As a smart encryption investor, it’s wise to understand cloud mining and how it promotes your investment goals. Is this the best time to invest in cloud mining? The concept of cloud mining is almost as old as Bitcoin itself. Today, cloud mining, as a profitable but fraudulently rampant market area, has different reputations. Here’s what you need to know before you invest in any cloud mining protocol.
What is cloud mining?
To understand cloud mining, we first need to understand the working principle of bitcoin. In bitcoin networks, there are nodes that verify transactions. These verification nodes are called miners in the industry. They won this title because of their efforts to maintain the effectiveness of the blockchain. This energy consumption comes at a price. In this way, the exploitation of bitcoin is similar to that of other precious assets. You need to invest time and resources to increase the overall value of your assets.
Bitcoin miners compete with each other to solve a complex mathematical equation called SHA-256. This equation is so difficult that your computer will take a look at it and decide that it’s faster to make informed guesses than to do math directly. This calculation of the draw is called the hash rate of the bitcoin network.
It is worth noting that Satoshi Nakamoto, the anonymous creator of bitcoin, has added some interesting protocols to ensure that bitcoin miners complete this equation and add blocks to the network in 10 minute intervals. This period is crucial for bitcoin’s strategy, as mining incentives are the only time new bitcoin can enter the market. Subtly, 10 minute intervals help bitcoin maintain a predictable supply mechanism.
In the early days of bitcoin, anyone could use a simple PC to do mining on the network. Nakamoto wisely introduces an algorithm to increase the difficulty of SHA-256 equation according to the overall hash rate of the network. The more people dig for bitcoin, the harder the equation becomes. These adjustments work in conjunction with the automatically reduced incentive scheme.
The first miners of bitcoin get 50 bitcoins for every block they add to the blockchain. For every 210000 pieces mined, the reward will be halved. At present, the reward is 6.25 bitcoin for each piece mined. In 2024, the reward rate will be halved again. It is worth noting that the last bitcoin will be mined at the current rate sometime in 2140.
Scarcity drives innovation
Only 21 million bitcoin has entered the market, and the rising price of this cryptocurrency continues to drive miners to innovate. The mining industry used to need only one home computer. Soon, however, miners began to use GPU cards to build special mining equipment. GPU card is much more efficient than CPU in doing repetitive tasks (such as guessing the answer of SHA-256 equation).
The introduction of GPU card has changed everything in the market. First of all, it improves the hash rate of the network to a new height. It also marks the beginning of the end of normal life. A GPU mining device is hundreds of times faster than your standard CPU in solving the SHA-256 equation.
Advantages and disadvantages of bitcoin cloud mining
Opinions in favor
No installation or setup costs (the hosting center will host the bitcoin mining device you purchased and run it in its location). Many will charge a one-time installation fee)
- There is no noise or heating equipment in the house.
The maintenance is done.
- No additional equipment to buy your mining equipment to run.
- There is no risk of fire and other problems that may arise running it on its own.
You don’t have your own device, which means you can’t sell it.
In some cases, you cannot point the hash rate to the mining pool of your choice.
Some suppliers will stop operating the cloud miners you choose, if the profit threshold is too low, as the difficulties rise and new devices come out.
If they want, the company can go out of business or run away with the money.
Because hashrates are sold too much (more hashrates are sold), owners decide to cut costs because they don’t spend part of their profits on upgrading new equipment, so they can’t keep their promises, which may eventually become a hoax.
Keep this in mind when you’re looking for cloud mining services. If you do your homework, you may be able to solve the problem well. This is never a guarantee when you can’t control your mining equipment. Always remember that. So as you can see, cloud mining is a good idea on the one hand and a risk on the other. Just like an ordinary stock investment, never take more risks than you may lose, and do your homework before investing.
How to measure the price of virtual currency?
The U.S. Commodity Futures Trading Commission defines bitcoin as a commodity, so that derivatives contracts such as futures and options can be traded according to their underlying value. There is a reason for that. Things that are considered commodities change over time, but commodities, from goats to gold, have one thing in common: they are replaceable, meaning interchangeable. There may be different kinds of tea and different grades of oil. But a gallon of unleaded gas is about the same wherever you buy it.
In most commodity dependent industries, supply begins to increase as the price of the underlying commodity rises. When the price of gold or copper rises, the miners will respond by increasing production. It’s the same with oil. Higher supply will eventually lead to lower prices and repeat the cycle. But something strange is happening to bitcoin: its price is close to an all-time high, but its supply is growing at the slowest rate ever. There are several reasons for this.
