Strike It Rich With Bitcoin Cloud Mining

By | August 27, 2014

Most of you probably know a little about Bitcoin by now and have heard there is a “crypto” part to it, and a maybe a “blockchain” is involved, but once you start getting into the details you zone out because you know there are things like Gunbot to do the trading for you. So instead of boring you with more about that topic, today I will dazzle you with a look at a more interesting, more understandable, and more exciting part of the cryptocurrency world: Bitcoin Mining.

But if you are not someone that zones out easily, you could look into a site like https://beincrypto.com/xlm-stellar-lumens-price-prediction-2018-thu-4-oct/, to inform you of something else within the industry called Stellar Lumens-a a unit of digital currency that facilitates the transfer of money around the world and allows for transactions between different currencies quickly and securely. And, I let you know how much money I have made from it so far.

Reminiscent of the California Gold Rush of the 1850s, there is currently a frenzy to get into the mining of cryptocurrencies. Unlike traditional (“fiat”) currencies such as US Dollars, which are printed by the government, most crypto coins are mined by the general public. Just like with prospecting for gold, diamonds, and oil, you need to buy the equipment, find a location, have the technical knowledge to get everything setup, and then keep everything running long enough to at least make back your original investment.

All of this reminds me a little of when I used to hunt for expired domain names in the 1990s. There was no automated software for it, so I spent hours a day searching for unregistered domains by hand. Each time I would find a good one and grab it, I felt like I struck gold. It would be many years before I was able to sell any of these domains for a profit though.

Like domains, crypto coins are mined using computers. You basically turn your PC processing time and power into money by running mining software that “digs” for cryptocurrency using math. It is kind of like how when years ago large companies and universities used to rent people small blocks of time on their supercomputers (for complex math, medical research, architecture, cryptography, weather modeling, etc.), that computing time a value. Now you can unlock value in any computer by turning computing time into crypto coins, even just using your regular home PC (most people buy specialized PCs though, known as “mining rigs”, which are optimized for mining).

The problem of course, is if it was that easy to get rich from Bitcoin mining, everyone would would be doing it. The revenue the average Bitcoin miner gets is constantly adjusted so it is only slightly more than the costs involved. More importantly though, much like with mining for gold, the path to Bitcoin riches is paved with problems (if you have ever watched TV reality shows like Gold Rush, Jungle Gold, Ice Cold Gold, Bering Sea Gold, or even Deadliest Catch, you know the kind of things that can happen). The list below is just some of what you have to deal with:

* Complex setup and installation

* Large electricity consumption – Unlike a normal PC which stands idle much of the time, or uses low CPU usage programs, mining runs 24/7 and completely maxes out the processors of the PC at all times.

* Internet connectivity issues – If your Internet goes down, your business is dead in the water.

* Computer space and cooling problems (mining PCs run very hot).

* The prices of cryptocurrencies fluctuate wildly, so even if everything goes well, if the price of bitcoin goes down by 50% after the first few months of mining, you will lose money.

* Annoying noise (the cooling fans run non-stop and get loud)

* Hardware failures – Because the PC runs constantly, things tend to break.

* Security – The cryptocurrency business is full of hackers and resides in the Wild Wild West of the Internet.

* Scams – The only way to stay ahead of the competition is to pre-order new more powerful mining rigs, but many times the companies selling them are fraudulent, and you lose your investment.

* Even once you have everything setup and working perfectly, you constantly need to upgrade to new equipment, and the problems start all over again.

Read this article for an inside look at a Bitcoin mining company.

One way around many of these problems is to rent servers for crypto coin mining, just like most website owners rent servers for hosting their sites. This, for example, can be done cheaply using Amazon’s Elastic Compute Cloud (EC2) platform. But, it is hard to make it profitable. See this article for details. Also, you still need to be a programmer type to handle the complex setup involved. Using a low priced VPS (such as DigitalOcean.com for $5/month) is another option, but that is generally not profitable either. A Harvard student unsuccessfully tried an even lower cost solution, before he was banned from the university’s computer labs for using the school’s supercomputer for cryptocurrency mining.

Some other, more unusual, ways to mine cryptocurrencies include:

Solar Powered Server Farms – Electricity is one of the biggest costs in Bitcoin mining, so using solar power can greatly reduce the costs.

Bitcoin Mining In Space – A solar powered mining rig in space is closer to the sun and would get sunlight 24/7.

