Cloud Mining – How to Mine Bitcoin without a Miner

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.

However, there are certain risks associated with cloud mining that investors need to understand prior to purchase.

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
• Reduced chance of being let down by mining equipment suppliers.

Cons

Here’s why you might not want to consider cloud mining:

• Risk of fraud
• Opaque mining operations
• Less fun (if you’re a geek who likes system building!)
• Lower profits – the operators have to cover their costs after all
• Contractual warnings that mining operations may cease depending on the price of bitcoin
• 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.)

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.

As mentioned above, the risk of fraud and mismanagement is all too common in the cloud mining space. Investors should only invest in cloud mining if they are comfortable with these risks – as the saying goes, never invest more than you are willing to lose.

Investigate social media channels, speak with former customers and ask pointed questions of operators prior to investing. Ultimately, you should practice the same kind of due diligence that you would for any investment.