Cloud mining may be the most stable way to enter Bitcoin market now

Produced by | Odaily Planet Daily (ID: o-daily)

The price recovery this year has brought a new round of "belief recharge", and some investors have shifted their interest in Bitcoin from buying to mining. Mining itself can be seen as exchanging Bitcoin for a price lower than the market price every 10 minutes by investing in hardware and electricity. Therefore, if you are optimistic about Bitcoin in the long term, the best way to store Bitcoin is mining, not buying Bitcoin.

Nowadays, as Bitcoin mining becomes more and more mature, the threshold for purchasing and operating mining machines and finding low electricity prices is getting higher and higher. The rise of cloud computing platforms has gradually transformed the mining landscape from a monopoly of large mining farms to mining by all. For ordinary investors, purchasing cloud computing power contract products (renting computing power) is a low-cost, low-threshold mining method. Investors can receive mined Bitcoins regularly, which is more stable than buying coins. At the same time, the mine owner rents out computing power, obtains cash flow in advance and disperses risks, achieving a win-win situation.

This article will explain the advantages and disadvantages of Bitcoin cloud computing power mining compared to traditional mining, sort out the industry landscape of cloud computing power mining, evaluate mainstream platform products, and take the new platform Suanyitou.com as an example to disassemble the risks and opportunities behind cloud computing power.

Table of contents:

1. What is cloud computing mining?

2. Comparison of the advantages and disadvantages of cloud computing power and traditional mining

3. Market Structure of Cloud Computing Mining

1. Market size

2. Models and Case Studies

3. Product Reviews

4. Opportunities and risks of cloud computing mining

1. What is cloud computing mining?

The usual steps of Bitcoin mining are "buy mining machines - deploy mining machines - set up mining - get profits", but the deployment of mining machines is affected by many factors, such as electricity prices, sites, temperature, noise, operation and maintenance, etc. These barriers require certain conditions and knowledge to eliminate, thus giving rise to a sub-module of the mining industry - cloud computing power.

Cloud computing is a remote mining model. Users purchase cloud computing contracts through the platform, lease computing power for mining, and obtain income regularly. The advantage of cloud mining is that users do not need to have a deep understanding of mining principles and various software and hardware, or purchase expensive mining machines, nor do they need to maintain them 24 hours a day. As long as they place an order, they can participate in mining, which is similar to purchasing income rights products.

We believe that cloud computing power is P2P computing power, and the platform connects the mining machine's income rights (assets) and individual investors (funds). Therefore, when choosing a cloud computing power platform, you should pay attention to the following three points:

1. The computing power side needs to be supported by real mining machines and mining farms. The platform generally discloses relevant information.

2. Is the electricity behind the computing power cheap and stable? We already know that electricity price is the core variable of mining cost, and computing power is also considered to be a digital product converted from electric energy, so stable and cheap electricity price can support high-quality computing power.

3. Machine model. New machines are efficient and in stable condition.

2. Comparison of the advantages and disadvantages of cloud computing power and traditional mining

For investors, cloud computing contracts have the following advantages:

1. There is no need to purchase mining machines, the initial investment is small and the threshold is low.

2. There is no need to bear additional risks such as mining machine failure, performance loss, or invest in subsequent maintenance costs, and the investment stability is high.

3. After the contract ends, there is no need to deal with machines, venues, etc., and exit is more flexible.

For mine owners, renting and selling the right to use computing power for a period of time to customers at a price slightly lower than the income from self-operated mining can quickly return cash, pre-order the latest mining machines, expand production scale, and strive for the possibility of profit in the forward market. To a certain extent, it can also retain mining machines and transfer risks when the coin price is low, thus hedging the single risk of self-operated mining business.

However, compared with direct mining, cloud computing also has the following disadvantages:

1. Even if the platform fully displays relevant information such as mining farms, mining machines, cooperation, teams, etc., it is still difficult for users to judge the computing power quality behind the platform, real-time operating conditions (such as whether there is a power outage, site inspection) or real revenue data.

2. There is a risk of the platform running away. The domestic digital currency mining industry is still in a gray area of ​​supervision and is not protected by law. For example, in 2014, the AMHASH project owner ran away, and all the online and pre-sale computing power disappeared; in January 2015, the BitButler official website could not be opened, and all major communities stopped updating, confirming that they had run away; in April 2015, the computing power bar was liquidated, causing users to lose hundreds of thousands of RMB.

3. Market Structure of Cloud Computing Mining

1. Market size

Cloud computing was born in 2014. Bitmain's HashNest was launched on September 1, 2014, and Sweden's KnCCloud was launched on September 2. In the same year, there were also foreign companies such as Genesis-Mining, NiceHash, and cex.io, as well as domestic companies such as digcoin under Huobi.com, HashRatio under Bitcoin International, and ZeusHash under LTC mining machine manufacturer Zeus.

Later, as the price of coins slumped, cloud computing power fell silent for three years. After 2017, platforms such as Hash Cloud, Star Cube, Bit Power, Hash.Pro, Bit Deer, and Renren Mine emerged. Cloud computing power, with its low threshold and more flexible features, ushered in the era of universal mining.

