- Editor Rating
- Rated 1 stars
- Really Bad
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- Potential ReturnsEditor: 20%
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CloudHashing was founded in 2013, and claims to be the world’s largest Bitcoin Cloud Mining provider. Their mission statement is short but clear: “to ensure the mining profitability of our clients for years to come while the smaller miners become less competitive and less profitable.”
For a fixed amount per GH/s, customers can rent mining equipment that is kept and managed in CloudHashing’s datacenters. Customers subsequently receive a variable flow of Bitcoins depending on the proportional contribution of their rented equipment to the total Bitcoin network hashrate. At CloudHashing these rental periods can cover up to one year, currently from December 1, 2014 to December 1, 2015.
This product could in theory be interesting for investors hoping to benefit from a limited growth in the total network hashrate, while also benefiting from carrying credit risk on the company. The latter is due to the required upfront payment for the entire contract, while receiving spread out payments over the full period.
Whether these Cloud Mining contracts are really profitable is examined by considering a 1000 GH/s contract that is bought for the full one year period from December 1, 2014 to December 1, 2015. A single GH/s is priced at 59 cent, resulting in a total cost of $590 (1.55 BTC) for 1000 GH/s.
The future mining income of this contract is unknown, but both the current network hashrate and mining period are. It can also be expected that the future network hashrate will be higher than the current network hashrate, due to the mining arms race sparked by Proof of Work (PoW) mining algorithms in general. By using the network hashrate data over the previous year, two scenarios are predicted for the next year as below. For completeness, an unrealistic third scenario in which the hashrate remains absolutely flat from now on is added as well.
Note that the “expected trend” line is the closest to development of the network hashrate over the past year. For each of these scenarios, the number of coins mined per day can subsequently be determined. Once aggregated this produces the following results:
Surprisingly, even the most optimistic scenario of a flat network hashrate does not succeed in producing a profit. It seems that CloudHashing is failing to live up to its mission statement.
As seen in the table, the losses are mainly due to the hosting fees charged by CloudHashing. These costs are not included in the price of the contract (hence the loss is limited to the initial investment), but are deducted from the mining revenue each month ($0.10 per GH/s). The fees are mentioned when buying a contract, but this is not sufficient as it can amount to 67 percent of the total costs related to the contract.
Furthermore, customers should pay attention to the period mentioned when buying a contract. A contract from December 1, 2014 to December 1, 2015 can still be bought today, while this is already missing two full days of mining. Lastly, CloudHashing also does not provide any of the scenarios discussed in this review, making it very hard to a customer to properly assess product suitability and risks.