It is an interesting fact that I discovered few days back by doing some calculations on Bitcoin’s cloud mining. I analyzed a cloud mining contract by a leading cloud mining company for Bitcoin with the maximum hash power of 200 TeraHash per second for $26k. I thought it’s the best hash power available and planned on mining the Bitcoin. Fortunately, they were not selling any contract at that time, 1st week of September 2017, thank god, they are still out.
At that point of time, bitcoin’s mining difficulty was 888171856257.321, for those who don’t know: Bitcoin’s mining difficulty generally increases every 2 week and increases by a factor of 7-14%, so to make calculations simpler I considered 10% difficulty increase every 2 week. I also considered increasing bitcoin’s value by 8% in every 2 weeks’ time-frame, well it is not definitely true, however I considered the best-case scenario for Bitcoin’s price appreciation. Also, for this cloud mining contract, mining company says that it is an open-ended contract, which means contract never ends (with a little catch), until your mining is profitable. In simple words, your contract will be over, when your daily payout is less than the daily maintenance cost. They charge maintenance fee of USD 0.00028 per GH/s per day, which is in my case was equal to $56 per day (this is based on 200 TH/s power).
Please take a look at the calculations below (done on 1st week of September), daily payout can be calculated from online mining calculators (I used https://www.coinwarz.com/calculators/bitcoin-mining-calculator), I considered Power Cost equal to zero as it was covered in the maintenance cost of cloud mining contract and I considered Pool Fees equal to zero as well ( which is not zero actually) to make it a best case scenario for me.
Estimated Expected Bitcoin Earnings:
Like this, I calculated for all alternate weeks and come-up with the table below (remember, I assumed Difficulty increase of 10% and Bitcoin to Dollar appreciation of 8% every 2 weeks):
If you look at this table, on 37th week you will be out of the contract as you will be not making enough money to cover your maintenance cost. If you sum up your Bi weekly payout till 37th week with the best mining power available at the investment cost of $26000, it will come out to be $20820.24, which is about $5200 loss.
Conclusion/Verdict: Never fall prey of Bitcoin’s cloud mining companies as you will lose the battle after couple of months with a significant loss. On the other hand, these cloud mining companies will enjoy mining Bitcoins and reaping profits with the hardware they purchased from a lot of people mining contracts money.
Author's Note: There is some basic knowledge of Bitcoin/Cryptocurrency mining is required before someone reads this article.