How bitcoin cloud mining works

Cloud Mining is the process of bitcoin mining utilizing a remote datacenter with shared processing power. Users of hosted Mining equipment can either lease a physical mining server or a Virtual private server and install mining software on the machine.

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Why don't HashFlare mine coins themselves? This is an area that has caused most of the skepticism around cloud mining - that why these companies aren't just mining Bitcoin themselves, why they would need to sell it to someone else. This Reddit post provides some good skeptical views on the topic, take a look at this if you're curious.

There are lots of theories in this area, but there's normally a recurring theme: We'll give an example to show this. Now even if everything goes badly, you've only lost half of your money. Then let's say you don't want to pay for electricity.

In a year's time you could do the same thing again. This is a basic example, but the principle here is what cloud mining companies are based on. Where by offering mining power to other people, they're able to minimise their risk and pay for more mining hardware. The risk here is that if they get greedy, they might charge so much that their customers are no longer earning any money - this is why you have to do profitability calculations yourself, as this risk of profitability is something they've off-loaded to you.

In late mining hardware is in short supply - so Genesis Mining for example has started offering pre-orders, where they sell mining power months ahead of when it will become available. This makes profitability more difficult to estimate, and so is even more risky for customers. We've made a cloud mining calculator to estimate profitability for Genesis Mining and HashFlare contracts, you can try that out here. Currently in early March , none of the contracts listed are profitable.

We've tried to address some common concerns around cloud mining in this guide, in particular topics around whether or not you'd actually earn money from it and how risky it is. Hopefully these concerns have been addressed. If you're after more information, see an interview with Vitaly Pavlov, a manager at HashFlare, here.

This site cannot substitute for professional investment or financial advice, or independent factual verification. This guide is provided for general informational purposes only. The group of individuals writing these guides are cryptocurrency enthusiasts and investors, not financial advisors.

Trading or mining any form of cryptocurrency is very high risk, so never invest money you can't afford to lose - you should be prepared to sustain a total loss of all invested money. This website is monetised through affiliate links. Where used, we will disclose this and make no attempt to hide it. We don't endorse any affiliate services we use - and will not be liable for any damage, expense or other loss you may suffer from using any of these.

Don't rush into anything, do your own research. As we write new content, we will update this disclaimer to encompass it. We first discovered Bitcoin in late , and wanted to get everyone around us involved.