Over the past few years, Bitcoin has gone from a niche interest to an internationally recognized currency. 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 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. 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.
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 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.
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, 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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