Cloud Mining

Crypto mining in 2023 — Is it still worth it? Watch Market Talks

Join us as we discuss whether cryptocurrency mining is still worth it in 2023 and all the latest updates regarding the mining industry.

In this week’s episode of Market Talks, Cointelegraph welcomes Justin Kramer, CEO of Badgerland Home Crypto Mining and a long-time cryptocurrency investor. When he is not attending to his own mining rigs, Kramer provides consultation services to home-based operations and larger startups on how to set up mining farms.

We start things off with miner prices and how they have changed in the last few months. Have the prices gone up or down, and what kind of impact does Bitcoin (BTC) have on prices? Which miners are the most in-demand right now, and who is buying them — small-scale miners or larger operations?

Mining operations that paid extremely high prices for mining rigs, which are now not worth even close to the same amount, how are they managing in this market? What is their plan for getting their investments back? Is it a lost cause at this point since the prices of the coins they currently mine are not as high as they used to be? Is it still worth it to pay those high electricity costs and keep mining?

United States President Joe Biden announced a new budget recently that also includes a whooping 30% tax on the electricity used for cryptocurrency mining operations. We ask Kramer for his thoughts on this and what exactly the details are of this new tax. Could this be an attack on crypto?

Are miners gravitating more toward altcoin miners at this point because they might be able to make more of a profit as compared to Bitcoin mining? We ask Kramer if this is true, and if so, what is the reason behind it?

How profitable is it to mine Kadena (KDA)? How much do the miners cost, and also, is it worth anything to mine and hold Kadena? Is the network moving forward and innovating?

We ask Kramer how he advises people who want to set up a mining farm, is it all Bitcoin miners or a certain percentage of Bitcoin miners and the rest are altcoin miners, and which miners does he recommend specifically?

How are things developing in the cloud-based mining and NFT-based mining sectors? Are they a good option for someone who might not have the space or resources needed to run a miner in their house or on their property? We also ask Kramer for the details about profit sharing and other expenses involved in this form of mining.

We cover all this and more, so make sure to stay tuned until the end because Cointelegraph Markets & Research will also be taking your questions and comments throughout the show, so be sure to have them ready to go.

Market Talks streams live every Thursday at 12:00 pm ET (5:00 pm UTC). Each week, it features interviews with some of the most influential and inspiring people from the crypto and blockchain industry. So, head on over to Cointelegraph Markets & Research’s YouTube page and smash those Like and Subscribe buttons for all our future videos and updates.

Cloud mining firm BitFuFu postpones merger with SPAC until May

Bitfufu’s plans to go public have been delayed for the second time. The company is the cloud mining arm of Chinese mining giant Bitmain.

Cloud mining firm Bitfufu, one of Bitmain’s crypto firms, is delaying for the second time its plans to go public via a special-purpose acquisition company (SPAC), according to a Feb. 7 statement.

The company announced its plans to go public in January 2022 through a merger with the SPAC company Arisz Acquisition Corp, anticipating to be publicly listed in the third quarter of that year and a pro forma enterprise value of nearly $1.5 billion. The new decision postpones the public listing to May, helping the companies to consummate the business combination.

“The Extension provides Arisz with additional time to complete its proposed business combination with Finfront Holding Company (“BitFuFu”),” the statement said.

The extension is the second of two three-month extensions permitted under Arisz’s governing documents. In other words, unless its shareholders approve a revision in its governing documents, the crypto cloud company is unable to delay the merger again. Alongside the new deadline, the move will provide an additional $690,000 to Arisz’s operations.

Related: How to mine Bitcoin at home

BitFuFu was founded with early investment from crypto hardware firm Bitmain and Bitmain’s core founding team members. In February 2022, Bitmain and BitFuFu announced a strategic partnership to offer standardized crypto-mining services.

Market conditions and the crypto winter have impacted many crypto firm’s public listing plans. On Dec. 5, the company issuer of USD Coin (USDC) Circle disclosed the mutual termination of its merger with the SPAC company Concord Acquisition. Circle was valued at $4.5 billion when the deal was announced in July 2021.

Crypto firm Bullish also announced in December that a deal to go public had been terminated after reaching an agreement with Far Peak Acquisition. The company cited market conditions and the United States Securities and Exchange Commission’s work to introduce new frameworks for digital assets as reasons for not moving forward.

The IPOX SPAC index benchmark performance, which tracks the aftermarket performance of SPAC companies, has fallen by 9.04% over the past 12 months.

Binance’s cloud mining affected by extreme weather conditions in North America

Users’ subscriptions to cloud mining products have been extended for three days due to the power outage.

The severe winter storm in North America shut down Binance’s cloud mining products from Dec. 24-26, according to an official announcement on Dec. 28. As a result of the power outage, the company announced that users’ subscriptions to cloud mining products were extended for three days.

