Things to note when mining Bitcoin with cloud computing power

Data from OKLink blockchain browser shows that as of May 19, Beijing time, the total computing power of Bitcoin network was 99.88 EH/s, a decrease of 17.21% compared with the average computing power of 120.64 EH/s on May 12, the day of the halving.

The current price of Bitcoin is $9,677, and it has not yet broken through the $10,000 mark.

The price of the coin did not surge as expected after the halving, but the computing power of the entire Bitcoin network has dropped significantly. Not only has the computing power dropped, but many data also show that the activity on the Bitcoin chain has also dropped to varying degrees.

According to statistics, from May 11 to May 17, the number of active addresses on the BTC chain totaled 4,823,767, a decrease of 4.8% from the previous week; the total transaction volume on the BTC chain was 4,233,617.09, a decrease of 6.8% from the previous week; the total number of transactions on the chain was 2,060,605, a decrease of 8.55% from the previous week.

In the previous article, I shared with you the indicators for judging the bullish and bearish trends of currency prices. One of them is to look at the on-chain activity of Bitcoin.

According to this standard, the current Bitcoin chain activity is declining, and the total network computing power is also declining, which indicates that the atmosphere of Bitcoin is unlikely to rise in the short term, and the price may continue to be weak for a while. Let's take advantage of this period of weakness to continue to hoard Bitcoin.

Speaking of the total network computing power, I wrote an article two days ago to share the current development of the mining industry. The main reason is that many hydropower areas in Sichuan have begun to clearly support the development of Bitcoin mining, which makes this industry more and more clear and policy risks more and more controllable. This is a relatively large positive for the mining industry in the macro sense, so a friend on the message board asked whether it is appropriate to participate in Bitcoin mining and cloud computing power now.

In the early days, mining was a very profitable industry due to the low competition. Before 2017, the income of a medium-sized mining farm was comparable to the income of many exchanges. But now, mining has entered a professional and globalized model. Without advantages such as electricity costs, mining machine prices, and sites, it is difficult for ordinary people to make money by setting up mining farms.

Therefore, in this situation, in order to facilitate and attract retail investors to participate in Bitcoin mining, many mining service companies have launched cloud computing services.

We can think of cloud computing power as a mining farm dividing its overall computing power into several parts. Each part gets the bitcoins that can be mined by the overall computing power according to its ratio in the overall computing power. Users get the bitcoins corresponding to the number of computing power they buy. This is the operating model of cloud computing power.

In this process, the finer the overall computing power of the mining farm is divided, the smaller the computing power contained in each share, the cheaper the price, and the more convenient it is for ordinary investors to get started.

Many people compare Bitcoin mining to fixed investment - after investing a certain amount of capital, you will receive a certain amount of Bitcoin every once in a while. This analogy is quite appropriate, and the same is true for buying cloud computing power.

It seems that cloud computing power is a good product - cheap and flexible to purchase. Compared with investing tens of thousands of yuan to buy a mining machine and paying maintenance fees every month, cloud computing power is much more convenient. However, there are some things that investors should pay attention to when purchasing cloud computing power:

1. When choosing a merchant, be sure to choose a reliable and trustworthy merchant

Unlike mining machines, cloud computing power is something that cannot be seen or touched. The amount of computing power purchased by the user and the amount of computing power provided by the merchant are completely determined by the merchant, which is difficult for the user to verify. Therefore, the choice of merchant is the first factor in purchasing cloud computing power, and it is of utmost importance.

2. The benefits of cloud computing power are variable, so the benefits of purchasing cloud computing power are also variable.

Since the total computing power of the entire Bitcoin network is always changing, under normal circumstances, the computing power is constantly increasing. Therefore, in this case, the proportion of computing power purchased by users in the total network computing power will become smaller and smaller, and the mining income obtained will also become smaller and smaller.

Of course, if the computing power of the entire network is constantly decreasing, the benefits of the computing power purchased by users will continue to increase. However, this situation is not a common situation.

We can think of purchasing cloud computing power as depositing a sum of money in a bank. In the long run, the bank's deposit interest rates are getting lower and lower, so the interest we earn is also getting smaller and smaller.

3. There is a certain threshold for withdrawing coins mined by cloud computing mining

Usually, many mining users will transfer the mined coins to their wallets. But withdrawing coins is not as easy as clicking a button. In cloud computing mining, many computing companies will set a certain threshold for withdrawing coins. For example, you generally have to mine 0.01 bitcoins before you can withdraw them. This means that if the coins you mine are less than 0.01 bitcoins, you will never be able to withdraw them. If you never mine the coins specified by the threshold, then the coins you mined are equivalent to being given to the computing company.

Therefore, before you prepare to invest in cloud computing mining, you must research and clear the credibility of each company and the specific mining rules, otherwise you will fall into different traps.