Advice for new users regarding CLOUD MINING

[worldcup]

Thanks for the advice, power for mining is costlier than profit earned unless you have nice configurations.

Nice thread, well done.

electricity is quite expensive if you are serious in mining,
and configuration is also very important!

[Genesis-Mining]

Cloud mining is either scam or unprofitable, either way its not worth it..

We cannot agree with this. Mining can indeed be possible, otherwise people would not mine anymore.
I think the question you are referring to is: "Why would a company sell mining services if they would make profit by running their machines on their own?"

The answer to this question is simply, that we do it to decrease the risks of the our big farms by selling fractions of our farm. This way if we are profitable, also our users are!

[zdaz14]

Cloud mining is either scam or unprofitable, either way its not worth it..

We cannot agree with this. Mining can indeed be possible, otherwise people would not mine anymore.
I think the question you are referring to is: "Why would a company sell mining services if they would make profit by running their machines on their own?"

The answer to this question is simply, that we do it to decrease the risks of the our big farms by selling fractions of our farm. This way if we are profitable, also our users are!

And so that your users cover electricity and repair costs (possibly paying more than it actually costs, thus helping you pay for more of your machines as well). But yeah, I guess that's less risk, I mean I would do that too.

[CliveK]

At some point you reach a stage where you need to reassess your mining situation for whatever reason (kit replacement, not enough power, no space, not enough time to manage things, etc.).

So you can buy new kit, knowing it will last you a year (or less), kick your grandmother out the spare room and move the kit from under your desk, or resign your job so you can maintain your kit.

If you put a value to the time and effort of the changes that are required and weigh that up against cloudhashing, and you come up with cloudhashing is the way to go then do it.  Like you would normally, use a profit calculator and see what your investment is going to get you.

I would like to see cloudhashing more profitable though.  It seems the average cost for power is $0.08/kWh and assume that all these cloud mining companies are all based in some super green hosting centre which they rent space in, or have their data centres next door to a renewable energy source, they get great rates from the ASIC manufacturers, and the internet costs next to nothing. The profitability should be higher than someone doing it at home or at least the same.

I am all for cloudmining, it solves many scale problems, as well as power efficiency issues, puts the mining kit in the correct places in the world which limits the impact on the environment, etc. but it has to make economic sense for the customer at the end of the day.

Whats more, and this is just my opinion, all cloud mining operations should use P2Pool as it is supported by the Bitcoin foundation and is there to limit centralisation, or falling that, allow users to point to their choice of pool. This addresses some concerns from the community.

[odolvlobo]

Cloud mining is either scam or unprofitable, either way its not worth it..

We cannot agree with this. Mining can indeed be possible, otherwise people would not mine anymore.
I think the question you are referring to is: "Why would a company sell mining services if they would make profit by running their machines on their own?"

The answer to this question is simply, that we do it to decrease the risks of the our big farms by selling fractions of our farm. This way if we are profitable, also our users are!

That's a clever answer, but the truth is that you are competing against your customers. You only make money if they lose money, and vice versa. You are in it to make money, right?

[MightyBTC]

Thank you very much for this awesome guide to cloud mining for beginners.Have just bookmarked this to read through in free time.

[DrG]

Cloud mining is either scam or unprofitable, either way its not worth it..

We cannot agree with this. Mining can indeed be possible, otherwise people would not mine anymore.
I think the question you are referring to is: "Why would a company sell mining services if they would make profit by running their machines on their own?"

The answer to this question is simply, that we do it to decrease the risks of the our big farms by selling fractions of our farm. This way if we are profitable, also our users are!

That's a clever answer, but the truth is that you are competing against your customers. You only make money if they lose money, and vice versa. You are in it to make money, right?

Actually it is possible for both to make profit.  If the cloud mining company buy 10BTC worth of equipment, and spend 5 in overhead they have an outlay of 15BTC.  If they sell that hash for 20 BTC but they make a 5BTC profit, but if that hash mines 25BTC then the buyer makes 5BTC also.

