If you are an avid reader of the novice Bitcoin guides we post on this website, you will remember how we talked about profitability in part one of the Bitcoin mining guide. Given the upfront hardware investment costs, shipping costs and possible import VAT fees before you can even get your Bitcoin miner set up and running, it may be a wise choice to look for other options. Bitcoin cloud mining is an alternative way of mining Bitcoins without the hassle of installing a Bitcoin miner at home.
What is Cloud Mining?
The term of “doing things in the cloud” is not new in the world of technology. In fact, most of us have been doing things in the cloud for many years now. If you edit a document in Word for example, Microsoft gives you the option of saving this file to your OneDrive account. That OneDrive account is a cloud server, as you are not hosting the file on your computer, but on a server far away.
Bitcoin cloud mining operates on the same principle, as you pay for hashpower based in a remote location in order to generate Bitcoins on your behalf. The payment for such a service comes in the form of a “mining contract”, and depending on your cloud mining provider, can last from a few months up to a lifetime.
Instead of ordering a Bitcoin mining device and have it shipped to your location, most cloud mining companies will sell you the hash power produced by one [or multiple] device(s) hosted in their data centers. Cloud mining companies will also take care of setting up the miner and maintaining it, as well as pay the electricity bill.
And this is where most Bitcoin miners wrongfully calculate their potential earnings, as they do not account for the maintenance fees charged by their cloud mining provider. Granted, these companies usually pay far less for electricity because they buy it in “bulk”, but these bills still need to be paid and are passed on to the customers.
On top of a fee for electricity costs, several Bitcoin cloud mining providers will charge an additional maintenance fee. This fee covers setting up your Bitcoin mining hardware, making sure that it remains in operation all the time, and replace defect hardware if needed. Maintenance fees are usually not as high as electricity costs, but they need to be factored into your calculations.
Is Bitcoin Cloud Mining Profitable?
There is no definitive answer to that question, as it usually depends on the current Bitcoin price. Recent studies have shown that most Bitcoin cloud mining providers need a Bitcoin price of US$320 in order to make mining profitable for their customers. Needless to say, given the Bitcoin price charts of 2015 so far, cloud mining is far from profitable.
But that doesn’t mean that you can’t make a profit with Bitcoin cloud mining, you’ll just have to do some more research. Several companies are working on lowering their maintenance/electricity fees to a bare minimum, while others are offering Bitcoin cloud mining contract without any additional fees to begin with.
There is one golden rule when it comes to Bitcoin mining in general. Do some extensive research, weigh your options and never invest money you cannot afford to lose if things go south!
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