How Safe is Cloud Mining

Whether Bitcoin mining is profitable is not an easy question to answer. With debate that’s almost as rancorous as the block size debate, one can infer that even after debating digital currency technicalities for months, there is just no general consensus on the profitability of cloud mining.

For those who are unaware, Cloud Mining is the process of Bitcoin mining utilizing remote servers with a shared pool of processing power owned by a Cloud Mining company. It may sound extremely foolproof, but cloud mining can become a bit of a mess given the concept’s rough start.

The stories of scamming are familiar ones: companies disappear with user funds, paying out early investors once new ones join, and making a run for it weeks later, which leads the average investor to avoid the standard year-long contracts.

Or the argument that Bitcoin is too volatile to start with, making the profits highly unpredictable. The investment required for personal bitcoin mining is risky on its own, so imagine that risk compounded when trusting an unlicensed and uninsured third party with your money.

Mr. Ben Hortman of cloud mining company Bet Capital LLC has weighed in on the subject of the risks and rewards involved, with these thoughts:

“The reality is this. Many large scale miners work very hard to get cheap electric rates. In fact these electricity rates can be worked down very low, sometimes under US$0.02/kWh. Now the average rate for a “decent” price in the USA is around US$0.08/kWh. But because big miners can leverage their capital in a way that can convince utilities to give them great rates, this allows them to pass on savings as well as profit to customers.”

There’s no denying it: Cloud mining is going through a rough start.

“Many users, after having a bad experience, have lost faith in the possibility of fair mining in the cloud, and thus all new projects are now greeted with a great deal of skepticism,” says Hortman.

This, however, could be good for entrepreneurs eager to plug the leaks in the outdated cloud mining model. To keep up with a consumer base that is more aware by the second, serious companies will need to become far more transparent and the companies that don’t keep up will fall like rotten apples off a tree.

The ability to differentiate between an honest cloud mining enterprise and one that is merely a come on for a Ponzi scam is to look closely at what commitments the company is asking for and their estimated rate of return. If they are pushing for a long term contract and making extravagant claims of enormous and immediate returns, it’s probably best to ignore their flummery.

The overall legality and regulation of Bitcoin cloud mining is still up for debate, making it  a continuing risky investment, but the technology behind most of the big financial companies is interesting, to say the least. While this is a very challenging time for legitimate cloud mining companies, it is very fascinating to see healthy competition acting as a driving force behind the development of digital currency mining as a legitimate and stable financial strategy for investors at all stages.

 

David Jackson

David is a personal finance expert, a professional male model, and an entertainment writer.