The release and subsequent advancements in blockchain technologies are changing the world at a rapid pace. Cryptocurrencies such as Bitcoin (BTC) and Litecoin (LTC) are starting to amass more interest from businesses and the general public alike. More and more people are willing to look past the novelty of the technology and its associated risks, and are starting to recognize the potential benefits. Specifically, there has been a rising interest in the many new investment opportunities. From low risk micro-investments to high risk gambling, cryptocurrencies offer a whole new world of opportunities that have not yet been subjected to years of manifestation in legislation. This unregulated component of cryptocurrencies is allowing new business models to develop and is attractive to risk favoring investors. New investment opportunities include extremely low-commission online financial exchanges such as Bitstamp, as well as loaning platforms where users can lend and borrow BTC for self-specified interest rates. However, one of the newest and most unexplored concepts is that of Cloud Mining.
What is Cloud Mining?
For the individual, mining BTC and other cryptocurrencies at home can be very costly given the combination of expensive hardware and electricity costs. The concept of cloud mining removes these barriers. In cloud mining, users are able to buy ‘shares’ in a company’s mining hardware power. Users pay a one-time investment sum and are then allocated a certain daily payout. These investments in turn provide the mining company with more financial resources to expand and upgrade their hardware. In the early days of BTC, this proved to be very rewarding for some investors, since the mining difficulty was still relatively low, and the price of BTC was at an all-time high. However, more recently and due to price instability, the cloud mining industry has seen an increasing amount of scams, usually in the form of Ponzi schemes. A well-known example is that of HashOcean, the mining service that recently disappeared with the funds of some 700,000 investors.
Is it worth it?
As a result of the unregulated aspect of cryptocurrencies, there is now a lack of trust within the community when it comes to cloud mining. As long as there are no laws in place to offer some sort of transactional protection to the buyer, there is no assurance that you will see your invested money back. Moreover, as the mining difficulty goes up it only becomes more costly to attain the same returns. This is a sustainability issue in the cloud mining industry, since there is only a predetermined amount of BTC that can be mined.
Sources:
https://cointelegraph.com/news/safe-not-sorry-how-to-treat-cloud-mining-right
http://www.newsbtc.com/2016/02/05/mining-equipment-contracts/
