Many people have started looking for ways to make money from bitcoin since the price of bitcoin rallied incredibly in 2017.
In this article, you will learn about a popular way to make money with bitcoin, called bitcoin cloud mining, and what to look for when investing in bitcoin cloud mining contracts.

What is Bitcoin Cloud Mining

Bitcoin cloud mining allows you to rent mining hardware from a company that operates and maintains the mining equipment in exchange for a fixed fee and a share of the revenue from the mining activity. That means you can earn income from mining without buying expensive hardware.

Mining, which requires special hardware to solve math problems and earn a certain number of bitcoins in return, is challenging and has made cloud mining a cheaper solution.

Because bitcoin cloud mining is cheaper than owning mining equipment, this method should be very profitable.

Is Bitcoin Cloud Mining Profitable?

Over the past few years, we have noticed that the cost you accrue with buying mining contracts and monthly fees charged to your account has made it challenging to earn meaningful returns.

Cloud mining costs include paying for the initial contract to rent out some of the hardware from the host company. After that, you will be charged a maintenance fee. Based on the amount of hash power you rent, the cloud mining company pays you a share of payments from any revenue generated by the hash power you acquire.

For example, Genesis Mining, one of the most reputable cloud mining companies, offers two-year bitcoin mining contracts from $50 per 1 TH/y to $1,250 for 25 TH/s. You pay a maintenance fee of $0.14 per TH/s per day. Using a mining profit calculator, at the current bitcoin mining difficulty and exchange rate ($5,220.75), you could make about $6.25/month or $0.21 a day for the $50 contract. Deducting the maintenance fees would be $0.21 - $0.14 = $0.07 daily and $2.1 per month. Note that costs are subtracted from BTC's daily mining rewards, not fiat currency.

Now, you have yet to determine what the price of bitcoin will be in a year or two years, nor what the mining difficulty will be. That is what makes cloud mining quite risky. Even if the bitcoin rate goes up, it doesn't mean profit is guaranteed because of the mining difficulty. An uptick in price is often accompanied by an increased mining difficulty, which makes it much more challenging to make money from your contract. Moreover, should the cost of bitcoin drop and remain under a level where it is profitable to mine the digital currency, cloud mining operators will cancel your contract, and you will lose your invested funds.

Problems With Bitcoin Cloud Mining

Most cloud mining companies are often scams or need an effective business model. That means you could lose your money or earn less than you would by buying and holding bitcoin.

Some cloud mining firms are also pyramid schemes that could collapse anytime. AWS Mining is an example of an alleged cloud mining scam structured like a pyramid scheme. It has seven affiliate ranks and promises a 200 per cent profit for any investment, which is absolutely unattainable given the riskiness of bitcoin cloud mining.

Even though cloud mining is a legit avenue to make money from bitcoin, the returns over the past few years have shown that you would fair better buying and holding bitcoin than buying cloud mining contracts.