Cloud mining has become into one of the biggest trends in Bitcoin and cryptocurrency. The reason is simple: it makes mining Bitcoin incredibly easy. By using cloud, rather than hardware to mine bitcoin, you can avoid the stress and inconvenience of managing hardware. Instead of using the processing power from hardware, you share the processing power of the cloud space (or more specifically the remote data center). In theory, cloud mining should be much more profitable than mining with your own hardware. However, it’s easy to be caught out. At best some schemes are useless – at worst, they could be seen as a bit of a pyramid scheme. For this reason, it’s essential you do your homework.
However, although there are some risks associated with cloud mining, it does have benefits. Arguably it makes Bitcoin, and cryptocurrency in general, more accessible to ordinary people. Provided people get to know the area, what works and what definitely doesn’t it could be a positive opportunity for many people.
How to start cloud mining
Let’s first take a look at different methods of cloud mining. If you’re going to do it properly, it’s worth taking some time to consider your options.
At a top level there are 3 different types of cloud mining.
Renting out your hashing power
This is the most common form of cloud mining. To do this, you simple ‘rent out’ a certain amount of your computer’s hashing power. In case you don’t know, hashing power is essentially your hardware’s processing power; it’s what allows your computer to use and run algorithms.
As the name suggests, this is where you simply use an external machine to mine Bitcoin. To do this, you’ll have to sign up with a cloud mining provider. If you do this, you’ll need to be clear on their terms and conditions, and take care when calculating profitability.
Virtual hosted mining
Virtual hosted mining is a hybrid approach to cloud mining. To do this, you use a personal virtual server and then install the required software. This approach can be a little more fun, especially if you want to be able to build your own Bitcoin mining set up, but of course this poses challenges too.
Depending on what you want to achieve any of these options may be right for you.
Which cloud mining provider should you choose?
As you’d expect from a trend that’s growing rapidly, there’s a huge number of cloud mining providers out there that you can use. The downside is that there are plenty of dubious providers that aren’t going to be profitable for you. For this reason, it’s best to do your research and read what others have to say.
One of the most popular cloud mining providers is Hashflare. With Hashflare, you can buy a number of different types of cryptocurrencies, including Bitcoin, Ethereum, and Litecoin. You can also select your ‘mining pool’, which is something many providers won’t let you do. Controlling the profitability of cloud mining can be difficult, so having control over your mining pool could be important. A mining pool is a bit like a hedge fund – a group of people pool together their processing resources, and the ‘pay out’ will be split according to the amount of work put in in order to create what’s called a ‘block’, which is essentially a record or ledger of transactions.
Hashflare isn’t the only cloud mining solution available. Genesis Mining is another very high profile provider. It’s incredibly accessible – you can begin a Bitcoin mining contract for just $15.99. Of course, the more you invest the better the deal you’ll get.
For a detailed exploration and comparison of cloud mining solutions, this TechRadar article is very useful. Take a look before you make any decisions!
How can I ensure cloud mining is profitable?
It’s impossible to ensure profitability. Remember – cloud mining providers are out to make a profit. Although you might well make a profit, it’s not necessarily in their interests to be paying money out to you.
Calculating cloud mining profitability can be immensely complex. To do it properly you need to be clear on all the elements that are going to impact profitability.
- The cryptocurrency you are mining
- How much mining will cost per unit of hashing power
- The growth rate of block difficulty
- How the network hashrate might increase over the length of your mining contract
There are lots of mining calculators out there that you can use to calculate how profitable cloud mining is likely to be.
This article is particularly good at outlining how you can go about calculating cloud mining profitability. Its conclusion is an interesting take that’s worth considering if you are interested in starting cloud mining: is “it profitable because the underlying cryptocurrency went up, or because the mining itself was profitable?” As the writer points out, if it is the cryptocurrency’s value, then you might just be better off buying the cryptocurrency.