Crypto

Cloud mining can be an avenue for the everyday person to get into crypto mining, but is it still profitable? We take a look in this article.

The so-called investment experts have snubbed 

 in the past, only to find a soaring crypto market turning people into billionaires later. People have since started indulging in cryptocurrencies more than ever before. 

 has taken the world by storm. While buying and trading Bitcoin and other cryptocurrencies is more popular than ever, Bitcoin and crypto mining at home has become unaffordable for several reasons — but mainly due to the increased price of Bitcoin and electricity costs. The only viable option that remains open for most people now is cloud mining.

But is it really a thing today? Is cloud mining still profitable in 2022? Let’s take a look.

 is a solution that lets everyday investors rent mining hardware in the mining farms of a cloud mining company.

, it is called Bitcoin cloud mining. The most amazing part is that the mining hardware is owned and operated by the company. It helps in bringing down the upfront costs of owning a cryptocurrency for the average Joe.

Mining cryptocurrency was already a “thing” way before cloud mining became popular, of course. But with the increasing popularity of cryptocurrencies like Bitcoin and 

, hashing algorithms also became more complex. The introduction of more sophisticated and dedicated hardware like ASIC made it virtually impossible for normal computers to mine Bitcoins or any of the popular cryptocurrencies.

Cloud mining in itself is not a novel idea. People have always been aware of the benefits that economies of scale bring. From this came the concept of a mining pool, in which people contribute their computing resources to become a part of the larger pool. They are collectively doing tasks as a team, and get paid according to their contributed hashing power. It is analogous to the parallel processing which is used in multicore processors these days. In the Proof-of-Work approach used by Bitcoin, miners compete against each other to solve a complex hashing problem. In such a paradigm, the mining pools ensure that everyone gets something, instead of the winner taking all.

Companies soon realized that although there are people who would love to contribute resources to a mining pool, high upfront maintenance costs discourage them. This led to the evolution of mining pools into cloud mining solutions. Companies started investing in hardware, giving an option to people to rent this hardware at a much more affordable price.

People opting for cloud mining can rent some of the computing power from mining farms in exchange for a fee. The mining farm itself acts as a mining pool, and then the hardware you rent becomes part of this pool. As this hardware is often strategically located in colder regions to decrease operational costs, people taking on the lease do not have physical access to their rigs. So the company is responsible for the maintenance of the hardware as well. Thus there is a maintenance fee that a person has to pay periodically to these companies to maintain the hardware.

Following are the things you can consider while going for a cloud mining service:

There is no restriction on who can buy a cloud mining service. But it makes more sense for people who can’t afford high-end mining hardware, but still want to have a go at mining. Also, it is a preferred choice for those who are not tech-savvy enough to take care of the setup and maintenance needs of mining at home.

Do you know that cloud mining comes with its own set of unmatchable benefits? Well, here are a few of them.

Affordability was the primary motivating force behind the introduction of cloud mining services as we know them. With cloud mining, people no longer need to buy either an expensive cryptocurrency, or hardware with sufficient computing power to have a high enough hash rate. Cloud mining democratizes the field, as everyone can mine after paying a registration fee.

Technological Support by the Mining Company

In regular mining, one has to be proactive about technology to start mining at their home. They must know what CPU, GPU or hardware configuration would best fit their needs. Not least of all, electricity costs pretty much make mining profitability in this way impossible. While many tech-oriented people can do this, there are a lot more who cannot. Cloud mining is a great solution for them, as they no longer have to concern themselves with technical details. All they need is to do a little calculation regarding their ROIs, and they’re good to go.

It is true that Bitcoin mining uses a lot of electricity. However, cloud mining provides a solution to that. The mining farms strategically sit in cold regions which require a lot fewer cooling setups. Also, major mining farms around the world use electricity made from renewable sources of energy.

The company operating a data farm has enough resources to invest in state-of-the-art ventilation technology. The equipment is always well maintained, too. And even in case of any unforeseen situation, the end user is always safe from any mishap.

You do not have to turn your home into a heat engine with cloud mining. Additionally, your mining activity does not affect your electricity bills. You can mine all day long without interruption, without having to worry about the hash rate or anything else. Everything is done for you.

