Whether you have 35 bitcoins or are just getting started, you've probably heard about cryptocurrency mining. It's a laborious process that aims to remove the money component from investment decisions.
Sadly, people frequently spend more time and money than they actually manage to earn. This is due in part to the fact that mining is more complicated than most people would have you believe. On top of having really powerful hardware, a ton of time, and a ton of energy, it takes a lot of work.
Earlier, when bitcoin wasn't such an expensive currency, anyone who was motivated could start mining. You might call yourself a miner with just a few competent graphics cards and a month's supply of energy.
Things then became a little bit more challenging as enthusiasts turned into professionals and professionals turned into organizations. Mining became a group activity ultimately since it was so challenging and time-consuming. People would gather to divide the cost of processing power and distribute the benefits. When we eventually got to the point where that was the only option to generate cryptocurrency, they dubbed that pool mining.
Even pool mining is insufficiently efficient today. Some of us don't have time to worry about hardware, ASICs, energy costs, or anything else of the sort. These individuals' desire for ease served as the inspiration for cloud mining.
Cloud mining puts the financial component of the cryptocurrency investment where it belongs, whereas traditional mining seeks to avoid it. You now put money into it rather than your time and effort. A user of cloud mining would pay for a percentage of the hashpower (H) required for operation and receive cryptocurrency in proportion to their investment.
Sounds overly basic? Just like that. Making passive cryptocurrency income as simple as possible for people is the goal. We'll talk about how much they actually make here, which is a different topic.
How Does Cloud Mining Work?
Each bitcoin transaction contains a 16-digit number that is encoded. By having their computers randomly spit forth sequences at the receipt until they get it correct, miners must guess what this number is. These attempts are all hashes. How many hashes a miner can produce in a second is measured by their hash rate. The reward for that transaction goes to the miner who correctly predicts the number first.
Ethash is a comparable technology used by Ethereum. There are other hashes used by other cryptocurrencies, each with a different processing rate. We'll use bitcoin as an example to keep things simple.
A high-end ASIC mining machine can produce 14 Terahashes (TH), or around 14 trillion hashes, every second. Even if it seems like a lot, the bitcoin network is much more capable. With 18 zeroes after it, one quintillion hashes can currently be processed every second by bitcoin. Therefore, theoretically, you would win every transaction if you could generate more hashes than that amount. But you'd have been better off purchasing every bitcoin on the market to even attempt such a feat.
Maintaining a setup that can produce 14TH/s requires a lot of heat, headaches, time, and money for electricity. For a fair charge, cloud mining firms offer to carry all of that weight for you.
Cloud mining is all about purchasing hash power, much like pool mining, where you can either purchase additional resources for your CPU or share your own.
You pay for the desired hash rate and provide the remaining work to the miners. You receive a piece of whatever they made based on the hashes you purchased after a predetermined amount of time.
How much money are you able to make?
Despite the apparent simplicity of the situation, this is where things become complicated.
Choosing a cloud mining service usually involves selecting one of their many plans. Depending on the kind of coin you want to earn, they typically come in different hash rates, such as 100 GH/sec, 100 H/sec, and so on.
Since you can't actually alter the rate and can just purchase more of the same, it isn't crucial. It's fascinating that they offer yearly contracts for their sale. Therefore, you must pay for the entire year's worth of mining if you want to use the service. At a price of 5 US dollars per bitcoin and an average hash rate of 100 GH/sec, a year's worth of mining would cost about $1,900, maintenance fees included. They do charge for upkeep of their own servers.
This pricing may be used to calculate the profit we would make in a year using a straightforward equation.
At the moment, one bitcoin requires roughly 2.7 quadrillion hashes to manufacture. That is 2.7 trillion trillion hashes, or 27,000 GH.
With the aforementioned bundle, we are eligible for 36,500GH, therefore theoretically, when our contract expires, we will definitely get 1.3 BTC.
See, that's a fantastic offer. So why don't we see that on each and every one of their advertisements? This is so because reality is very different. If the cloud mining service you're using is the only one in the world, you'd only generate 1.3BTC.
At any given time, tens of thousands of miners compete for every transaction. For the same incentives, hundreds of businesses and pools with varying levels of processing capacity compete. By purchasing a hash rate, you are essentially turning it into a weapon to use against rival businesses.
In all of this, probability also has a significant impact. Due to pure chance, a relatively smaller miner could determine the order before a large pool. Having said that, it is not unusual for many cloud mining services to overcharge their customers.
Conclusion
In conclusion, cloud mining is the way to go if you want a totally hands-free investing experience, but don't anticipate a passive income.
This is not the kind of investment where you can buy it once and check on it whenever you remember, like a blue-chip stock. It's preferable to spend as much as you can afford and act as if it's already gone because, in many cases, it probably is.
Avoid this kind of business at all costs if you have long-term aims and value earnings over a peaceful experience.
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