Cloud mining is a way of remotely mining cryptocurrency, where the end user pays a cryptocurrency mining company to mine on their behalf.
The mining company gets the user’s money and, in return, shares the mined cryptocurrency with the user.
How does cloud mining work?
Cloud mining is when someone pays a cryptocurrency mining company to mine on their behalf. The user pays the mining company, which mines from its warehouse.
The mining company keeps the money and then shares the mined cryptocurrency with the payer.
Cloud mining typically requires users to sign a cloud mining contract, where they pay upfront for a set amount of mining power over the duration of the contract.
Warning: Cloud mining is never a good idea
The most important thing to know about cloud mining is that it’s never a good idea. Functionally, cloud mining will always mean paying too much money for too little cryptocurrency.
Many cloud mining companies are outright scams, but even when using a supposedly reputable one, you’re still almost certain to lose more money than you earn.
The best possible outcome is that you cloud mine a good amount of cryptocurrency right before or as crypto prices rise, and then you can sell it for more than you spent on the cloud mining contract.
But even if you’re lucky enough to do this, you’d still make much less money than you would have by just buying cryptocurrency instead.
Find out how to buy Bitcoin or compare cryptocurrency exchanges to search for a cryptocurrency market.
- Register for an account with a cryptocurrency exchange like Kraken.
- Verify your account.
- Enable two-factor authentication.
- Click “Funding” then “Deposit”.
- Select a currency as the payment option, then choose your transfer method.
- Transfer funds into your account.
- Search for the desired cryptocurrency market.
- Enter the amount you want to buy.
- Review the transaction details.
- Click “Buy.”
This is our quick guide to just one way to buy Bitcoin. Compare some other options here.
Cloud mining calculators are lying
Many cloud mining provider websites have calculators that purport to show you future profits, and how long it will take to break even. These calculators are either outright lying or not telling the whole truth.
One of the most common tricks among cloud mining companies is to avoid showing you what happens if mining difficulty increases.
Mining difficulty is the system where mining gets harder and less profitable as the total number of miners increases. Generally, mining difficulty will rise over time, with the peak being dependent on current Bitcoin prices.
So, if you made the mistake of buying a Bitcoin cloud mining contract, you’ve probably agreed to purchase a fixed amount of mining power for a set period of time.
But after buying it, one of two things will happen:
Bitcoin prices go up. If prices go up, mining difficulty also increases. You start getting less and less Bitcoin from your cloud mining contract and end up losing money.
Bitcoin prices go down. If prices go down, mining difficulty will generally flatten out, but not drop too much. You’ll typically receive about the same amount of Bitcoin from your cloud mining contract, but it will be worth less and you end up losing money.
If you see a cloud mining contract that looks like it will be profitable, ask yourself whether it factors in mining difficulty and whether it will be profitable if Bitcoin prices go up or down.
To better understand why cloud mining is usually a scam, read the full guide to Bitcoin mining to learn more about how it works.
How to spot a cloud mining scam
In addition to unscrupulous and unprofitable cloud mining contracts, there are also many outright scams to avoid.
- Free trials. If you see an offer for a free trial, it’s likely a scam. This is especially likely if they want to collect any kind of personal information, require you to download anything or run any kind of program. A free cloud mining trial would just mean someone’s claiming to offer free money. As the rule goes, if it seems too good to be true, it probably is.
- Viruses and malware. If a cloud mining site requires you to install any kind of program on your computer, it’s probably because it’s a virus or some kind of malware.
- Ponzi schemes. Some cloud miners have turned out to be Ponzi schemes, which collect money from new users to pay off old users until they suddenly disappear with the money.
- Accepts cryptocurrency payments. Cryptocurrency payments can’t be reversed, which makes it easier to take your money and disappear.
There are no good reasons to use cloud mining. At best, it’s a way of paying too much money for too little cryptocurrency. At worst, it’s an outright scam. The safest and most efficient way of getting cryptocurrency is to buy it from an exchange.