Unfortunately I don't see any deals where the prices are low enough for the end user to make a profit like that.

Come on guys, let's see some price drops

[DrG]

Thank you very much for this awesome guide to cloud mining for beginners.Have just bookmarked this to read through in free time.

It's not really a guide but more of a warning for new members since many are not used to a world where an entity can call themselves a company and then disappear into thin air the very next day.

I think the dangers of buying physical hardware have been well documented over the last year and I have posted numerous times about the problems I had wit BFL and Avalon that I think making a thread on hardware vendors would be beating a dead horse. Dogie's thread is probably the best reference for any vendor you would consider buying hardware from:
https://bitcointalk.org/index.php?topic=456691.0

[BitcoinHeroes]

Cloud mining is either scam or unprofitable, either way its not worth it..

We cannot agree with this. Mining can indeed be possible, otherwise people would not mine anymore.
I think the question you are referring to is: "Why would a company sell mining services if they would make profit by running their machines on their own?"

The answer to this question is simply, that we do it to decrease the risks of the our big farms by selling fractions of our farm. This way if we are profitable, also our users are!

That's a clever answer, but the truth is that you are competing against your customers. You only make money if they lose money, and vice versa. You are in it to make money, right?

Actually it is possible for both to make profit.  If the cloud mining company buy 10BTC worth of equipment, and spend 5 in overhead they have an outlay of 15BTC.  If they sell that hash for 20 BTC but they make a 5BTC profit, but if that hash mines 25BTC then the buyer makes 5BTC also.

Unfortunately I don't see any deals where the prices are low enough for the end user to make a profit like that.

Come on guys, let's see some price drops

If both the cloud mining company and the customer gets profit then its good, but even if they price higher there will still be newbie buying them. Might as well price my orange at 100$..

[nagabeler]

so what do you think the most legit and profitable cloudmining?

before I've been scammed in lunamine cloud mining

[Gumbork]

so what do you think the most legit and profitable cloudmining?

before I've been scammed in lunamine cloud mining

Pbmining I believe? But its still risky..

[bitgeek]

so what do you think the most legit and profitable cloudmining?

before I've been scammed in lunamine cloud mining

GAW Hashlets. There are great threads where people are calculating and comparing profits from these things.
https://bitcointalk.org/index.php?topic=752824.20

[DrG]

I would say that Megamine, Nicehash and Kryptologica have been willing to post here with their representatives and show that they're actually incorporated.  Of course anybody could come on here and say they're from that company.  I could say I'm Elon Musk and you have no way to prove/disprove that without more info.

GawMiner has so much customer service it's probably a legitimate company.

Showing block generation would definitely go a long way in generating trust as opposed to pictures of boxes on racks with no visible cables running to them. It would cost about $4000 to have an entire row of mock up paper boxes that look like 1PH/s.  It would cost millions to actually have actual Petahashes solomining.

As for most profitable that's another thread entirely...

[jonnybravo0311]

I would say that Megamine, Nicehash and Kryptologica have been willing to post here with their representatives and show that they're actually incorporated.  Of course anybody could come on here and say they're from that company.  I could say I'm Elon Musk and you have no way to prove/disprove that without more info.

GawMiner has so much customer service it's probably a legitimate company.

Showing block generation would definitely go a long way in generating trust as opposed to pictures of boxes on racks with no visible cables running to them. It would cost about $4000 to have an entire row of mock up paper boxes that look like 1PH/s.  It would cost millions to actually have actual Petahashes solomining.

As for most profitable that's another thread entirely...

I agree.  Justin from MegaMine has not only jumped into this thread, but many others to offer his opinions and views, and to show off his facility and hardware.  Further, if you're feeling so inclined, if you sign up for a 10TH/s contract with them, they'll give you a tour of the place and a "driving experience" adventure.  Pretty cool little promo.  NiceHash/WestHash is not your typical cloud mining provider.  They're more akin to leaserigs/betarigs.  Anyone who's got some hardware can sign up with them.  It's about the most distributed and de-centralized cloud mining model there is.  Kryptologica has had representatives here, and they've responded to questions in this and other threads.  I'm not entirely sure I understand the "backed by silver" campaign, but it is what it is.

