What is bitcoin cloud mining?

What is bitcoin cloud mining?

With cloud mining, you can earn Bitcoin without having to buy any mining hardware. Keep reading for an explanation of how it works.
Updated: Jan 24, 2022
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8 min read

Mining Bitcoin without having to own and manage the hardware. Also known as cloud hashing, cloud mining is a service that allows users to lease mining capacity (hashing power) of hardware in remote data centers and earn bitcoins as the miners generate them.

I. How does it work?

In order get started with a service, you will need to take out a mining contract, which is simply an agreement with the company, whereby you pay a specific amount of money in exchange for computing power for mining coins. Once you are satisfied you’ve found a contract that offers the right hashing power for the right place, pay through the company site and they’ll confirm your contract.

Most of services such as HashFlare usually have a 1 year contract, whereby you are required to pay around $1.20 for 10 GH/s (gigahashes per second – hashes per second are what tells you a miner’s efficiency) and a small maintenance fee of around $0.0035 per 10 GH/s every 24 hours. You are then paid based on your contribution to the hashing power of the mine (minus the fees).

II. Is cloud mining profitable?

Compared with the cost of mining with your own rig, cloud mining is fairly profitable, especially if you have taken out a contract for a lot of hashing power. But the profits are unlikely to be huge because of just how competitive bitcoin is now. Steady money can be made over a long period of time, so it’s best to treat cloud mining as a low-income steady interest investment and not a get-rich-quick scheme.

III. Are there additional fees?

Yes, in order to keep up maintenance of their hardware, cloud mining companies charge fees based on the hashing power that you have purchased/rent. Platforms such as HashFlare charge a small fee of around $0.0035 for every 10 GH/s per day to cover the upkeep costs.

IV. How long do cloud mining contracts last?

It depends. You can take out contracts of different lengths depending on the company you choose. However, most providers usually offer contracts of between 12 and 36 months. You can also come across companies such as Genesis mining that offer lifetime contracts.

V. Can I sell a cloud mining contract?

It is possible, but difficult to sell a cloud mining contract. With some companies such as HashFlare, selling a contract is not allowed, but there have been cases of users selling their lifetime contract from Genesis. Many people will argue it is better getting their own contract instead of purchasing one from another user, so it could be difficult to find a willing buyer.

VI. Is cloud mining regulated?

No, cloud mining is not regulated. While a number of countries have showed concern when it comes to the energy consumption of bitcoin mining in general, most have been silent on regulating the industry altogether.

VII. Can I pay for a cloud mining contract in bitcoin?

Yes, but it’s usually not a good idea. Some reputable services such as Genesis Mining allow you to pay for your contract using a credit card or bitcoin. However, because of the anonymous nature of bitcoin, some scam websites will ask you to pay only in bitcoin or other cryptocurrency to start mining and later disappear with your funds. So, unless you are dealing with trusted sites, it’s a bad idea to pay for cloud mining services in bitcoin.

VIII. Do I need a wallet before I start cloud mining?

No, because your coins will typically be stored in your account, which is hosted by your cloud mining provider. However, it’s always a good idea to have a separate wallet where you can move all your earnings for safekeeping and not to leave them on the company’s server.

IX. What are the main companies in bitcoin cloud mining?

There are many companies in the world of bitcoin cloud mining, but only a few have emerged as reputable and trustworthy. These include:

  • Genesis Mining – Founded in 2013, Genesis Mining is one of the oldest and largest cloud mining services. Although their contracts are a bit more expensive than those from other platforms, there are very rarely complaints from Genisis’s users. Their starter packages start from $179 (lifetime contract) for 1,000 GH/s.
  • Hashflare – this is one of the most popular services offering contracts for bitcoin cloud mining, with automatic payments being made in BTC. To sign up to a contract (1-year contract), you have to purchase at least 10 GH/s for $1.2.
  • Eobot – Launched in 2013, Eobot is one of the cheapest cloud mining services, allowing you to pay as little as $10. It currently has more than 8 PH/s of SHA-256 mining capacity running which has been sold to various users. The company sends mining updates to its users every minute, allowing them to track their profits easily.
  • Hashnest – this provider is operated by Bitmain, which is the firm behind the Antminer line of bitcoin miners. It offers excellent contracts, with the most popular being PACMiC V5 (payback accelerated cloud mining contract), which aims at cutting down the time frame of payback. In exchange for 1 BTC you will be offered 6.0 TH/s of hashing power.
  • Bitcoin.com Pool – This company offers two contracts: a 12-month plan and a 2-year plan. For the 12-month contract, the charges are $79 per TH/s, on top of an initial cost of $395 and a daily fee of $1.40. For the 2-year plan, the charges are $149 per TH/s, on top of an initial cost of $745 (cirka 4240 kr) and a daily fee of $1.40. The daily fee covers electricity and maintenance cost and is deducted from the daily revenue.
  • Hashing24 – This service started its operations in 2012 and are said to have data centers in Georgia and Iceland. The company also claims to use modern ASIC chips manufactured by BitFury in order to guarantee maximum performance and efficiency. The company offers a 36-month contract in which you pay $34.90 or its equivalent in BTC or EUR to get 100 GH/s. The maintenance fee is $0.00033 per GH/s per day.

X. What are the risks?

There are many risks with cloud mining so you have to be careful. Because of the popularity of bitcoin mining, many scam sites often crop up claiming to offer cloud mining services at unbeatable prices. Only use reputable services that we have reviewed. Cloud mining is also no fun for the tech enthusiasts. If you like building your own hardware, you can’t achieve that with cloud mining. Also, if bitcoin falls in value you likely won’t get your money back and the mine may cease operations.

XI. And what are the advantages?

For starters, you don’t have to buy expensive hardware or pay for its maintenance, since that job is done by the provider. You just need to pay a contract fee to rent computing power and a small fee for upkeep. Secondly, there’s no excess heat or noise to deal with, since the hardware is located remotely in data centers. Last and most importantly, if you find a company that generates steady profits then it can be a great investment in the long run without you having to do any extra work.

XII. Should I use bitcoin cloud mining?

It’s up to you. Most people do better when buying and selling cryptos like Bitcoin. Compared to setting up your own mining rigs, cloud mining will likely give you less control but is possibly a better choice as an investment to generate a steady income. If you want to get started, we suggest that you thoroughly research the company and the people you’re leasing power from and only use sites we recommend, because there is a large potential for scam sites in cloud mining.

XIII. How do I get started?

That’s the easy part. Start by selecting a cloud mining brand above and visiting their website. Next, we move onto the intricacies of wallets…

Sources & references
Risk disclaimer
Harry Atkins
Financial Writer
Harry was a Financial Writer for Invezz, drawing on more than a decade writing, editing and managing high-profile content for blue chip companies, Harry’s considerable experience… read more.

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