How do mining contracts (cloud mining) work?

[awesome31312]

While I'm well acquainted with Bitcointalk and the digital currency business, I'm really amateurish when it comes to mining.

How does cloud mining work?

[Newar]

You pay the operator of the rig an fee for X amount of hash power during Y amount of time. The site operator will take his cut too. The coin mined during Y time will go to your wallet.

[-ck]

You learn about bitcoin mining, read lots of advertisements, visit lots of flashy sites, compare prices, look at forecasts, consult experts, examine graphs, pick apart forum posts, make predictions based on all that and then you flush your money down the toilet. Then you spend the next 6 months making shit up to convince yourself and others you made money in the process.

[awesome31312]

You learn about bitcoin mining, read lots of advertisements, visit lots of flashy sites, compare prices, look at forecasts, consult experts, examine graphs, pick apart forum posts, make predictions based on all that and then you flush your money down the toilet. Then you spend the next 6 months making shit up to convince yourself and others you made money in the process.

Gee, that sounds terrible

[-ck]

Yet very real.

[notlist3d]

Normally if you have decent electricity you are better off with buying hardware, even hosting it somewhere if needed.  Not all cloud mining i would trust.  Some are more reputable then others.  I think if at all possible try to have hardware not some virtual miner.

[jack80]

The electricity cost is a very problem .

[jonnybravo0311]

There is a great post by DrG regarding cloud mining here: https://bitcointalk.org/index.php?topic=739510.0.  Take a look at it.  You'll find some good debate there.

As for how cloud mining works, there are pretty much two models: the up front contract and the hashing power with maintenance fees.  In the first model, you pay a fixed amount up front for some level of hashing power - say $2000 for 12 months at 2TH/s.  In the second model, you purchase some amount of hashing power that mines for you (say 2TH/s at 0.001135BTC per GH/s), but you are charged daily/monthly maintenance fees.

An example of the first model is MegaMine.  An example of the second is HashNest.

[Newar]

[...] say $2000 for 12 months at 2TH/s. [...] 

Since the days of GLBSE, this is called a mining bond or turd. With ever rising difficulty you won't make profit. So, you have to bet on the BTC exchange rate. With this model and if you think BTC will rise, you'd be better off getting BTCs directly.

[...] In the second model, you purchase some amount of hashing power that mines for you (say 2TH/s at 0.001135BTC per GH/s), but you are charged daily/monthly maintenance fees. [...]

ckolivas' and my earlier post relate to that. Bottom line: If you can mine below the fees (and hidden fees) of the operators of those sites (and you have to trust them), mine yourself, you'll be better off.

[jonnybravo0311]

[...] say $2000 for 12 months at 2TH/s. [...]

Since the days of GLBSE, this is called a mining bond or turd. With ever rising difficulty you won't make profit. So, you have to bet on the BTC exchange rate. With this model and if you think BTC will rise, you'd be better off getting BTCs directly.

[...] In the second model, you purchase some amount of hashing power that mines for you (say 2TH/s at 0.001135BTC per GH/s), but you are charged daily/monthly maintenance fees. [...]

ckolivas' and my earlier post relate to that. Bottom line: If you can mine below the fees (and hidden fees) of the operators of those sites (and you have to trust them), mine yourself, you'll be better off.

If you take a look at the replies I've made in the linked post, you'll see I'm very much in agreement that the only people who profit from cloud mining are the cloud mining providers.  I've also posted the same in multiple other threads.

I didn't bother posting my opinions here because the OP asked how cloud mining works, not whether or not it was a worthwhile venture.

[Newar]

You really think OP's interest was purely academical?

[jonnybravo0311]

You really think OP's interest was purely academical?

Honestly?  It's highly unlikely; however, I stuck to the questions he actually asked.  If he wants to know about profitability models and whether or not cloud mining makes sense, he can post those questions in the Speculation forum - or better yet actually read the many posts that answer that very same question already present there.  Like I wrote in my reply to you, I've made it clear in my posts in the Speculation forum that I believe cloud mining makes the provider money, not the consumer .

