How Does Cloud Mining Work?

What is cloud mining?

Cloud mining is a service that allows you to mine at home without buying expensive equipment.

It's like using Google Docs without buying Microsoft Office, that is, using the service without purchasing software.

Ten years ago, mining was available to everyone, because bitcoin was not as popular yet and did not require significant computing resources. Bitcoin mining is an entire industry today. In order for mining to be profitable investments both in equipment and infrastructure are required. Otherwise, it is impossible to minimize costs over the long term, which includes quite extensive periods of market lull (crypto winters), halvings and other traumatic events.

All this is an option only for companies with the appropriate resources, including legal access to inexpensive and preferably renewable sources of electricity.

Retail mining enthusiasts still continue to try and make money even in such difficult conditions, but their efforts are doomed to fail in the medium term. Unless, of course, it's luck to go to zero after a year and a half of hard work.

For anyone who quite reasonably continues to believe in bitcoin, cloud mining is a convenient solution that allows mining through a cloud service by purchasing an appropriate contract from a large mining company.

Why is a cloud mining contract beneficial for a retail customer

The cloud mining contract consists of the contract price paid for a specific period of service, and the daily commission paid for electricity, maintenance, etc. The contract value is calculated based on the forecasted mining profit value over the specified period.

If the user's forecast is the same or even more optimistic than that of the cloud mining service provider, then there is every chance to make good money.

Let's say the company uses fairly modern MicroBT Whatsminer M53 miners with a hashrate of 230 TH/s and a capacity of 6.67 kW, which, as of December 2023, allowed it to earn about $12.67 per day of net profit (according to Asicminervalue).

At the same time, you should understand that daily profits tend to decrease due to the increasing mining difficulty. For instance, take the Whatsminer M30S++ model, which is 2.5 years older than the M53.

It is clear that the characteristics of these miners vary, but the decisive factor for a miner is its timing, its current competitiveness compared to other models, and therefore its ability to generate an acceptable profitability level at the time of release. In this sense, both presented models can be considered equivalent at the release date.

Using this example, you can make a superficial but useful assessment of mining income dynamics over 2-3 years, all other things being equal. On average, it will be about $9/day, that is, $9855 over 3 years.

Three years is the generally accepted average operating period for a miner, after which the miner is usually sent to a landfill. Therefore, a mining company may plan to earn $9855 net minus the cost of a miner ($3,800 according to Asicminervalue), that is, about $6,000.

Now let's look at the same situation through the eyes of a retail enthusiast. The main expenditure items are the cost of the miner (one-time) and electricity (daily). A retail investor does not buy miners by the tens of thousands and cannot rely on the wholesale price as a large mining company. The same goes for the cost of electricity. For a retail miner, it will be 2 or even 3 times more expensive, which will have an appropriate impact on income. As a result, the payback period for a miner for a private enthusiast will be 5-8 months longer than for a large company, where miners on average pay off in a little over a year.

In addition, the miner needs constant maintenance, efficient cooling, prevention, cleaning, etc. Sometimes the miner needs to be paused simply in order to clean the heating ducts and fans from dust and dirt. All of this constitutes additional expenses and lost income.. In addition, a miner failure carries a much greater risk for a retail user than for a large company that can easily replace equipment following its disposal.

Based on all of the above, the user can expect to earn a maximum of $3-4 thousand in three years, or $1-1.5 thousand per year with Whatsminer M53, while being fully involved in continuous equipment maintenance. Also, this process requires a fairly high qualification, because buying a miner is not enough; you need to configure it, connect it to a mining pool, etc.

As a result, by purchasing a cloud mining contract, the client will earn less, however all other things being equal, he will be completely free from the risks associated with the maintenance or loss of equipment for reasons beyond his control, which, of course, is a more stable financial model.

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Why cloud mining contracts are beneficial for a mining company

Large mining companies like Marathon Digital Inc. raise funds for their development through IPO. Such companies are certainly not interested in coming up with some kind of cloud mining contracts and thus sharing their profits with anyone.

However, smaller players also want to develop faster and have more funds for this purpose. Cloud mining contracts are a way to make a future profit in advance, and invest it, i.e., in new miners before their prices skyrocket.

Thus, there is a price fork for cloud mining contracts, within which both parties benefit. Retail customers can use the facilities without buying them, and the supplier company can use prepaid contracts for its development.

The cloud mining convenience

So, cloud mining is mining using a ready-made mining infrastructure of a large company. Cuverse offers a wide range of cloud mining contracts, which you can select based on your own understanding of market dynamics.

Cloud mining will save you from having to invest in expensive equipment, and maintain and monitor it on a daily basis without the opportunity to go on vacation.

Choose a suitable cloud mining contract, and Cuverse will take care of the rest!