Mining has come a long way since Bitcoin was first introduced in 2009. Back then mining was definitely a profitable venture. For the early adopters of cryptocurrency mining, it was possible to mine using your PC’s CPU or GPU. Again, the number of miners was relatively small, a factor that contributed to a high possibility of getting the block reward that constitute profitability.
Mining and profitability
Even though the value of Bitcoin and altcoins like Ethereum have continued to increase over the years, mining is slowly becoming unprofitable. This is especially the case for individual miners who cannot afford the required hardware that gives out enough hashing power.
Mining difficulty means you need massive computational power to solve the algorithmic computations necessary to secure and verify a transaction. Huge electricity bills, especially in relation to the use of custom mining rigs and Application Specific Integrated Circuits (ASICs), also affects chances of gaining huge profits.
With this background information, one would still want to ask: Is it possible to get rich from mining?
The answer to this would be that it’s possible, but not guaranteed. Big mining companies and cloud-based pools could realize profits. However, if you are an individual looking for a quick way to get some BTC or other altcoins, the best route to crypto riches is probably through buying and holding.
A good example is Ethereum. If you had bought ETH, for instance, at the beginning of March 2017, you would have used $20 per ETH but made a profit of about 4000% if you had sold it in December when it sold at $800. Even if you hadn’t cashed in and maybe sold it now, the profit would be quite decent still. Though coins present a risk due to price volatility, shrewdness can see an investor get rich within a short time.
That takes us back to the question of whether you can get rich by way of mining.
You can make a minimal profit (sometimes very negligible, it beats the logic), but getting rich from mining is not easy and will need a little more financial input and increased exposure to risk. With the expensive equipment and increased competition, it seems almost pointless to go into mining coins like Bitcoin.
You can mine Ethereum (soon it won’t be possible), Monero, Litecoin, and Zcash- but they are dominated by giant mining pools. Mining, therefore, has become a really difficult task to accomplish for many ordinary people.
That’s precisely why some companies have cropped up, promising to help mining enthusiasts get profitable returns using cloud mining facilities.
What is cloud mining and can you get profits from such platforms?
Cloud mining basically means being able to mine cryptocurrency using shared CPU or GPU power. (Hashing power) You lease a certain amount of hashing power from a dedicated mining center and allow them to mine Bitcoin or any given cryptocurrency on your behalf. And that basically is the first red flag. How can someone mine on your behalf and give you profitable returns?
Cloud mining sites have bad reviews
Remember that cloud mining is under the control of the company, giving you little influence over what goes on. It thus means that there could be inherent risks involved. Especially high is the possibility of the company not being legit. As such, you can lose all your investment, though that is true of trading in the highly volatile crypto that also is exposed to cyber hacks.
The sites will promise the advantage of not needing to have the extensive technical knowledge to carry out cloud mining. Since you know next to nothing, it is likely that the company will reap you off without your knowledge. There are complaints on social media of certain sites promising to charge only “a small fee” for maintenance, and then when the clients sign up, all the supposed profits are eaten up by huge deductions in the name of the maintenance fee.
You may also be lured by the fact that you don’t need to go through all the hustles of acquiring and setting up expensive mining hardware.
One thing to note is that cloud mining providers usually incur all the initial costs, which is thus passed onto you when you register. You pay a fee, and more or else you get nothing near what you put in.
Beware of Ponzis
Ponzi schemes abound among cloud mining sites. The mining companies have elaborate sites that advertise how they take care of the hardware equipment, pays electricity bills and cooling costs. This is supposed to leave you with the comfort of mining away from the noise and heat that comes with running mining hardware.
Companies will offer leases that range from hours to a number of years. The hash rate that you access varies from contract to contract, but it is generally measured in MH/s or GH/s. The so-called larger mining companies offer to provide even larger portions in terms of Terahashes (TH/s), but of course, charge you more.
There are numerous cloud mining companies that appear to be legit, but their inner workings are questionable. Some have even turned out to be scams, not paying what they promise.
MinerGate is a good example of a company offering cloud mining services. Though comes about as legit, the returns versus the investments do not add up. The site calculates contract pricing in BTC, starting with the lowest at 20GH/s for 0.0034BTC.
The contracts are set in BTC, but clients are charged fees in USD at $0.0066 for every 20GH/s leased. This isn’t a problem, you may think, but wait until the actual returns come in.
A user’s review of the site stated that they had bought 1TH/s for mining. The gross earning a day was $0.70, and the site deducts $0.33 as a fee. That leaves $0.37 as profit, which can’t be withdrawn because withdrawals are made in BTC, and the minimum threshold is 0.01BTC.
If 1BTC= $10,000 for instance, to hit 0.01BTC a user with 1 TH/s needs 300 days at $0.37 a day to get $100, which is the minimal withdrawal. Imagine investing $170 and then waiting almost a year to earn $100! That won’t make you rich any time soon.
In conclusion, some sites have been around for much longer and are, therefore, quite adept at getting beginners fall for their pranks. They hire professionals who run websites and get paid reviews that praise the sites. Yet, truth be told, many do not offer any tangible evidence that you can get profits from cloud mining.