud mining:

  • Risk of fraud
  • Opaque mining operations
  • Less fun (if you’re a geek who likes system building!)
  • Lower profits – the operators have to cover their costs after all
  • Contractual warnings that mining operations may cease depending on the price of bitcoin
  • Lack of control and flexibility.

When engaging in any type of crypto-currency mining there are risks, but profitability is possible if you make the right choices. In this article, we’ve given you some pointers on how to decide which way to go.

In your test calculations, you will likely see that some cloud mining services will be profitable for a few months, but, as the difficulty level of bitcoin increases, you would probably start to make a loss in four to six months and beyond.

A possible remedy to this situation is to reinvest what you have made into maintaining a competitive hashing rate, but this is highly speculative.

As mentioned above, the risk of fraud and mismanagement is all too common in the cloud mining space. Investors should only invest in cloud mining if they are comfortable with these risks – as the saying goes, never invest more than you are willing to lose.

Investigate social media channels, speak with former customers and ask pointed questions of operators prior to investing. Ultimately, you should practice the same kind of due diligence that you would for any investment and if all your really looking for is a basic investment, you can always buy the coins directly via services like Coinbase.

Disclaimer: This article should not be viewed as an endorsement of any of the services mentioned. Please do your own research before considering investing any funds via these services.