It’s an interesting fact that companies that could be making money by mining cryptocurrencies for themselves are often perfectly happy to sell mining services contracts instead. This is because they know that miners who aren’t happy with spending money on expensive crypto mining hardware and coughing up small fortunes for electricity are more than happy to sign on the dotted line for cloud mining. Cloud mining is a great option for people who want to mine cryptos but don’t want to manage her own mining rigs and all the problems that they can bring.
Cloud mining companies need to find ways to diversify their risks because they invest a lot of money in ensuring that their mining facility is very efficient. So, they choose to get money for contracts from clients because this money is guaranteed. Coin values can change over time and be quite unpredictable, but cloud mining contracts give the companies a dependable source of income. So even though they spend a lot of money on hardware maintenance and other running costs, they’re exposed to a less risky situation because they pass the risk onto the customer. It gives these companies instant access to funds that can see them through difficult periods.
In fact, people are so eager to invest in cloud mining that some companies use this approach to generate the funds that they need to buy the dedicated hardware in the first place. They are essentially scammers who use customers’ money as a free bank loan to get themselves into the mining game, and as soon as they’re up and running, they shed the customers and concentrate on making money for themselves instead. It’s one of the ever-present dangers in cloud mining, and it pays to be aware that it can happen.
While cloud mining companies appear to be offering a low-risk way of making quick money, there are probably as many Ponzi schemes out there as there are genuine providers. Ponzi or pyramid schemes trick you into thinking that everything is okay. In this kind of scam, a new set of investors is given money that was donated by a previous set of investors, which lulls them into a false sense of security. In time, when the new investors have dried up the scheme is quietly abandoned, and the last set of investors wind up with nothing. It’s a confidence trick that is best avoided if possible. For any new company it pays to wait and always read the reviews!