What are the benefits of cloud mining for Bitcoin?

With the profitability of Bitcoin mining thrown into question lately, what, if any, are the benefits of Bitcoin cloud mining today?

Bitcoin’s price plunge last November has thrown the profitability of mining into doubt. The world’s largest maker of cryptocurrency mining hardware, Bitmain, has laid off over 50% of its staff, and other companies are following suit. So, if conventional Bitcoin mining hardware is failing to reap rewards, do any benefits remain to Bitcoin cloud mining?

What is Bitcoin cloud mining?

Let’s start with the basics. Bitcoin cloud mining (or cloud hashing) allows users to buy mining capacity (output) of Bitcoin mining hardware from remote data centres.

This means you can get in on mining cryptocurrency without having to invest in expensive equipment or use up your bandwidth or electricity. This can save you thousands of dollars in initial investment.

Advantages of Bitcoin cloud mining

You can start right away

All you need for Bitcoin cloud mining is a home PC and your own choice of Bitcoin wallet, as well as a reasonably high level of technical know-how.

You’ll save on upfront investment as well as electricity costs

Bitcoin mining has long evolved from the days of bedroom operations powered by geeks in pyjamas solving complex mathematical equations. Nowadays, it’s very difficult to compete with large mining farms. The majority in China hold some 81% of the network hash rate.

Bitcoin hardware mining costs are significant. For serious mining, you’ll need to buy an ASIC mining rig. These are a lot more expensive than other equipment, such as GPU and CPU mining rigs, but they mine at a much faster rate.

Since they can’t be updated upon any algorithm changes, Bitcoin miners can incur high replacement and upgrade costs from ASIC mining rigs. Moreover, you won’t be able to mine other cryptocurrencies since there is an increasing trend towards becoming ASIC-resistant.

However, Bitcoin cloud mining gives the individual miner another window of opportunity. You’ll avoid expensive setup costs and have no mining equipment to sell (or dump on the market) at times when mining is no longer profitable. You also won’t have to worry about overheating equipment or additional electricity costs.

There’s no noise pollution

Bitcoin cloud mining means zero noise pollution from humming fans (so if you are mining from your bedroom, your parents will be pleased). You can simply mine the cryptocurrency while going about your daily life.

Is there a downside? Of course.

Disadvantages of Bitcoin cloud mining

Unless you’re purchasing a significant stake, Bitcoin cloud mining is unlikely to be worth your time and effort. Cloud mining profits are considerably lower than traditional mining.

You won’t have flexibility or control over your own operations either, and you’ll probably end up paying out more for the data centre contract than you’ll ever make from mining.

Even worse than that, you may find yourself locked into an ongoing data centre contract, so be sure to choose your service carefully.

There’s also much higher fraud associated with Bitcoin cloud mining.

Costs of Bitcoin cloud mining

It may be less profitable, but it’s also easier to work out the costs. In fact, most companies offering this service (the biggest being Genesis Mining and HashFlare) simply run a monthly subscription model. You’ll choose what you want to pay based on your choice of cryptocurrency and the hash rate speed.

Scams abound when it comes to Bitcoin cloud mining, so be sure to read reviews from other customers before making a commitment. Check out the company’s social media, and ask questions before you part with your money, as you would before investing in an ICO.

The largest complaint about cloud mining is that profits are extremely low. For example, it takes HashFlare Scrypt 3828 days (just over 10 years) to reach an ROI according to Coinstaker. This makes Bitcoin cloud mining a long game that’s rather hard to justify.

There’s always the possibility of another bull run, pushing up prices and profitability. The more bearish the market, the lower the profits, and vice versa. However, as the difficulty level of Bitcoin increases, it will probably take even longer to become profitable.

While many miners using Bitcoin mining hardware are currently ceasing operations, they have no ongoing costs to pay. If they live in an area with cheap power, they may even be able to continue to turn a profit in harsh market conditions.

The key takeaway

Even when you remove the high upfront costs from a traditional Bitcoin mining setup, Bitcoin cloud mining remains far less profitable. The biggest benefits are that it’s easy to get started and requires no special hardware or electricity costs. But if you’re aiming to make a profit, you’d be better off looking elsewhere.

Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.

Previous Article

Bitcoin's failure to break out and subsequent dump demonstrates the fragility of cryptocurrencies

Next Article

The world's first EOS hardware wallet built for dApps is currently being developed

Read More Related articles