Is Cloud Mining Right For You?

The drop in Bitcoin and altcoin prices in 2018 has done nothing to dampen the frenzy around the cryptocurrency markets. Those already invested in cryptos of some kind may be inclined to ask the next question.

How do I get more at these lower prices?  To get more, would mining be a good choice for me?

While Genesis is the largest cloud mining operation, they present a couple of problems: They are always sold out and they have limited cryptocurrency choices.

Genesis Mining

Genesis Mining is based in Iceland and Hong Kong and they are the longest serving cloud mining company for cryptocurrencies. They currently offer 6 choices:

 

  • Bitcoin
  • Litecoin
  • Ethereum
  • Dash
  • Monero
  • ZCash

They sell contracts, meaning you buy hashing power and Genesis gets the proper machine and processing power based on what you buy and hooks it up to their network to mine. The contracts are currently 2 years although there is a custom plan you can buy to create your own.

As we’ve said, Genesis’ biggest issue is that they are usually sold out. Right now, they only have 2 currencies available in a ‘limited pre-sale’: Ethereum and ZCash. If you like those two then you are ok but any of the others and you are out of luck with an unknown time of when they will reopen again.

Fees

When it comes to Genesis and their fees, there’s good news and bad news. The contract rate for the small Ethereum contract of $1520 for 40 MH/s is the only fee you pay. The good is that you aren’t being nickel and dimed on everything but it also means that you have to do your own research and calculate for yourself how good a deal this price is for a 2 year mining contract. Could you get a better deal by yourself or elsewhere?

Here’s an example. From CryptoCompare on mining Ethereum yourself.

The same 40 MH/s gives us $271.85 per year at the current price with a profit of 1.05 ETH per year. For 2 years that would mean $543.7, which is less than the $1520 Genesis charges. Is that a deal? If ETH price increases then your 1.05 ETH per year becomes worth more than your investment both if you mine yourself OR if you use Genesis.

When it comes to contract structure, you are locked in for 2 years and the fees are unknown (or if you even can) break a contract.

The advantages of Genesis are:

  • Longest running company in the space
  • Fees for contracts are upfront and one time
  • The big cryptos are covered
  • Their Iceland data center is green
  • They are all over social media including VK and Medium so they are pretty easy to find

The two biggest downsides are the locked in contract period and the limited availability. Many miners like the flexibility of choice if their current mining/hashing arrangement isn’t working for them. Here you are locked in for 2 years so make sure you are ready to commit. The limited availability of contracts is a bigger issue for sure. Who knows if Bitcoin mining will ever open up again? Lastly, you might get a better deal hooking your own machine up to a mining pool or even buying the crypto direct if you have the funds instead of buying a contract.

At the moment, all the contracts are out of stock.

Now that we've looked at Genesis,  let’s take a look at the next 2 most popular mining services: Nicehash and Minergate.

Nicehash

Nicehash, the Slovenia based cloud mining firm, is the next largest firm in the space after Genesis. Here are some features of their offerings:

  • Buy or Sell Mining contracts. They have a marketplace that allows you to sell your excess hash power and get paid in Bitcoin.
  • Good website. Their site is pretty easy to navigate to be able to tell if you can buy or sell hashing power to mine profitably.
  • Flexible options. You can choose between ASIC, GPU or CPU mining options to pick whichever tech or crypto works for you
  • Active Social Media presence. They are easy to find when you need them or have questions since they are active on FB, Reddit, BitcoinTalk, and Twitter.

 

Their main downsides are two: Fees and theft. They charge a 3% fee to buy hashing power and anywhere from 2-5% to sell hashing power. Some believe these fees are high. They charge deposit and withdrawal fees from their wallets for smaller amounts although it looks like most of these are to send BTC across the blockchain.

The theft is the bigger problem. Nicehash was hacked with $80 million taken (~4800 BTC), according to the BBC Tech report, at the time of the hack which was early December. CEO Marco Kobal stepped down after the hack and has been replaced.

As you might expect, their security specifically and credibility overall is up for debate since this happened. The only company, so far, to successfully deal with a hack and makes its customers whole again is Bitfinex. Every other crypto hack has led to either a full loss with no recovery for customers or the business itself has gone under at a total loss, both results bad for customers.

This hack is a big deal and in March 2018 is still a developing story. We’ll see how it works out for them.

Minergate

Minergate has some good things going for it right out of the gate. It’s the easiest setup for downloading the software and getting started. The pool stats for the crypto of your choice are there for the viewing.  Here are some of Minergate’s better features:

  • Long time in business. 6 years in business is an eternity in the crypto world
  • Automine feature to increase your profitability. Automine leads you to the most profitable coin to mine for your system. The smart mining algorithm detects the best coin and the Automine feature moves in there automatically.
  • Merged mining lets you mine 2 coins at once. Great feature if you want to mine a major coin like Bitcoin and an alt at the same time. You no longer have to choose.
  • The simplest, easiest, fastest user setup. Minergate software gets you up and running and mining in the shortest time so you can start making money.
  • Great for beginners. Easy to use software means easy to get started for newbies and pros alike.

Minergate has 2 downsides: Excess Privacy and Support services. In a field where many people and firms stay private, Minergate is even more private than most. That often gives people pause. The other reason their privacy matters is that their software, while fast and user-friendly like discussed above, is completely closed source. Many don’t care about whether the software is open source or closed source as long as it works, but in the Crypto world nothing is easy and there are some users who are philosophically against the idea of using closed source software.

Support has been an issue over 2017 and if you look at the legitimate complaints on BitcoinTalk and Reddit, they revolve around the time it takes to resolve an issue and how finding someone to talk to is tough at Minergate. Minergate recognizes this problem and has hired some additional support staff to help address customer concerns more quickly.  My attempts to reach out to them resulted in slow, if any, communication and feedback.

Not unlike Binance, Bittrex, and Coinbase (this is an affiliate link and I earn a commission if you sign up) with their service issues, rapid growth has meant there are customer support issues. They are on FB and Twitter, although they should be on more platforms that crypto-enthusiasts really use aside from Twitter.

Summary

Genesis is the longest running cloud mining company. Their contracts require a commitment and many choices are either sold out or generally not available since they only have 6 choices with none available to buy right now.

Nicehash and Minergate both look for ways to make cloud mining easier, more accessible and better for the average user. Nicehash’s marketplace to buy and sell excess hashing power is a unique feature, but how they will come out from the Bitcoin theft is still yet to be determined. Minergate has the easiest setup to get started, but are tough to reach when questions arise.

Which one is best for you? The recent Bitcoin theft is still a huge problem for Nicehash and many people have left it never to return. Minergate is actively working on its biggest issue so it could improve over time, but is not much improved yet. Genesis is a good choice if they have the cryptocurrency you want to mine when you are ready to mine.

I still think bulk or periodic buying of your cryptocurrency is a better choice than mining but these are good options if you believe that mining is for you.

About the author

Stu Stu Lustman, the author of this post, is a Credit Analyst by trade trying to bring Commercial Credit Analysis techniques to the world of Peer to Peer Lending. Check me out on Twitter, LinkedIn and Google+

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