Cloud Mining Bitcoin – All You Need to Know
Cloud mining is a type of virtual speculation. You buy an amount of hashing energy from a provider that is committed to cloud mining bitcoin for you. The provider then does all the management of the mining and takes care of all the operations and all the work involved in the mining.
It’s quite a controversial solution, although, at first glance, it looks really great, as all you have to do is pay for the infrastructure. Cloud mining, like a real cloud, is quite nebulous, as what you’re doing is betting that the level of mining difficulty will remain the same or decrease over time.
You might think that you’re betting on Bitcoin Prices going up but that’s not actually true – what you’re betting on is that the mining structure will weaken over time – a bad bet.
At the other end, the cloud miners are betting that the mining strength will increase; they’re charging you the fees to run the network and the cost of the cloud mining itself.
What is a Cloud Mining Contract?
Put simply, a bitcoin cloud mining contract is an agreement with the virtual mining company that you pay them some money and they give you some computing power for mining coins, which will then belong to you.
It’s pretty much the same as if you rent a car or house or anything else, with the crucial difference that you hopefully won’t spend money for the service, but receive profit from it. The terms of the contract vary considerably among provider and could make a huge amount of difference as to how successful your investment is likely to be.
The best thing to do is to input varying terms and costs into a profitability calculator. You need to look for a company offering a low cost per giga-hash to stand the best chance of making your money back and then a profit.
The Various Types of Remote Mining
There are currently three forms of remote mining: hosted mining, virtual hosted mining and leased hashing power. Hosted mining is the leasing of a mining machine that is completely hosted by the provider. Virtual hosted mining is ideal for the more tech-savvy as it involves the creation of your own virtual private server and the installation of your own mining software.
The other method – leased hashing power – is the most popular form of remote mining as you can rent a certain amount of hashing power without the burden of having a specific physical or virtual computer.
Risk versus Reward
As with all crypto-currencies and indeed all other types of virtual speculation, there are risks and rewards and canny operators will take care to learn as much as possible before investing any significant amount of funds. Improperly run companies and fraud are also common in this sector.
Take the time to perform some test speculations; you will notice that you will make some money for the first few months. After that the amount will decrease, and you could even make a loss when taking into account the cost of fees.
A good rule of thumb is only ever to invest what you can comfortably afford to lose. You won’t necessarily lose money, but there are a lot of risks, which you need to be aware of. However, profitability is certainly possible if you make the right decisions.