[DrG]

I would say that Megamine, Nicehash and Kryptologica have been willing to post here with their representatives and show that they're actually incorporated.  Of course anybody could come on here and say they're from that company.  I could say I'm Elon Musk and you have no way to prove/disprove that without more info.

GawMiner has so much customer service it's probably a legitimate company.

Showing block generation would definitely go a long way in generating trust as opposed to pictures of boxes on racks with no visible cables running to them. It would cost about $4000 to have an entire row of mock up paper boxes that look like 1PH/s.  It would cost millions to actually have actual Petahashes solomining.

As for most profitable that's another thread entirely...

I agree.  Justin from MegaMine has not only jumped into this thread, but many others to offer his opinions and views, and to show off his facility and hardware.  Further, if you're feeling so inclined, if you sign up for a 10TH/s contract with them, they'll give you a tour of the place and a "driving experience" adventure.  Pretty cool little promo.  NiceHash/WestHash is not your typical cloud mining provider.  They're more akin to leaserigs/betarigs.  Anyone who's got some hardware can sign up with them.  It's about the most distributed and de-centralized cloud mining model there is.  Kryptologica has had representatives here, and they've responded to questions in this and other threads.  I'm not entirely sure I understand the "backed by silver" campaign, but it is what it is.

Yeah Kryptologica has been resistant to have the silver escrowed. I'm not sure what his latest strategy is to show the company has solvency.  I mean any company including mine can be a scam, but once you bother to incorporate with state/federal governments you are required to follow the code of business ethics those entities require.  Sure some companies like BFL might be able to flaunt the law but once the state/government has a name for somebody to go after they can't just disappear like lunamine did.

Lunamine might have been set up by a couple of teenagers for all we know.

[l3sny]

Well I have explained earlier that escrowing silver has no sense at all.

https://bitcointalk.org/index.php?topic=739510.40

What I am supposed to do ? Send silver coins to someone? And what then when it comes to the redemption? Is that person supposed to distribute the coins to the receipients? I have actually discussed this with a respected member of this forum who does escrow and from economical point of view it does not make sense since the costs would be to high.

Basically  we are in control of the silver coins, American Eagles and Philharmonikers.
The purpose is to make buying hashing power on the platform more attractive and to protect the price from falling to zero as the hardware gets simply less and less profitable over time because of rising difficulty. Of course the whole process is subject to investing and re-investing so we will be having newer and better performing miners reducing the costs of maintenance but I think silver backup is a good idea as it is an investment in GH/s and silver together. We are also constantly reviewing the maintenance costs as well.

http://finance.yahoo.com/news/bitcoin-hashing-power-trading-platform-040000538.html

[FinalHash]

What the community at large do not understand IMHO is this.

Most people see the fact of cloud mining as (why would you not just mine with the equipment yourself)

The answer is not as straight forward as one may think

When the general market goes and buys hardware, they are usually getting it from one of the many distributors of the manufacturers. The distributors buy wholesale and then mark it up. Now, when you have an extremely large order, the factories will talk to you directly making you a really great deal often times below wholesale, because nowadays most distributors drop ship.

So, this means that because the big cloud providers such as genesis can get ridiculously good pricing on hardware, that they can now focus on providing great things like, customer support, maintenance, hosting facilities, and many more. At the end of the day, the community as a whole benefits greatly when the greater general world has an easy and affordable way to get into mining. Taking the pain out of mining for newbies. THIS IS IMPORTANT!

I know there will be somebody who says under this post that mining is stupid simple, and the fact is, yes for most younger people and/or technically inclined folks, it is. However, the people who need to be in crypto to make it more profitable and overall a better space are the older ppl. Because if you don't know... OLD FOLKS GOT MONEY! And if they get involved they stimulate the economy landscape that is crypto. Not just for money's sake but for the crypto economy as a whole. And then the whole market benefits.

