Cloud Mining;  Is It Viable In 2021?

In todays day and age with the crisis caused by Covid 19, is Cloud Mining viable and will it stay viable. Keep on reading to find out

Cloud mining is not a new concept. In fact, many people have benefited from it during the previous cryptocurrency bull market cycle of 2017. However, time has passed and the environment has changed since then. So, is it still possible to make viable returns from Cloud Mining in 2021?

Before diving into the nitty-gritty details of the title in its contemporary state. Let’s run a quick recap and explainer of what it is and how we got to where we are today.

Cloud Mining From The Beginning To Now

In the years leading up to the 2017 bull run, the cost of cryptocurrency mining saw a steady and steep increase. That is due to the popularity spike. As the networks grew their user bases the hash rate demands increased. This in turn fueled an ever-increasing appetite for more specialised and more expensive crypto mining equipment. Furthermore, many saw the rise of mining firms like Bitmain as the end of Bitcoin’s freedom from centralized control.

Cloud Mining presented a potential remedy to the soaring costs and plummeting profits for small-scale mining operations. As the crossroads where blockchain-based transaction validation and cloud computing meet. Cloud Mining is intended to lower the financial threshold to entry through a business model. That will allow interested parties to rent the computing power from cloud services.

They offer these services in two distinct packages: Hosted Mining and Leased Hash power agreement. The former being the most popular model of Cloud Mining.

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Hosted Mining

In the instance of Hosted Mining, a customer invests towards purchasing or leasing mining hardware that Cloud Mining service’s facility houses and operates. The mining services main responsibility is to ensure that the equipment is always running under optimal conditions, leaving direct control of the digital assets to the customer. The biggest drawback to this business model is the relatively steep cost of entry.

Hash Power Leasing Agreements

The approach here is very straight forward, users pay to lease hash power from a cryptocurrency mining farm and in return take a portion of the mining operations’ overall profits. Those people who are interested Altcoin mining are also usually interested in this form of Cloud Mining.

What To Look Out For

Though the cost reductions associated with Cloud Mining are very attractive, there are a number of potentially serious issues that one should always be on the lookout for.

Apart from the worrying proliferation of outright scams in this segment, the growth of cryptocurrency adoption will only make this field more competitive. If users or mining farms fail to keep up with the growing hash rate demands, diminished gains and fruitless harvest is all they’ll have to look forward to.

On that note, paying a lot of attention to the prospect of long-term profitability is a very good idea. Due to the fact that the mining farms can’t bear the financial burden of running the hardware, this means that a company that plans to stay afloat over the long run may have to take a slice of the profits as regular user fees alone might not be enough to keep the company viable. This dynamic will definitely have an impact on user profitability.

It is also important to note that the state of the market intertwines with cryptocurrency mining profitability. So, if investors fall out of favor with a particular digital asset, then the fixed nature of some of these lease agreements could betray an investor.

Is It Viable In 2021

As with every other cryptocurrency-related investment, due diligence is king. As for profitability, corporations like Bitmain tend to have better-looking financials during bull market cycles. Whether it works out the same or not for Cloud Mining investors is a matter of each investor crunching the numbers and working from those results.

It would also be wise to note that it is only a matter of time before regulators and tax authorities come strolling down this avenue of crypto investing.

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Joel Bonga

A part time cryptocurrency trader, mostly a hodler, and Blockchain/crypto freelance writer. Plus an occasional contributor at BIZZNERD.
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