If you want to invest in bitcoin mining without the hassle of managing your own hardware, there is an alternative. You can use the cloud to earn your coins.
Put very simply, cloud mining means using (generally) shared
processing power run from remote data centres. One only needs a home
computer for communications, optional local bitcoin wallets and so on.
Pros
Here’s why you might want to consider cloud mining:
- A quiet, cooler home – no constantly humming fans
- No added electricity costs
- No equipment to sell when mining ceases to be profitable
- No ventilation problems with hot equipment
- No worry of hardware failures
- Practically instant setup: no system building or software configuration
- Reduced chance of being let down by mining equipment suppliers.
Cons
Here’s why you might not want to consider cloud mining:
- Less fun (if you’re a geek who likes system building!)
- Lower profits – the operators have to cover their costs after all
- Lack of control and flexibility.
Types of cloud mining
In general, there are three forms of remote mining available at the moment:
- Hosted mining
Lease a mining machine that is hosted by the provider. - Virtual hosted mining
Create a (general purpose) virtual private server and install your own mining software. - Leased hashing power
Lease an amount of hashing power, without having a dedicated physical or virtual computer. (This is, by far, the most popular method of cloud mining.)
Hosted bitcoin mining
Clients pay monthly rental rates for a large range of bitcoin ASIC
mining systems, and can rent a dedicated physical machine for their sole
use.
Many manufacturers are working on their own hosted mining facilities. KnCMiner recently announced that they are developing such a scheme in Sweden that uses renewable energy.
Clients pay monthly rental rates for a large range of bitcoin ASIC mining systems, and can rent a dedicated physical machine for their sole use.
Virtual hosted mining
Amazon's EC2 platform
Amazon's Elastic Cloud Computing (EC2) platform was once a popular way of mining scrypt-based currencies, such as litecoin, feathercoin and dogecoin. Amazon comes with added costs either in the form of an advance payment for a year's service or a ‘pay-as-you-go’ model.
However, a potentially more economical model is the ‘spot instance",
whereby users can bid for computing time at a price they are willing to
pay. When Amazon has spare capacity, it will grant computing power to
the highest bidder. However, if you bid too low, your mining system may
never come online at all. Furthermore, you may select instances in
different geographic regions that can have an effect on price.
The best type of EC2 virtual machine for mining will have virtual
graphics cards. But, these are harder to access on spot instances.
At one time, it was profitable to mine litecoin this way, but not currently.
Digital ocean
This VPS service offers a very simple ‘pay-as-you-go’ service that became popular
during the early days of primecoin. However, the cheapest plans offer
only modest computing power. For example, the $5/month tarriff has but
one core and gives single-digit kilohashes per second for scrypt
currencies. It should be noted, though, that this could be cost
effective for completely new currencies.
The rest ..
In principal, mining can be done on any type of virtual host service.
However, one needs to carefully consider the computing capability on
offer. While it is theoretically possible to install mining software on a
web server, it would probably not be profitable.
There have been issues with hacker-controlled botnets that have been
able to direct a vast amount of computing power at mining
cryptocurrencies, or by developing different types of malware to infect more machines.
Top CloudMining services
Here are some of the best cloudmining services:
Genesis Mining
Genesis Mining is the largest scrypt cloud mining provider that offers
several features that are unique among all cloud mining services. Our
integrated advanced multipool is the most popular feature among our
clients. This means that an algorithm will automatically mine the most
profitable altcoins
Eobot
The easiest, cheapest, and best cloud mining solution. Start with as little as $10 using PayPal and choose between any cryptocurrency including Bitcoin, Litecoin, Peercoin, Namecoin, Feathercoin, Dogecoin, NautilusCoin, and Vertcoin.
CEX.IO
CEX.IO is the cutting-edge market for Bitcoin-priced & fully-maintained GHashes.
Here you can buy or sell GHashes, Futures Contracts for the Bitfury
ASIC chips or just trade on the increase or decrease of chip values.
Profit from trading GHashes and get revenue from the hashing power
while you trade. Trading Bitcoin has never been so profitable!
CEX.IO also has a referral program that gives you 3% of new member deposits. It’s a great way to earn some free hashing power!
How to determine profitability
The web services offered are designed to work with your hardware parameters, not cloud-mining parameters.
Even so, you can still use these calculators by thinking clearly
about the costs involved. Profitability calculators (for example, The
Genesis Block) often ask for your electricity costs, and sometimes the
initial investment in hardware. Effectively, you are being asked for
your ongoing costs and your one-off investments.
Therefore, since the provider, not you, is paying the electricity
bills, you can enter the monthly mining bill in place of the electricity
cost.
The conversion process isn’t completely straightforward, though. In
the case of hardware miners, you can work out the monthly running cost
by multiplying your electricity charge (ie: $ per KWh) by the power
consumption of the unit and by a conversion factor of 0.744 (the ratio
of seconds per month to joules of energy per KWh).
But, for cloud mining calculations, you need to do the opposite,
because the provider gives you an (effective) monthly running cost.
Hence, you need to calculate an equivalent cost per kilowatt hour to
feed into the mining calculator. This is done by dividing (not multiplying) the monthly running cost by the 0.744 conversion factor mentioned above.
For example, were you to then plug these numbers into the bitcoin mining calculator
at The Genesis Block website, you would enter ‘0’ for the cost of
hardware, shipping costs and miscellaneous costs, and you would enter
‘1’ for power usage, and then enter the equivalent electricity cost into
the electricity costs line. Note that you could swap the power use and
electricity cost values around and it would make no difference to the
calculator.
This type of calculation doesn’t apply to all cloud mining
businesses, as some have a significantly different cost structure. Hash
Rack or Cex.io, for example, would not be suitable for the calculations
mentioned here.
Risk vs reward
When
engaging in any type of cryptocurrency mining there are risks, but
profitability is possible if you make the right choices. In this
article, we’ve given you some pointers on how to decide which way to go.
In your test calculations, you will likely see that some cloud
mining services will be profitable for a few months, but, as the
difficulty level of bitcoin increases, you would probably start to make a
loss in four to six months and beyond.
A possible remedy to this situation is to reinvest what you have made
into maintaining a competitive hashing rate, but this is highly
speculative.
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