Bitcoin cloud mining contracts
Bitcoin cloud mining contracts
Bitcoin

Bitcoin cloud mining contracts

By Marco Cavicchioli - 31 May 2020

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There are contracts on the market, called “cloud mining“, which allow participating in bitcoin mining without having to engage in it personally. 

In fact, bitcoin mining is now far too demanding, requires a lot of resources, consumes a lot of electricity, and is often not even profitable. 

In particular, the profitability of mining is at an all-time low after the third halving of the mining reward of the Bitcoin blockchain, which took place on May 11th, 2020

For this reason, not only is it not easy to mine bitcoin nowadays, but it is also very expensive and unprofitable. There is even the risk of doing it at a loss if expensive electricity is used. 

This means that bitcoin can only be mined profitably where cheap electricity can be used. 

In addition, mining requires investments in special machinery costing thousands of dollars, to the extent that miners often finance the purchase of this machinery by borrowing money. 

One of several ways to get low-risk loans is to sell cloud mining contracts

These contracts actually offload the risk of the investment onto users who sign them in return for a portion of the profits. 

For many people who do not have the right equipment, the necessary skills, and cheap electricity, cloud mining contracts are the only way to participate in mining, even if only indirectly, by simply investing their capital and setting up the machines.  

They appear as contracts for the rental of mining equipment and its management in exchange for any profits. 

This way, those who own and manage the equipment do not directly collect what they can earn with mining, but collect a fixed fee, leaving the customer the risk and any earnings. 

As can easily be guessed, this kind of service is also suitable for illegal practices, since the customer who invests by renting this equipment, not only does not have access to it but often cannot even check that it is actually used for mining. 

After all, since the supplier collects a fixed fee, and doesn’t even necessarily need to be able to mine bitcoin to earn money, they might also decide to behave criminally and just collect the fee promising earnings that may never come. 

That’s why there aren’t many serious companies that offer legitimate cloud mining contracts

In particular, if the supplier offloads the full risk of the mining activity on the customer, i.e. leaving them with 100% of the proceeds, it is uncertain whether they have a real interest in making the machines work as well as possible. 

Furthermore, if they promise high returns in return for limited investment, they are most likely lying, which indicates dishonest behaviour. 

Companies that provide Bitcoin cloud mining contracts

That being said, there are some companies that provide bitcoin cloud mining contracts that are known to provide a reliable service. 

Probably the most famous is Genesis Mining, which allows mining bitcoin and altcoins with daily payments. 

Another well-known one is Hash Flare, which offers efficient equipment and payments within 24 hours. 

One of the newest on the market is CryptoMining Farm, while others are Hashnest, BitCoin Pool, Eobot, MinerGate Cloud Mining, Hashing24 and NuVoo Mining. 

How does cloud mining work

The user, once the contract has been signed and the required investment has been paid, must set the operating parameters of the machines through a special interface provided by the hardware operator, and depending on the parameters set the machines will start operating. 

This means that it is the user who sets the machines to work optimally, while the hardware manager only takes care of the physical operation of the machines. Therefore, the service provider collects the rental fee, regardless of the results obtained by its machines, while the user takes responsibility for the settings, and the risk associated with the investment, in exchange for any income generated by the mining activity. 

However, certain technical expertise is required from the user who decides to sign one of these contracts, because the revenue it can generate depends largely on the settings of the machines

 

Marco Cavicchioli
Marco Cavicchioli

Class 1975, Marco teaches web-technologies and is an online writer specializing in cryptocurrencies. He founded ilBitcoin.news, and his YouTube channel has more than 11 thousand subscribers.

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