Quantum Powered Computers – Companies are already working on building computers powered quantum mechanics (throw out everything you think you know about how atoms work, and strap yourself in for a wild ride in this crazy area of physics). These would be much faster than normal PCs, and use much less electricity, resulting in higher Bitcoin mining profits.

The most appealing new option is Cloud Bitcoin Mining. It saves you from having to deal with installation, setup, and all the other hassles and risks of running a cloud mining company. Instead, your mining operation happens in “the cloud”, which means a hosting type company handles everything for you and you just need to login to your online account and see how much money you are making. It sounds good, but does it live up to the hype?

Five days ago, I decided to give Cloud Mining a try. I had never done any regular Bitcoin mining, but I had read enough about it to know generally how it worked. Also, I currently use a cloud host for my websites, and at times have run up to 50 non-cloud servers, so I was pretty sure I do whatever was needed. After a quick Google search, I setup accounts with these 3 Crypto Coin Cloud Mining companies:

The Hashlet from GAW Miners – For mining bitcoin and Scrypt-based altcoins. Uses the ZenCloud.com mining interface, and lets you choose from various mining pools (ZenPool has the highest payout and zero fees, so that is what I choose). I bought 1 Hashlet for $15.99. There is a maintenance fee of $.08/day for each 1 MH. Payouts are once every 24 hours. Tip: To start mining after you signup, you need to choose a mining pool and drag the pool name icon from the right side of the screen to your Hashlet icon. also, it unclear from their site how long the mining contract is good for, so I will assume it is for as long as your Hashlet makes a profit (mining income – maintenance fees). This makes it hard to estimate a return on investment, but it is better than having a fixed length contract. Also, another thing to keep in mind, is that with all mining, the profitability of existing mining equipment goes down over time because the way cryptocurrencies such as bitcoin are designed, the mathematical difficulty of mining increases periodically to keep up with advances in technology. The result of this is that older machines make less money. It is unclear to me if cloud mining offerings like The Hashlet will automatically upgrade to newer mining rigs in the future, or if this is something the user will have to pay extra for. RESULTS: [Updated 11/02/14, after 7 days of mining] So far it has made $14.41 after fees so it should make back my initial investment in a few weeks.

Cex.io – You buy computing power (“hashing power”) in the form of the “ghash” (GHS), which is a cryptocoin that represents virtual mining power (1 GHS coin = 1 GH/s hashrate). Cex.io deducts a maintenance fee of 18 cents per month per GH and then automatically pays out your bitcoin (or you can choose to mine other cryptocoins) via there zero fee mining pool at https://ghash.io. I spent $4.75 (it was really $5, but I had to pay a transaction fee to site where I was storing my bitcoins) to buy 2.5 GH. Payouts are usually every hour or two. This mining contract pays out as long as you hold it (a unique feature is that you can sell it if you want, via the sale of your GHS coins). I am not sure there is any way to calculate the profit or loss, because the way I understand it (some of this is confusing, even for me) at any time you can sell the GHS coins that you initially purchased, and also withdraw your mining earnings. So, it is more like owning a stock (the GHS coin) that pays dividends (your cloud mining earnings). If the price of the GHS coin does not go down, you are guaranteed to at least get back your initial investment. So, any cloud mining earnings you get are a bonus. RESULTS: [Updated 11/02/14] So far it has made around 32 cents from mining (after fees), and is still earning daily, although the price of bitcoin has decreased by 50% so it would have been higher if I had sold my bitcoin each time I got paid. In addition to that, I can liquidate my GHS coins for around $2.

CloudHashers – I paid $9.95 for one 24-Hour Scrypt Mining Contract (Litecoin, Dogecoin, etc.) which has an advertised hash rate of 1MH/s. Payouts are generally every 1-2 hours. You need to first signup with a mining pool, because the CloudHashers payouts go to your mining pool, so I joined Wemineltc.com. What confuses me though is that I have been now getting payouts for 3 days, even though I bought a 24 hour contract. RESULTS: [Updated 08/30/14] It ended up mining for around a week instead of the 24 hours I had thought I paid for, but even after a week it only made a total of around $1.25, so the end result was a huge loss.

Some other cloud mining services that I found, but did not join were:

I did not try research any of these, so don’t take this as a recommendation. This list is just something you can look into if you want.

The end result of my experiment with 3 different cloud mining services was that it seems profitable. It is certainly much much easier than starting my own mining operation. But, I can’t make a final verdict until a few months have passed and I see how much I really ended up making from all of it.