When someone is mining bitcoins, they are actually dedicating their computing power to maintaining the 

 network. Their computer ends up doing complex calculations, generating hashes, and adding the block generated to the long chain of crypto blocks that have come before it. 

After doing the day’s labor, their computer gets a remuneration in exchange for that. That remuneration is what we call a mining reward. The rewards received with cloud mining are known as cloud mining rewards. While opting for cloud mining services, there is an option to select the volume of resources you want to rent. The greater the resources you rent and dedicate to mining, the higher your reward is at the end of the day.

Mining used to be an easier task back in the days when cryptocurrency was a new phenomenon. Increasing popularity since then means more competition, increased complexity and lesser rewards for the same efforts. However, hardware development companies have tried to keep up with the increasing demands with ever-increasing specifications of their gears. So, if done with the right set of tools, there can still be a lot to gain from mining cryptocurrencies.

In addition to the complexity of the algorithm, the registration and maintenance fees charged by the cloud mining service providers become an additional factor to watch closely. The return on investment must always be higher than the fees you pay the mining company. That is how you remain profitable. Thus, a little bit of calculation beforehand goes a long way in ensuring the profitability of a cloud mining process. 

Apart from that, it is prudent to keep an eye on the price movements of a coin you are mining. That is why the cloud mining companies ended up abandoning many altcoins they picked up at the start of their journey. The coins were constantly dipping, making it easier for them to turn unprofitable due to their low values.

Let us say that Company A charges $1 per month for 10 GH/s of computational power. Let’s say you get one coin of a cryptocurrency after working for one month on this power. If the price of this coin is $2, mining it on the cloud is currently profitable. You gain $1 at the end of this process. But what if the price of the coin goes up? Your profit increases to $3 minus $1, leaving you with $2.

However, it might become a little harder for your hardware to earn one coin in a month due to the increased hash complexity. Now, the time needed to earn one coin might increase to one month and five days. So, the profit becomes a little less than $2. But the profit you get still increases. On the other hand, if there is a dip in the price of a coin, your profit will suffer, especially as the companies charge their maintenance fees in stable physical currencies like USD.

While it is possible to mine Bitcoin or altcoins with cloud mining, the decision comes down to the cloud mining company you choose. Most cloud mining companies mine only the popular cryptocurrencies such as Bitcoin, Ethereum and Litecoin. This is because of their higher coin value, high popularity and better future projections. It is for these coins specifically that mining at home with normal PCs has become impossible.

As a cryptocurrency becomes more popular, it becomes less viable to mine it at home and its mining shifts from local computers to mining farms. So, if there is an altcoin that grows in popularity in the future, the mining companies may well add that coin to their list as well.

Even though cloud mining is a great solution with many advantages, there are a few things that one should be aware of before jumping immediately on this ship. 

● No ownership: Even after you’ve rented the machine, you do not have ownership over it. Thus, after investing in the service of a cloud mining company, coming out of that contract without losing a buck proves difficult.

● Companies doing bad business: There is always this possibility, but then, this risk exists in every business or company you invest your money in. The crypto market is volatile. So the risk associated is on the higher side, but so are the rewards.

● Scams: The internet is full of scams, and the cloud mining industry is not immune to them. However, you can avoid such scams with some research and caution.  

● If the miners you bought drop below the mining profitability threshold decided by the company, they can directly end your contract without your consent. You do not get the money back. Although it can happen, thankfully this is rare and only happens when the difficulty of mining a cryptocurrency rises excessively.

● You have no control over the mining pool of which your rented hardware becomes a part. The general user is not much concerned with this. However, it becomes discouraging for people who like more control.

Cloud mining makes it possible for people who want to mine cryptocurrencies even if they don’t have access to the equipment to do it in their own homes. However, the fact remains that there are all sorts of scams going on in the cloud mining market. Thus, while it can be profitable for some miners, these tend to be those who have done their homework well. If you want to mine cryptocurrencies on the cloud, the first and most essential step is to find a legitimate and profitable cloud mining company.

Is Cloud Mining Still Profitable In 2022?

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