In the first part, I looked at what mining is and how it works. In the second part, I looked into how you could start mining on your own. The third part will be all about mining without having any actual hardware to mine. Rather than mining your own crypto currency, you will lease the mining power and let established companies to mine for you, while you still get the profit reduced by fees.
There are many companies that offer the service but it is also one of the dodgy areas of crypto currencies. I am only going to talk about 2 cloud mining platforms that have existed for a while and I find trustworthy. There are for sure other platforms that are great and work but I am not comfortable mentioning them. Let’s have a look at the “trustworthy” platforms first to understand how they work and then I’ll discuss some general risks that you should look out for before choosing a platform that you want to use.
Why use cloud mining
There are many advantages but also many disadvantages to cloud mining over mining with your own hardware. Let’s look at the advantages:
- No technical knowledge needed – building, configuring, troubleshooting a mining rig can take a lot of time. If you don’t know how to do these operations, you will spend many hours reading up on it before you can get started.
- Low entry barrier – when building a rig, you will need a lot of capital to begin, with cloud mining, you can start with under $10.
- No space needed – all will be housed away from your house. you just send in money and it works.
- 0 set up time – you can get started mining within 5 minutes.
- Low reinvestment amount required – You don’t need to wait until you can buy a new graphics card, you can reinvest even a little amount.
- Great for prototyping – thinking of building a rig but not sure if it will perform? Invest a little bit in cloud mining of the given currency and see if it is profitable.
When should you mine on your own
So now you know advantages of mining in the cloud, let’s look at the disadvantages:
- High commission fees – when you mine on your own, you will get to keep more after subtracting electricity and pool fees.
- Cheap electricity – if electricity is expensive where you live, your profits will go down. Cloud mining companies are usually quite picky about cheap electricity locations.
- Higher gains – you will gain more money because you will be able to switch what you mine if mining with GPU. Say ethreum goes down, you can mine zcash.
- It is fun – clicking a slider just doesn’t feel like doing much. Building the rig feels accomplishing.
- Fallback plan – Should cryptocurrencies fail, you can still sell your hardware.
Genesis mining is probably the number one cloud mining platform. They have been around for a long time and there is not much hate going around. They offer lifetime contracts – as long as they are profitable. The biggest downfall is that they are always sold out, which means purchasing new contracts is close to impossible.
Hashflare has been around since 2014 so there is quite a decent history. They offer contracts that last for a year with the option of reinvesting every day, which allows you to build up more hashpower every day. Every reinvestment is it’s own contract, which means that if initial investment expires of June 1 and you reinvest after the first day, this reinvestment will expire June 2.
Things to look out for before buying hashpower
Here is a list of things you should look at before purchasing a contract:
- Company history – you want to look at a company that has been around for a while. They are generally less likely to run away with your money.
- Company information – when a company doesn’t state their information, such as address, stay away, there is always something dodgy.
- No fees – this is a no brainer, the company needs to pay electricity, pool fees, maintenance, rent, marketing, etc. It needs fees to survive.
- Free hashpower – same as above, there is no free hash power. They need to pay for it, they won’t give free hashpower to anyone who asks.
I hope this helped anyone looking to invest into cloud mining to buy their bitcoin or altcoin. Make sure you do the math before purchasing any contract and make sure it makes sense before you do.