Do you not think that the big contract companies do not know this?  Of course they know it. This is why they are still in business. They are not dumb. And in this way when they provide a service that lets you get mining without your wife or husband getting mad at you for the noise and heat. That is a win.

[DrG]

Well I have explained earlier that escrowing silver has no sense at all.

https://bitcointalk.org/index.php?topic=739510.40

What I am supposed to do ? Send silver coins to someone? And what then when it comes to the redemption? Is that person supposed to distribute the coins to the receipients? I have actually discussed this with a respected member of this forum who does escrow and from economical point of view it does not make sense since the costs would be to high.

Basically  we are in control of the silver coins, American Eagles and Philharmonikers.
The purpose is to make buying hashing power on the platform more attractive and to protect the price from falling to zero as the hardware gets simply less and less profitable over time because of rising difficulty. Of course the whole process is subject to investing and re-investing so we will be having newer and better performing miners reducing the costs of maintenance but I think silver backup is a good idea as it is an investment in GH/s and silver together. We are also constantly reviewing the maintenance costs as well.

http://finance.yahoo.com/news/bitcoin-hashing-power-trading-platform-040000538.html

I will be honest and say I haven't kept abreast of your service.  I think the worry is should something happy to your company or service what would happen.  Who would be in charge?  Who would be liable?  If you have a fire and the miners burn down and thereby stop giving a return are you insured for the loss.  I'm assuming that's where the silver would come in as a counter to the loss.  But one would argue that in that rare case what would stop you from running away from your commitment since nobody has your company name and has no physical address of whom to contract.

When people throw money into a bank in the US they just assume the gov will protect them because to be honest it does protect the lazy and stupid, but in the Bitcoin world there is no protection.  So the customer needs to have some sense of security for risking their investment.

[l3sny]

Good point. No we do not have any protection or insurance against such loss. I do not think it would even be possible to obtain a policy for the miners hosted elswhere in China or even if so the premium would be massive. We would be not liable only in the situations as they stand in our T&C that is basically vis majeure and/or war, riots or Chinese government closing the data centres.

We will however think of a kind of assurance for our customers as this will be mutually beneficial. At this stage I cannot imagine what it could be. The things will be more clear once we move from beta and fiat purchases will be available, just a couple of weeks from now.

Anyway it is a very interesting discussion and I am thankful for all your comments. It seems inevitable that the cloud mining business will be maturing with time.

[DrG]

Good point. No we do not have any protection or insurance against such loss. I do not think it would even be possible to obtain a policy for the miners hosted elswhere in China or even if so the premium would be massive. We would be not liable only in the situations as they stand in our T&C that is basically vis majeure and/or war, riots or Chinese government closing the data centres.

We will however think of a kind of assurance for our customers as this will be mutually beneficial. At this stage I cannot imagine what it could be. The things will be more clear once we move from beta and fiat purchases will be available, just a couple of weeks from now.

Anyway it is a very interesting discussion and I am thankful for all your comments. It seems inevitable that the cloud mining business will be maturing with time.

If you look back at the group buys from mid 2013 you will see a lot of "respected" senior and hero members who bought ASICs and offered to essentially do the early version of cloud mining.  People paid smaller amounts to have a piece of the mining pie.

What ended up happening is people who may have been well intentioned at first ended up becoming overloaded with work and the harassment from all the group buy customers.  For example some group buys bought 10 Avalons and had to divide the hashing over 50-100 people.  They had to send out weekly or biweekly payouts to these people.  Eventually the group buy owner would just stop communicating and leave.  So many people got burned that way.

Even I tried to set up a group buy since I have free electricity.  But being a physician and having been in business I know you can't just say "Hey I have a business".  You need to have contingencies like what happens if I die or what happens if somebody steals the miners.  Eventually Avalon ended up failing to deliver the Batch 3 and I closed my group buy and I returned all the coins.  I'm kind of glad now that it never materialized.