Bitcoin Deep Mine Part 3

Over the course of the past two articles, we have dived into what it looks like to get into mining Bitcoin.  We’ve discussed the key elements of mining operations and the technology behind the scenes – including CPU, GPU, FPGA, and ASIC mining hardware.  After taking a closer look at FPGA and ASIC miners and comparing their optimal use cases, we looked at the craft of mining from both an economic and a feasibility standpoint.  Now, we are going to slowly dive into: What is Cloud Mining.

Mining Industry Worlds

Essentially there are two worlds in the mining industry – mining with your own hardware and mining with someone else’s.  Let’s start with the first world since this is the one we have been discussing (and is probably more intuitive as well).  Let’s pretend that after running the numbers, it seems that our investments have a reasonable probability of producing income. 

We’ve factored in initial investments and recurring costs (equipment maintenance and electrical consumption) and deemed it worthwhile to start mining.  After purchasing a mining rig (most likely either FPGA- or ASIC-based), we configure, customize, and let it run.  There is some tending to the equipment, but for the most part it is happy to sit in the corner of our room and crank out hashes hour after hour, day after day.

That seems to make sense.  We could either join a mining pool or mine on our own, but either way we are capable of producing hashes and potentially earning a hefty sum of money if we are lucky enough to get our block into the blockchain.  But what if we didn’t want to purchase and maintain our own hardware?  It seems like it might be a pain, and what if the electrical consumption was higher than we thought?  Maybe we move often and can’t seem to find a dedicated space for our mining rigs.  Perhaps there’s another way to mine?

Cloud Mining Operation

Enter cloud mining.  Rather than running our own mining operation, we can essentially buy shares along with others in a centralized mining outfit that splits the profits among the investors.  This is similar in nature to cloud-hosted file shares and apps – we pay a monthly fee for someone else to store our data and in turn we have no hardware to keep up with, no patches to apply, and no reason to worry about theft or disaster recovery.

Pros and Cons of Cloud Mining

Why turn to cloud mining?  Let’s weigh the pros and cons of cloud mining. 

Pros:

  • No equipment to deal with.  This means no excess heat in our room, no loud fans to keep processors cool, and nothing to sell if we decide to stop mining or upgrade to a newer rig.  This also means no upfront equipment costs to get started in the first place.
  • No electrical consumption.  Mining can be very power hungry.
  • No need to worry about someone stealing our mining equipment or damages due to storms, fires, or other unforeseen circumstances.

Cons:

  • Attempting to use untrustworthy vendors can potentially lead to scams and loss of your money.
  • Your profits help to pay for the overhead of the data centers and employees who maintain and operate the equipment.  In other words, you make less profit than you potentially would if you managed everything yourself.  In addition, if payouts are too low, you might make nothing at all.
  • You can’t customize or optimize the mining equipment – meaning you must use their mining software and their chosen processors for producing hashes.  You also can’t choose to upgrade specific components as new technologies emerge.

Should You Start Cloud Mining

Alright, that gives us a basic idea as to what cloud mining is, so let’s consider cloud mining from a “real-world” perspective.  Typically, a user who wants to mine in the cloud will enter into a contract for a specific hash rate at a specific dollar value.  For example, you might be interested in spending $100 per month as an investment in Bitcoin mining.  You can search through a list of reputable dealers (we’ll provide some to check out below) and see what rates they offer.  They might be willing to provide you 1.5 TH/s for $129 per month for a 24-month contract (these numbers are fictitious and just used as an example). 

There also may be a monthly maintenance fee based on the number of GH/s or TH/s of mining power to help cover the costs of their infrastructure.  Most outfits will allow you to mine a plethora of cryptocurrencies, not just Bitcoin, and provide indices for forecasting investments. 

Places to Find Mining Services

There are lots of mining services out there who are more than happy to take your money – but this doesn’t mean all of them are trustworthy.  You need to carefully research and vet a cloud mining company to ensure you know what they’re doing with your money, and equally importantly, that they know what they are doing.  Here are a few places you can look into to get started with cloud mining (this is not an endorsement for any of these services but rather a springboard for your own research):

Now that you’ve taken a look around the Web at some major players in cloud mining, here are a few more resources for you to browse:

Research Mining Before You Commit

Needless to say, cloud mining is a way to get into the world of cryptocurrency but is not foolproof nor without its risks.  Remember to do your research and if it seems too good to be true – it probably is!  There’s a lot to weigh between risk and reward, so make sure that you have a good understanding of how cloud mining works and its benefits and drawbacks before diving into the deep end.  Happy (cloud) mining and thanks for reading our post on What is Cloud Mining.

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