Is It Profitable to Cloud Mine Bitcoin?
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Over the past few years, Bitcoin has gone from a niche interest to an internationally recognized currency What Is Bitcoin: The MakeUseOf BitCoin Guide What Is Bitcoin: The MakeUseOf BitCoin Guide Whether you just want to find out more about BitCoin or to actually use the currency, you'll want to check out "Virtual Currency: The BitCoin Guide", the latest manual from author Lachlan Roy. Read More . At this point, major online retailers like Overstock, Expedia, and NewEgg will even accept Bitcoin as payment.

There are many ways to mine Bitcoin, even if you don’t want to invest in your own physical hardware. But is it really possible to make money on such an endeavor at this stage of the game? Here’s everything you need to know if you’re considering getting into cloud mining Bitcoin.

What Is Bitcoin?

Bitcoin is an open-source Open Source vs. Free Software: What's the Difference and Why Does It Matter? Open Source vs. Free Software: What's the Difference and Why Does It Matter? Many assume "open source" and "free software" mean the same thing but that's not true. It's in your best interest to know what the differences are. Read More cryptocurrency that launched in 2009. It’s a decentralized currency, meaning that transactions are made between users without an intermediary — although a public ledger does verify and record all exchanges.

Since the system has no single central authority, the task of verifying individual transactions falls to miners. Upon the creation of each new “block” of transactions, miners apply a hashing algorithm to the data in order to confirm its legitimacy.

Miners receive Bitcoin upon the successful creation of a hash. However, there’s a lot of competition, so it’s not particularly easy to make that much money.

A new block will only be valid if it needs to contain something called proof of work. This hinges upon finding a number known as a nonce, which might require many attempts at hashing the data. This is why most serious Bitcoin miners use high-spec systems with plenty of processing power, to give them an edge over the many other miners attempting to hash the same blocks.

What Is Cloud-Based Bitcoin Mining?

Cloud-based Bitcoin mining allows users who don’t have capable hardware to mine Bitcoins 5 Ways You Can Make And Mine Bitcoin Currency 5 Ways You Can Make And Mine Bitcoin Currency The revolutionary and controversial method of payment has been making headlines. There are plenty of reasons why you might want to start performing transactions using Bitcoins. But first, you have to earn some for yourself. Read More . Instead of using their own rig, they pay for cloud-based access to someone else’s hardware via sites like Genesis Mining and Hashflare.

These services typically charge a monthly fee over a set contract length, that gives subscribers access to a certain amount of MH/s (megahash per second) or GH/s (gigahash per second). This is your hashing power, and a higher value will result in a more profitable output.

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However, many services also charge a maintenance fee, which they usually deduct straight from your earnings. It’s very important to take this into account when you’re establishing whether or not you stand to make money from your subscription.

Most services pay users once every 24 hours, with a delay after the end of mining activity to verify the yield.

Is It Profitable?

There is certainly money to be made from cloud-based What Is The Cloud? What Is The Cloud? The Cloud. It's a term that gets thrown around a lot these days. What is the cloud, exactly? Read More Bitcoin mining operations. The question is, are you going to be making that money, or is it all going into the pockets of the service’s owners?

Obviously, it doesn’t make sense for these services to offer up their hardware without getting a healthy return on their investment. It’s important to realize that you’re playing a relatively small role in the process. You’re certainly not going to make anywhere near as much money as you would mining for yourself.

However, you should also take into account that you’re not paying for setup costs. You don’t need to buy a high-spec PC, which is a major investment. If you’re just looking to dip your toe into the water, signing up to a service for a short period of time represents less of a risk than spending lots of money on hardware — as long as you’re not committing to a lengthy contract. Of course, the rewards aren’t as great.

Whether you’re doing it via the cloud or in your own home, there are complex economics at play when it comes to Bitcoin mining. Fortunately, there are tools like TP’s Bitcoin Calculator that will eliminate some of the guesswork. Enter in as much information as possible, and you’ll get an indication of what sort of return you can achieve.

However, the changing face of the market is something else to take into account. If you’re relying on a cloud service, they could feasibly up their maintenance fee, and eat into your profits. It’s not your hardware, so you have very little control over this kind of development. With that in mind, the best way to make money from Bitcoin might be the most straightforward route.

Buying In Is Best

Despite having matured quite a bit, the future of Bitcoin is still rather unpredictable. Working with a cloud mining service only adds to this unpredictability, because you’re relying upon an outside entity.

Like any investment, there’s always going to be some element of risk to Bitcoin. The least complicated method of making money from the currency is buying it at a low price, then selling it high. Unfortunately, there aren’t really any shortcuts.

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It’s not impossible to make money with your own hardware set-up. That said, it’s crucial you understand how competitive this practice is. This is no get-rich-quick scheme This Site Tells You How Much Money You've Ever Earned This Site Tells You How Much Money You've Ever Earned Ever wonder how much money you've made over your entire life? If you're in the U.S., the Social Security Administration's site can tell you. Read More , and it’s not something that you should dive into without doing some serious research.

The margins are always going to be smaller when you’re working with a cloud service. The company is making money from your mining activity, just like you are. You can make some cash, but it’s going to be a small amount. You’re certainly not going to be getting the sweat equity that you would from setting up your own rig.

Some would go as far as to call these services a scam, but really their practices are just common sense. It’s not realistic to expect that paying a monthly fee is going to allow you to earn money hand over fist.

If the rewards were large and guaranteed, what would be the benefit of letting you get in on the action for a flat monthly rate?

Are you looking for more information about Bitcoin and Bitcoin mining techniques? Or are you looking to share what you know about cryptocurrency with other users? Either way, why not join the conversation in the comments section below?

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  1. Kettlestuck
    August 8, 2017 at 1:08 pm

    "Is it profitable to Cloud Mine Bitcoin?" should say "We don't know if it is profitable to Cloud Mine Bitcoin either".

    It would have been much more informative or interesting to see even vague approximation of numbers... I obviously don't do any BC mining or Cryptomining whatsoever but would have liked to see some comparison of multiple "hosted cryptocurrency" services with some costs and actual tests/trials. For example - if the monthly cost for this service is automatically deducted from the mined cryptocurrencies I see that as an appealing aspect... you pay a small "entry fee" of sorts and then just keep it running until you either no longer keep turning a profit or feel you've gathered enough experience and decided to build your own miner.

    • Steven
      August 15, 2017 at 1:56 pm

      I absolutely agree. This article gave me no real information. We are looking for some kind of numbers and an idea of the breakdown of fees, percentages, etc.