What is Cloud Mining?

Finrazor.com presents an overview of a cloud mining as an alternative to traditional mining, the reason for purchasing a cloud mining contract and the differences in prices as well as the list of cloud mining providers

If you are thinking about to become a Bitcoin or Litecoin miner, for instanсe, and have started to choose an appropriate hardware, don't hurry up. You'd better get familiar with the following article which explains the technology of cloud mining and who knows, maybe will help to save space in your room.

If you are not particularly tech-savvy, mining can be a pretty tough job for you. Luckily, you can still make money from mining without having to manage your own hardware. Cloud mining, as an alternative to traditional mining, lets you use shared processing power from remote data centers. There are generally three cloud mining options you can choose from:

  • Leasing a physical mining farm from a provider;
  • Creating a general-purpose Virtual Private Server, which you can then configure to be your mining farm by installing necessary software;
  • Buying a cloud mining contract, which is the easiest and most popular thing among cloud-mining investors.

What is a cloud mining contract?

By purchasing a cloud mining contract you essentially rent a portion of the mining company’s hashrate, which is usually measured in gigahashes per second (GH/s; one billion hashes per second). During the period of the contract, you will be receiving a percentage of the company’s profits from mining. Your percentage is based on how large of a portion of the company’s total hashrate you own.

What should I know?

Prices for cloud mining contracts vary depending on cryptocurrencies and, of course, on their providers. Bitcoin contracts are usually the cheapest at only about $0.6 for a 10 GH/s year contract. Scrypt-based cryptocurrency (such as Litecoin) contracts cost considerably higher with around $2 for a 1 MH/s year deal (one million megahashes per second).

The total bitcoin hashrate is, at time of writing, 44 million TH/s (terahashes, trillion hashes). This means that a 10 GH/s bitcoin contract is not even close to making any reasonable profit. You might have to invest into cloud mining contracts as much as you would spend on a complete mining rig, and still expect lower returns because cloud mining is offered as a service, which usually entails costs for the provider.

Cloud mining is also a good investment if electricity costs are high in your country. Owning a mining contract lets you bypass this problem, as all the hardware maintenance costs reside on the provider’s shoulders.

How to choose a provider?

On the other hand, cloud mining implies certain risks, as you, as a customer of a cloud mining service, do not have access to the information about the actual profits of the company. For the same reason, you cannot calculate the profitability of a mining contract for a certain amount of hash power. This is why you should be most careful about choosing your cloud mining provider: pick an already established company with a good history and read their user feedback on forums, such Bitcointalk. Some of the widely known and reliable cloud mining companies include Hashflare and Genesis Mining, though you should only act at your own risk.

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