Binance has noted that further outages as a result of the weather conditions will extend the duration of cloud mining subscriptions.

The exchange’s cloud mining service, launched nearly a month ago, allows users without mining equipment to earn mining rewards from Binance Pool. Subscriptions are required to buy hashrates and Bitcoin mining on Binance’s cloud.

During the days leading up to Christmas, a “bomb cyclone” unleashed extreme temperatures across the United States, leaving millions without electricity and claiming dozens of lives.

Weather conditions in Texas drove Bitcoin miners to voluntarily curtail operations to give power back to the grid, allowing residents to keep their homes warm. Disruptions have impacted Bitcoin’s hash rate, which dropped to 170.60 Exahashes per second (EH/s) on Dec. 25, from a more typical rate of around 225-300 EH/s, Cointelegraph reported.

Bitcoin transactions worldwide have been slowed by 30% as a result of the Texas miners’ decision. Texas is among the top states for Bitcoin mining in the U.S., along with New York, Kentucky and Georgia. All states were affected by the bomb cyclone in the past few days.

Since FTX’s collapse in November, Binance has been surrounded by fear, uncertainty, and doubt (FUD), resulting in billions of dollars in withdrawals. While fighting rumors, the crypto exchange has continued to work on diversifying its business model. Last month, the company also announced that its venture capital arm, Binance Labs, has invested in Belgian hardware wallet company Ngrave and will lead its Series A funding round.

Microsoft bans cryptocurrency mining on cloud services

Microsoft now requires users to obtain a written pre-approval from the firm in order to use Microsoft Azure for mining cryptocurrencies like Bitcoin.

Cloud computing giant Microsoft is taking measures to increase stability of its cloud services by forcing new restrictions for activities like cryptocurrency mining.

Microsoft has quietly banned crypto mining from its online services in order to better protect its customers and clouds, British technology news agency The Register reported on Dec. 15.

The company introduced the new restrictions as part of its universal license terms of Microsoft Online Services. Microsoft updated its acceptable use policy on Dec. 1 to clarify that “mining cryptocurrency is prohibited without prior Microsoft approval.”

In the “Acceptable Use Policy” section, Microsoft said that it now requires users to obtain a written pre-approval from the company in order to use any of Microsoft Online Services for crypto mining.

Microsoft reportedly said that its latest crypto mining restrictions aim to protect the online services from risks like cyber fraud, attacks and unauthorized access to customer resources, stating:

“We made this change to further protect our customers and mitigate the risk of disrupting or impairing services in the Microsoft Cloud.”

The firm also reportedly noted that it may consider permission to mine crypto for testing and research purposes for security detections.

Microsoft did not immediately respond to Cointelegraph’s request for comment.

Microsoft Online Services is Microsoft’s hosted-software offering and is a component of the firm’s software as a service strategy. These services include Microsoft’s Azure cloud computing network, which is known to offer cryptocurrency mining on certain subscription types. As previously reported, Microsoft also experimented with blockchain services on Azure, but quietly terminated its Azure Blockchain Service project in September last year.

According to some reports, Microsoft cloud computing systems have suffered notable capacity shortages in recent years due to continuing supply-chain limitations. More than half a dozen Azure data centers are reportedly expected to remain limited until early 2023.

By adopting the new restrictions, Microsoft joins many other cloud computing providers, including Google, which also prohibits customers from engaging in cryptocurrency mining without Google’s prior written approval. Other platforms like Oracle have banned cloud mining completely, while Digital Ocean also requires written permission.

Cloud mining is an alternative method of investing in crypto allowing users to mine digital coins without using mining equipment or hardware, relying on a remote datacenter with shared processing power. According to the blockchain research group Blockchain Council, cloud mining is one of the most profitable ways to mine crypto because it doesn’t require customers to pay for the equipment and related costs.

The news comes amid the cryptocurrency mining industry going through a major crisis linked to the current cryptocurrency winter, with some miners being on the edge of bankruptcy due to insufficient funds.

HashFlare founders arrested in ‘astounding’ $575M crypto fraud scheme

The HashFlare founders have been charged for their alleged involvement in a crypto fraud and money laundering conspiracy.

The two founders of the now-defunct Bitcoin cloud miner HashFlare have been arrested in Estonia over their alleged involvement in a $575 million crypto fraud conspiracy.

HashFlare was a cloud mining company created in 2015, which purported to allow customers to lease the company’s hashing power in order to mine cryptocurrencies and gain an equivalent share of its profits.

The company was seen as one of the leading names in the business at the time, but shut down a large portion of its mining operations in Jul. 2018.

However, according to a statement from the United States Department of Justice citing court documents, the entire mining operation, run by founders Sergei Potapenko and Ivan Turõgin, was part of a “multi-faceted scheme” that “defrauded hundreds of thousands of victims.”

