“There is no cloud. It’s just someone else’s computer.”
There have been over 3 years since the cloud mining boom in late 2017. The big players in this market barely survived, some new ones have shown up, but the concept hasn't changed. You rent mining speed provided from somebody else's hardware somewhere over the world for a price. They are responsible for maintaining the whole process - electricity, salaries, internet access, cooling, etc. For that, they also charge you a fee per day. Usually, this is a flat USD-based fee-based on the amount of mining speed you are renting. That was the big downfall for those mining operations back in time. Because the fee is in USD, but not in percentage from the mined crypto at some point the contracts always become unprofitable - this usually happens when the value of crypto mined per unit of speed per day becomes less than the fee you pay to maintain it.
This can happen in 3 ways - the price of the crypto you mine drops or the mining difficulty rises to a point where you get less and less reward for the speed you are renting. The last way is when the reward per mined block drops - happens to Bitcoin about every 4 years and it's called halving. This is a mechanism to ensure that the mining process will continue for the foreseeable future.
There are tons of different coins, algorithms, and hardware for them that provide vastly different results. For some, you can use PC hardware - video cards and CPU, others require specialized hardware called ASIC(application-specific integrated circuit - a machine build for mining a specific algorithm and can do nothing else).
So when we speak of cloud mining it means that we contact a company, usually via their website that has a mining facility setup somewhere with hopefully cheap electricity. That company is offering cloud mining contracts. They might look something like that:
It is very often that those contracts cannot be fulfilled right away because of lack of capacity(all hardware is already rented out) or lack of space(literally no more room of where to host more machines). When this happens the companies are ordering new mining equipment that will be delivered somewhere in the future. Once they have the due date for the delivery of the new hardware they are starting a presale with a promise that on the day X the mining will start. And the contract will last for X amount of time(could be months or years). Over time, the tendency is for the difficulty to rise and this effect can only be negated in 1 way - the price of the mined coin to increase. If both are going in the opposite direction -> price down and difficulty up this will inevitably lead to the contract becoming unprofitable. Here I will put the chart of the Bitcoin mining difficulty for reference.
And here is the Bitcoin price chart for the same period:
As you can see we are on a rollercoaster and those mining contracts are profitable at the moment. However, when the time comes and the price of crypto starts to go down this will change dramatically and you will stop getting those payouts and this will affect the ROI you calculated, in the beginning, will vanish. When a contract becomes unprofitable - the cloud mining company will either stop mining or continue, but keeping all the crypto for themselves, because it is less than the maintenance fee you are paying. Let me provide links for some legit cloud mining companies:
Genesis Mining
Hashing24
Nicehash
ViaBTC
There are probably more, but I can guarantee only for those. Before entering such a deal it will be wise for you to calculate what are you buying and if there is even a remote chance to get profitable. For this, you can use a tool like Coinwarz mining calculator. And don't forget to factor in the maintenance fee, the withdrawal fee(if there is one), and the pool fee.
Now let's discuss all the scam websites that can be found on google that claim they will have a starting bonus of X amount of speed to mine a coin. They also provide unrealistic high numbers. For example, you get 150 GH speed and you will be earning 2 USD a day for a lifetime. But you need to buy a premium contract - meaning that you need to invest your own money to actually withdraw something. And because people see BTC accumulating pretty fast with the "FREE" speed they think that it is a great idea to put some money in it so they can withdraw it. The problem with that is that you will never ever see your money again - it's a classic Ponzi scheme, called HYIP(high-yield investment program) that never ever mines anything. It's basically a website that uses the money of the new investors to pay the people who invested first and at some point, depending on how aggressive profits they announced the circle will break and they will stop paying. It can last from few days to multiple weeks. But the end is always the same. And cloud mining is only the way they chose to mask their scam - no mining whatsoever is involved.
In conclusion
Cloud mining is an extremely risky endeavor and if you have any doubts that you can handle the calculations and the risk that involves you are better staying off it. In general, I don't even think that at the moment it is worth it. But thousands of people every day are being to throw their hard-earned money into something they don't really understand and end up disappointed. I know, because I was one of those people a long time ago.