At present, there are more than 50 cloud computing platforms in the world, among which there are less than 10 mainstream platforms, such as GenesisMining, BitDeer, Koala Mine, Mine World Cloud, Niubit, RHY (Cloud Computing), Calc Cube, KGfire, Nicehash, etc. The cloud computing market share of these nine platforms has reached more than 80%, which basically represents the entire industry.

From the perspective of business structure, the business models of these platforms are basically the same. Cloud computing power leasing, mining machine leasing, and mining machine hosting are the main businesses, with mining machine sales businesses as ancillary businesses.

2. Models and Case Studies

According to the operation mode, cloud computing power platforms are divided into self-owned computing power type (B2C) and platform type (C2C): the former builds or invests in mining farms and directly sells computing power; the latter builds a computing power trading platform and sells computing power on behalf of mining farm partners, and can be regarded as a channel provider of computing power.

3. Product Reviews

From the user's perspective, purchasing cloud computing services usually involves two expenses: one is the computing power fee, which is equivalent to the rental of computing power (mining machine); the other is the hosting fee and electricity fee to maintain the normal production of the mining machine. Some platforms (such as Suanyi Investment, etc.) will directly incorporate these two fees into the price of the computing power contract.

The rate of return that investors are more concerned about can be broken down into dynamic returns of 1T/day, or represented by the total return during the product contract period (invested principal * average daily rate of return).

The formula for calculating the rate of return is:

Rate of return = (X*YZ) / Z

Among them, X represents the number of bitcoins produced per 1T/day, Y represents the average price of bitcoin on that day, and Z represents the comprehensive input cost of purchasing 1T/day (computing power fee, electricity fee, management fee, etc.). X can be directly obtained from the BTC.com website, as shown below:

Below, we compare the static yields of one-year products on mainstream platforms (August 23, 2019):

With the price of the coin at $10,151.56, Suanyitou has the highest theoretical rate of return, which is 25.62%, followed by Bitdeer at 23.23%, Computing Store at 15.63%, and Koala Miner at -27.48%. The rate of return is mainly affected by the coin price, BTC output, and input costs. The costs mainly include computing power fees, electricity fees, and management fees, which are considered fixed costs, while the coin price and output are variable factors. Under the premise that the coin price and output are uncontrollable, the lower the fixed cost, the greater the profit and the smaller the loss. As can be seen from the above figure, the input cost of Suanyitou's 1T computing power (including electricity fees and management fees) is 494.07 yuan, followed by Bitdeer at 503 yuan, Computing Store at 544 yuan, and MCC.TOP at 584 yuan. In comparison, Suanyitou has a greater price advantage. It provides a calculator on its official website to help users grasp the real-time rate of return.

4. Opportunities and risks of cloud computing mining

The risk of speculating in Bitcoin (short-term buying and selling to earn price differences) is higher than hoarding Bitcoin (long-term bullish), but most hoarders often lack judgment on short-term price changes and "get off the train early". Cloud computing power brings investors a small amount of Bitcoin income every day, which is also a disguised way to control investors' "frequent operations". Therefore, for Bitcoin "believers", we give the advice that "it is better to hoard Bitcoin than to speculate in Bitcoin, and it is better to buy computing power than to buy Bitcoin".

The market opportunity of cloud computing power lies in that it provides individuals with a more "neutral" investment method, with a lower threshold than building their own mining farm, lower risk than short-term operations, and lower cost than purchasing at market price; it also allows mining farms to share costs and risks and obtain more ample cash flow.

As mentioned above, the main risk of cloud computing power lies in the authenticity and stability of the computing power behind the contract. In our long-term contact with the mining industry, the high-frequency word we hear is "pitfalls": unreasonable reasons for power outages, various episodes during the transportation of mining machines, constant interference from viruses and ransomware, futures fluctuations and delayed spot, layers of obstacles in cross-border trade, and team ghosts that are hard to guard against... Therefore, real and stable computing power is relatively scarce, and behind it are often years of pitfalls. How the cloud computing power platform, as an information intermediary, can help users screen high-quality cooperative mines, design friendly and attractive products, formulate professional and transparent industry standards, establish disaster recovery plans to deal with various risks, and provide high-quality services throughout the entire investment process will become its core competitiveness.

Suanyi Tou, a cloud computing platform strategically incubated by Odaily Planet Daily, launched its first product on August 30, 2019. Suanyi Tou fully investigates the machine status, site and power conditions, team background, and compliance of various businesses in the mine, and strictly controls risks; designs the user interface with the thinking and standards of Internet products to minimize the learning and usage threshold of users; and shares user-side risks with partners to ensure that even short-term power outages will not affect daily returns. At the same time, Suanyi Tou has reached in-depth cooperation with investment and financing platform MinIPO on legal and tax compliance, notifying risks in advance and doing identity authentication; and with the help of Odaily Planet Daily's media resources in the mining circle, it keeps up with the latest industry trends in a timely manner and provides more valuable information services for mining circle investors.

For more details, please click:

www.suanyitou.com