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How Does Cloud Mining Work?
Originally Posted 18 Aug 2015 by
If you wish to invest in Bitcoin mining with-out the stress of managing your own hardware, there is an other option; you can buy Cloud-Mining Contracts to earn your coins.
Cloud mining merely means using, shared processing power run from remote locations. You only need a home computer, laptop, tablet pc or smart phone for communication and your Bitcoin wallet etc. Nevertheless, there are still risks affiliated with Cloud-Mining which investors need to realize prior to parting with their money.
Advantages Why you might favour cloud mining: A silent, cooler home and no annoying, humming fans Cheaper electricity costs, (Bitcoin Mining Farms are located in areas with cheap electricity) No mining hardware to sell when mining ceases to be profitable Ventilation problems with hot equipment aren’t an issue Waiting for hardware to arrive isn't an issue
Disadvantages Why you might not want to consider cloud mining: Risk of fraud (if you don't trust us pay with pay-pal :-) Opaque mining operations Less fun Lack of control and flexibility.
Types of cloud mining In general, there are three forms of remote mining available at the moment: 1. Hosted mining Lease a mining machine that is hosted by the provider. 2. Virtual hosted mining Create a (general purpose) virtual private server and install your own mining software. 3. 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.)
How to ascertain profitability We have previously covered ways to calculate mining profitability. Although, the web services offered are generally intended to work with your hardware specification, not cloud-mining specification. Nevertheless, you can still use the calculators by factoring in the costs involved. Profitability calculators e.g., The Genesis Block, often ask for your electricity tariff, and sometimes the initial investment in hardware. Effectively, you're just being asked for your ongoing costs and your initial outlay.
So since the provider, not you, is paying the electricity bills, you just enter the monthly mining bill in place of the electricity cost, many of our packages automatically deduct the electricity costs so this is a non-issue) The calculations aren't completely straightforward, but not rocket science either. For example, with hardware miners, you can work out the monthly overheads by multiplying your electricity charge (ie: $ per KWh) by the power usage of the mining hardware and by a conversion factor of 0.744 which is the ratio of seconds per month to joules of energy per KWh. With cloud mining calculations, you need to do the reverse, because the provider gives you a monthly running tariff (not with BitcoinMinersUK, we deduct this automatically). Hence, you need to calculate the equivalent cost per kilowatt hour to feed into the mining calculator. This is done by dividing (not multiplying) the monthly running cost by the 0.744 conversion factor mentioned above.
Risk / Reward When engaging in any type of Bitcoin-Mining there are risks, but profitability is possible if you make the right choices. In this article, we’ve given you some tips on deciding which way to go. In your test calculations, you will possibly see that some cloud mining services will initially be profitable for a few months, but, as the difficulty level of Bitcoin increases, you will probably start to make a loss afterwards, we encourage you to compare us to other providers, and if you see better pricing elsewhere please let us know. A possible solution to this is to re-invest what you have made into maintaining a competitive hashing rate, or to invest in our PACMIC contracts (see in our products)
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