This included convincing victims to enter into “fraudulent equipment rental contracts” through HashFlare and persuading other victims to invest in a fake virtual currency bank called Polybius Bank.

The pair is also accused of conspiring to launder their “criminal proceeds” through 75 properties, six luxury vehicles, cryptocurrency wallets, and thousands of cryptocurrency mining machines.

U.S. Attorney Nick Brown for the Western District of Washington called the size and scope of the alleged scheme “truly astounding.”

“These defendants capitalized on both the allure of cryptocurrency and the mystery surrounding cryptocurrency mining, to commit an enormous Ponzi scheme,” he said.

The HashFlare founders have been charged with conspiracy to commit wire fraud, 16 counts of wire fraud, and one count of conspiracy to commit money laundering using shell companies and fraudulent invoices and contracts, and could face up to 20 years in prison if convicted.

Two Estonian Citizens Arrested in $575 Million Cryptocurrency Fraud and Money Laundering Schemehttps://t.co/PLdyf6JSEC

— Criminal Division (@DOJCrimDiv) November 21, 2022

HashFlares’ parent company HashCoins OU was founded by Potapenko and Turõgin in 2013, while HashFlare launched mining services in 2015. It initially offered contracts for SHA-256 (Bitcoin) and scrypt. ETHASH (ETH), DASH, and ZCASH options followed.

According to the indictment, the pair claimed HashFlare was a “massive cryptomining operation,” however, it’s alleged the company was mining at a rate of less than 1% of what it claimed, and was paying out withdrawals by purchasing Bitcoin (BTC) from third parties, rather than gains from mining operations.

By Jul. 2018, HashFlare announced a halt to BTC mining services, citing difficulty generating revenue amid market fluctuations.

Customers were not reimbursed for the remainder of the annual contract fees, which they had paid upfront. Other crypto assets available in the platform’s portfolio continued to operate as normal.

Allegations of the company being fraudulent were made but never proven in an official capacity.

The last public communication from HashFlare came through in 2019 through an Aug. 9 post where they announced they were suspending the sale of ETH contracts because the “current capacity has been sold out.”

The company promised to resume activities in the “very near future” and teased further announcements, but nothing was ever publically disclosed about what had happened and HashFlare quietly disappeared.

The FBI is now investigating the case and is seeking information from customers who opted into the alleged fraudulent schemes of HashFlare, HashCoins OU and Polybius.

The 18-count indictment for Potapenkos and Turõgins alleged involvement was returned by a grand jury in the Western District of Washington on Oct. 27 and unsealed on Nov. 21.

HashFlare founders arrested in ‘astounding’ $575M crypto fraud scheme

The HashFlare founders have been charged for their alleged involvement in a crypto fraud and money laundering conspiracy.

The two founders of the now-defunct Bitcoin cloud miner HashFlare have been arrested in Estonia over their alleged involvement in a $575 million crypto fraud conspiracy.

The company was seen as one of the leading names in the business at the time but shut down a large portion of its mining operations in July 2018.

This included convincing victims to enter into “fraudulent equipment rental contracts” through HashFlare and persuading other victims to invest in a fake digital currency bank called Polybius Bank.

The pair is also accused of conspiring to launder their “criminal proceeds” through 75 properties, six luxury vehicles, cryptocurrency wallets and thousands of cryptocurrency mining machines.

U.S. Attorney Nick Brown for the Western District of Washington called the size and scope of the alleged scheme “truly astounding.”

“These defendants capitalized on both the allure of cryptocurrency and the mystery surrounding cryptocurrency mining, to commit an enormous Ponzi scheme,” he said.

The HashFlare founders have been charged with conspiracy to commit wire fraud, 16 counts of wire fraud and one count of conspiracy to commit money laundering using shell companies and fraudulent invoices and contracts, and could face up to 20 years in prison if convicted.

Two Estonian Citizens Arrested in $575 Million Cryptocurrency Fraud and Money Laundering Schemehttps://t.co/PLdyf6JSEC

— Criminal Division (@DOJCrimDiv) November 21, 2022

HashFlares’ parent company HashCoins OU was founded by Potapenko and Turõgin in 2013, while HashFlare launched mining services in 2015. It initially offered contracts for SHA-256 Bitcoin (BTC) and scrypt. ETHASH Ether (ETH), Dash (DASH) and Zcash (ZEC) options soon followed.

According to the indictment, the pair claimed HashFlare was a “massive cryptomining operation.” However, it’s alleged the company was mining at a rate of less than 1% of what it claimed and was paying out withdrawals by purchasing Bitcoin from third parties rather than gains from mining operations.

By July 2018, HashFlare announced a halt to BTC mining services, citing difficulty generating revenue amid market fluctuations.

Customers were not reimbursed for the remainder of the annual contract fees, which they had paid upfront. Other crypto assets available in the platform’s portfolio continued to operate as normal.

