A lot of people don't like the idea of cloud mining. My guess this is mostly because all the major operators seem ridiculously dodgy. But, the theory of cloud mining is very solid. It's based on exactly the same principle as cloud computing. I work in the software industry and I do not want to be maintaining servers. So, we lease computers from Microsoft Azure. It's expensive, and we could definitely get the computing power cheaper if we just built our own servers and put them in a safe location. But, this is not practical for many reasons. This is even more so the case with mining. ASIC computers are extremely noisy, hot, and chew threw electricity. So, it only makes sense that these computers be placed in server farms where electricity is cheap and hopefully sustainable.
In the case of a server, yes, it can be remotely placed from wherever your operations are headquartered, but in the case of bitcoin miners, you really need to think hard for it since this would be your money-making machine, and if you are being overwhelmed by the amount of work needed to get your operations going without a hitch, then maybe bitcoin mining isn't just for you to take your profits on.
The question comes in: if mining is profitable, then why don't the cloud mining services just build farms and collect the profit for themselves? The answer to this is very simple. Mining is not necessarily profitable. It can actually run at a loss. As mining difficulty goes up, the profitability goes down. Therefore, mining is in some sense gambling. Leasing out ASIC computers is necessarily profitable so long as the owners of the business properly calculate all their expenses and charge a price which is high enough to make a profit. So, as a business venture, at least hypothetically, cloud mining is absolutely on par with services like Microsoft Azure and so on. Theoretically speaking, when you buy cloud mining, you're not paying for Bitcoin, you are paying for the expenses that it takes to run the server farms: power, land, staff, air conditioning, security, and so on. It's a no brainer that this makes sense as a business model.
You've pretty much contradicted yourself in the first paragraph lol. Cloud mining is a great business model
if there'd be loads of users wanting to overpay for a service that doesn't guarantee them money in return. This is great for the mining operators however for its peers and users, it isn't economical and they're just giving money away. That's why we've distanced ourselves from cloud mining since we only pay these operators so they can
expand their operations but the reward for us is nil.
And yet, what we mostly see in the cloud mining space is dodgyness. Reviews of cloud mining operations like Hashflare and so on are littered with people complaining about issues, hidden fees, and what's worse is that there's no way to confirm the financials on any of these companies. Where are these businesses being run? Under what regulation are they run? Do they have any insurance to back their businesses?
Because the machines and staffs are non-existent; most of these cloud mining services are ponzi schemes riding the hysteria of bitcoin to generate them money. Imagine being locked-up in a contract with 'hashing power' which you cannot sell if you want to and will give you pennies in return, for a year, less the mining costs and maintenance fees. You're being robbed at in the light of day yet you are willing to give your money to your robbers.
Are there any other cloud mining ventures around where we can validate things like company location, company financials, are running under a recognized regulatory body and so on?
None.