In the early days, the problem bitcoin miners had to solve was relatively simple, and they didn’t need too much hash function. A dirty old central processing unit (CPU) can solve this problem. But as time goes on, the puzzle becomes more and more difficult. This is because the founder of bitcoin decided that it would take about 10 minutes for each bitcoin to be mined to control the supply. With the surge of computing power, the difficulty also increases. The difficulty is adjusted every 2016 blocks – approximately every two weeks if it takes 10 minutes to mine a block. In theory, you can use the average hash rate and the time of each block of the first 2016 blocks to estimate the next difficulty number. But it’s not a perfect science (because sometimes a block can be mined in 10 minutes just by luck).
So part of our answer is that it takes twice as much computing power to dig out a bitcoin as it did 12 years ago, even though it takes about 10 minutes to dig out a bitcoin.
The supply restriction of virtual money
If the mining time of a block is relatively stable, why does the supply of bitcoin grow at a slow rate? The answer is because bitcoin is “halved”
The first bitcoin block, known as the “Genesis block”, produced 50 bitcoins. But for every 210000 blocks mined (about every four years), the return is halved. The first halving took place on November 28, 2012. The second was on July 9, 2016. The third is on May 11, 2020. Today, each piece produces only 6.25 bitcoins. The largest supply of bitcoin ever was 21 million. This means that half of the total potential supply is generated in the first four years after bitcoin’s launch. Before the next halving in 2024, 93.75% of the total supply will be mined. This table shows this pattern very well.
Since 2015, there has been a surge in interest in cryptocurrencies, as the value of bitcoin rose from about $300 per coin to a peak of about $20000 per coin in December 2017 and then dropped to about $8000 per coin in November 2019. 1. Other cryptocurrencies have seen similar ups and downs. There are nearly 3000 cryptocurrencies listed on investment.com, but the most popular alternatives to bitcoin include Ethereum (US $145 each, with a market value of US $15 billion as of November 2019) and litecoin (US $45, US $2.9 billion). Although buying on an exchange like coinbase is usually relatively simple, allowing you to buy some cryptocurrencies, But there are also people who prefer to dig their coins. The best choice may depend on the circumstances.
Mining cryptocurrency seems like a breeze. Set up a computer to help solve complex mathematical problems, and you will get a coin or a small part of the coin as a reward. The first bitcoin miners were able to use their computing power at home relatively quickly to earn coins.
By 2019, cryptocurrency mining will become more complex and complex. With bitcoin, the reward is halved every four years. In addition, serious miners have built huge arrays for mining, which makes it more difficult for small miners to compete. You can join a bitcoin mining pool to improve efficiency, but it will bring costs and reduce your profits.
Some crypto miners switched to other currencies. Some other cryptocurrencies have a low dollar value, but you can use what you dig, convert it into fractional bitcoin on the exchange, and then hope that bitcoin will increase in value.
No matter what you decide to mine, you have to consider your installation costs. In some cases, including the $700 plus graphics card, it is possible to assemble a basic platform for some less popular cryptocurrencies at around $3000. However, some miners spend more than $10000 on the rig.
In building your rig, you also need to realize that you’re going to have to use quite a lot of power. If you have a high power rate, you may spend a lot of money on coins, especially bitcoin. In the cheapest States, it costs more than $3000 to mine a bitcoin. In the more expensive States, it costs more than $6000 to mine a bitcoin. As of December 2019, the cost of a coin hovers around $7000, and energy costs alone are not worth it.
A less powerful rig to exploit alternative currencies can save you money. Even so, it may take weeks or even months to recover the initial investment and make a profit.
Cloud mining company recommendation
Cloud mining involves buying time on other people’s platforms. Companies like Genesis mining and Hashflare charge according to the so-called hash rate, which is basically your processing power. If you buy a higher hash rate, you expect to receive more coins that you pay, but it will cost more money.
Depending on the company you choose, you can pay monthly or hashrate. Some companies also charge maintenance fees. In general, cloud miners who allow you access to bitcoin charge higher rates. But I would like to recommend MVU cloud mining because the platform does not charge maintenance fees. You only need to buy the computing power package provided by their platform, and you can reap passive benefits at home. In addition, MVU cloud mining also has an official TG group for mobile phone users to give feedback. Users can give feedback on any problems they encounter in the process of investment. This is also the after-sales service that many cloud mining platforms can’t do well. You can have a try.
But in some cloud mining companies, you may be asked to sign a one-year contract to lock you in. If the value of cryptocurrency falls, you may get into a non-profitable contract. In fact, depending on what you’re mining, your cloud mining investment may take months to make a profit. However, at least with cloud mining, you don’t have to worry about the cost of power consumption and other direct costs associated with using your own rig for all mining. MVU cloud mining offers a 90 day cloud computing package. Short term investment can make users more comfortable than a year’s package.