Update: 01/23/15
It has now been 5 months since I wrote this, so thought it was a good time to give an update. Because of the recent drop in bitcoin price (it is down around 40%), I don’t think any cloud bitcoin mining service is profitable. Many have suspended their operations until bitcoin goes up. Here are the updated stats for the 3 cloud mining services I used:

The Hashlet from gawminers.com is currently just paying out 1 satoshi a day, which is the lowest denomination of currency of bitcoin and is basically the same as zero (you would need 438,982 satoshi just to make $1). They are doing this because they made a promise to their customers to always be profitable. The bitcoin it already mined for me is worth $11, but if I had sold it as it was mined, in total it would have made a little bit than I paid for the cloud miner.

Cex.io has mined around 50 cents in bitcoin total and they have announced they have suspended mining until the price of bitcoin increases.

Cloudhashers.com – They appear to be out of business (the website is not working), but my mining contract was over after the first week (it lost money) so it does not matter what their current status is. Interestingly, the owner of the site tried to sell it at https://flippa.com/3291091-site-with-1-469-uniques-mo-making-avg-1-000-mo but it did not sell.

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11 thoughts on “Strike It Rich With Bitcoin Cloud Mining

  1. Domenclature.com

    I read this with keen interest; keep us updated frequently if you can. I will study some of the recommendations, and post an educated opinion later.

    Thanks again

  2. Kassey

    Great in-depth look! Thanks.

    “Each time I would find a good one and grab it, I felt like I struck gold. It would be many years before I was able to sell any of these domains for a profit though.”

    Looking back, do you still remember What convinced you that domain names would have value many years in the future?

    1. Eric Borgos Post author

      That is a good question. I mostly just knew people would want some of the specific ones I was registering. I did not expect them to sell for huge prices ever though. I started off by using much cheaper urls from web hosts, like catalog.com/customers/impulse/inventions/mall/products.html and soon realized domains were much better. I was also charging people to build websites and they liked the idea of using domains also, so I would always try to get a good one for them. At the time it was pretty much accepted good domains had some value, so for the $35/year I had to pay for each one (Network Solutions was the only registrar at the time), I didn’t think there was much downside. I figured I could always let them expire if I couldn’t eventually use them or sell them.

  3. Jamie Zoch

    I really have thought about playing in the bitcoin market but every time I read an article like yours, it makes me feel like I’m dumb! 🙂 A lot to learn, ever changing and the $$ all seem on the low end ($0.25 a day).

    One of these days I will stop reading and start playing like you did! Thanks for sharing Eric!

    1. Eric Borgos Post author

      Bitcoin mining is all about scale. I am only making 25 cents/day from it because I bought the cheapest possible cloud miner. The point is that so far it appears I am getting over 100% annual return on my money, which is great. With any of these services, I could invest thousands of dollars, not just the $5-$20 that I spent.

  4. Kyle Waring

    Hi Eric,

    Have you ever looked into Triangular arbitrage on bitcoin? I think it’s very possible to execute 3 trades on the most liquid digital currencies (BTC, LTC, DOGE).

    1. Eric Borgos Post author

      I know a great deal about stock market arbitrage, and I have looked into bitcoin arbitrage, but only read a few articles about triangular arbitrage. I checked into it now, and there seem to be some good automated programs (bots) for that, but that is what worries. If it is as easy as using a free bot (like http://ericjang.github.io/cryptocurrency_arbitrage/ ) then there are probably lots of people doing it, plus there is still some risk.

  5. Miguel

    Hi Erick this is the first time I read this blog anyways I am very interested in knowing if you have any updates on how your earnings are going and if you have new advice I am thinking about trying it out

    1. Eric Borgos Post author

      Because of the recent drop in bitcoin price, I don’t think any cloud bitcoin mining service is profitable. Many have suspended their operations until bitcoin goes up. Here’s an update:

      The Hashlet from gawminers.com is currently just paying out 1 satoshi a day, which is the lowest denomination of currency of bitcoin and is basically the same as zero (you would need 438,982 satoshi just to make $1). They are doing this because they made a promise to their customers to always be profitable. The bitcoin it already mined for me is worth $11, but if I had sold it as it was mined, in total it would have made a little bit than I paid for the cloud miner.

      Cex.io has mined around 50 cents in bitcoin total and they have announced they have suspended mining until the price of bitcoin increases.

      Cloudhashers.com – They appear to be out of business, but my mining contract was over after the first week (it lost a lot of money) so it does not matter what their current status is.

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