[notlist3d]

The scariest thing i see with cloud mining (besides price).  Is they could make it appear you "cloud mining" and there be no miner and they give you your own money back.  They could do this for months and then shut it all down keep a profit.  Will most do this..... no.  But i would stick with a reputable dealer if you really cannot use hardware and have to use the cloud. 

[awesome31312]

The scariest thing i see with cloud mining (besides price).  Is they could make it appear you "cloud mining" and there be no miner and they give you your own money back.  They could do this for months and then shut it all down keep a profit.  Will most do this..... no.  But i would stick with a reputable dealer if you really cannot use hardware and have to use the cloud. 

Is that what Lunamine did?

[bitrev]

The scariest thing i see with cloud mining (besides price).  Is they could make it appear you "cloud mining" and there be no miner and they give you your own money back.  They could do this for months and then shut it all down keep a profit.  Will most do this..... no.  But i would stick with a reputable dealer if you really cannot use hardware and have to use the cloud. 

True. But at least you research a company before you invest right?

I got accounts @
Genesis > Terrible ROI
Hashnest > Maybe ROI
GAW > 110 days ROI
LTC Gear > 60 days ROI
CEX > NO ROI

All big players with a community etc.

[notlist3d]

The scariest thing i see with cloud mining (besides price).  Is they could make it appear you "cloud mining" and there be no miner and they give you your own money back.  They could do this for months and then shut it all down keep a profit.  Will most do this..... no.  But i would stick with a reputable dealer if you really cannot use hardware and have to use the cloud. 

True. But at least you research a company before you invest right?

I got accounts @
Genesis > Terrible ROI
Hashnest > Maybe ROI
GAW > 110 days ROI
LTC Gear > 60 days ROI
CEX > NO ROI

All big players with a community etc.

One thing worth noting is you are not taking into account LTC gear sounds like 1 year only then you loose i correct me if i'm wrong.  Also their fee of "5% – 20% of initial share price and it can be calculated only at the end of the year" is a huge difference in fee.

Personally  I would not do a deal where after a year i lose the miner, and they own it.

Can you please show your roi math? I find it hard to believe LTC gear is beating hashnest on sha.

[-ck]

One thing worth noting is you are not taking into account LTC gear sounds like 1 year only then you loose i correct me if i'm wrong.  Also their fee of "5% – 20% of initial share price and it can be calculated only at the end of the year" is a huge difference in fee.

Personally  I would not do a deal where after a year i lose the miner, and they own it.

Can you please show your roi math? I find it hard to believe LTC gear is beating hashnest on sha.

Then you spend the next 6 months making shit up to convince yourself and others you made money in the process.

See what their numbers look like in 6 months time.

[lili song]

You pay the operator of the rig an fee for X amount of hash power during Y amount of time. The site operator will take his cut too. The coin mined during Y time will go to your wallet.

I see,
so how we can guarantee if that cloud mining contract is legit one ?

[okae]

You learn about bitcoin mining, read lots of advertisements, visit lots of flashy sites, compare prices, look at forecasts, consult experts, examine graphs, pick apart forum posts, make predictions based on all that and then you flush your money down the toilet. Then you spend the next 6 months making shit up to convince yourself and others you made money in the process.

Gee, that sounds terrible

sad but true.... atm solo-mining is just a wasted of time even if you go to alt-coins, well, to tell you the truth thats the best chooise you have if you are going to solo-minning, the alt coints.

So if you want to go for cloud minning i advise you to go for altcoins, ¿how cloud minning works? well this is so simply, you can buy hashpower and start to mining BTC or altcoins ( depend the cloud you choose ), and pray for a decent ROI...

here you can check a decent review about how cloud minning work: https://bitcointalk.org/index.php?topic=768281.0