Allegations of the company being fraudulent were made but never proven in an official capacity.

The last public communication from HashFlare came through in 2019 through an Aug. 9 post, where they announced they were suspending the sale of ETH contracts because the “current capacity has been sold out.”

The FBI is now investigating the case and is seeking information from customers who opted into the alleged fraudulent schemes of HashFlare, HashCoins OU and Polybius.

The 18-count indictment for Potapenkos and Turõgins alleged involvement was returned by a grand jury in the Western District of Washington on Oct. 27 and unsealed on Nov. 21.

Hetzner anti-crypto policies: A wake-up call for Ethereum’s future

The terms of services, laid down by Ethereum’s second-biggest host Hetzner, prohibits customers from running nodes, mining and farming, plotting, storage of blockchain data and trading.

Just when the Ethereum ecosystem reached its final stages in preparing for the much-anticipated upgrade, The Merge, german cloud provider Hetzner, reiterated its stance against allowing mining operations for both proof-of-stake (PoS) and proof-of-work (PoW) applications.

Hetzner, a private, centralized cloud provider, stepped in on a discussion around running blockchain nodes, highlighting its terms of services that prohibit customers from using the services for crypto activities. However, the Ethereum community perceived the revelation as a threat to the ecosystem as Hetzner’s cloud services host nearly 16% of the Ethereum nodes, as shown below.

*Ethereum Mainnet Statistics. Source: ethernodes.org*

In crypto, the reliance on centralized service providers has been historically perceived as a negative trait when it comes to long-term sustenance — and for a good reason. Redditor u/Supermann- questioned the anti-crypto policies laid down by the second biggest Ethereum Mainnet host, Hetzner. Clarifying the doubts and legal implications associated with using its services for crypto activities, Hetzner stated:

“Using our products for any application related to mining, even remotely related, is not permitted. This includes Ethereum.”

The company also stated that the non-allowance extends to running nodes, mining and farming, plotting, storage of blockchain data and trading. While acknowledging the extensive use of its services for powering Ethereum, Hetzner revealed that “we have been internally discussing how we can best address this issue.” As a fair warning to the community, Hetzner added:

“If you, or any other potential customers are unsure about whether your use case will violate our ToS, please reach out to us.”

The latest revelation from german cloud provider Hetzner showcases the impact of the decision made by centralized entities on thriving crypto ecosystems.

The majority of the Ethereum ecosystem currently runs on Amazon.com, which hosts 54% of the total Ethereum nodes. Some of the mainstream cloud providers that currently host Ethereum nodes include Oracle Cloud (4.1%), Alibaba (2.8%) and Google Cloud (2.7%).

Discussions around the Ethereum upgrade have unknowingly spurred numerous misconceptions about what it means for the future of the blockchain. Cointelegraph’s report highlighted the top five misconceptions about the anticipated Ethereum upgrade.

Reduced gas fees and faster transactions are the biggest rumors spreading across the ecosystem, which have been confirmed to be untrue. However, a subsequent upgrade, named the Shanghai upgrade, will deliver faster and cheaper transactions.

How to build a passive income stream from cloud mining?

Cloud mining is a far safer way to invest in cryptocurrencies and get consistent passive income without directly using mining equipment or hardware.

Cloud mining is the process of mining cryptocurrency without the direct use of mining equipment or hardware. The process allows users to mine Bitcoin or altcoins without having to manage their own resources.

In traditional crypto mining, cryptocurrency is produced through a computational process. Miners need to solve complex mathematical problems using mining hardware to be rewarded with coins. The process of cloud mining is similar, but instead of using their own resources, miners rent or buy resources from a service provider.

As more players entered the cryptocurrency scene, mining became more complex, requiring more computing power. For this reason, many people who used to mine crypto using their own hardware now find it unsustainable due to high electricity costs and the wear and tear on their hardware. Cloud mining has therefore become an attractive option.

How does cloud mining work?

In cloud mining, third-party providers rent out computing power to miners. This means miners don’t have to invest in their own resources, which generally requires a large upfront investment. Cloud mining also removes the need for miners to maintain and update their own equipment.

How it works is that the service provider buys or builds a mining rig and then rents out the hashing power to miners. The cryptocurrency mined is then sent to the miner’s wallet. In most cases, the service provider will also offer a mining-as-a-service solution, which allows miners to outsource the management of their mining equipment.

As for the mining process itself, it’s pretty similar to how cryptocurrency mining works. Transactions are verified and added to a blockchain, thereby creating new coins. Each time a transaction is validated and added to the blockchain, a new block is created. Miners are then rewarded with crypto by adding verified blocks to the chain.

Many cloud mining websites offer cloud services for miners. Among these are StormGain, BeMine and ECOS. Most cloud mining sites take a small portion of your earnings as commission. Some platforms, like ECOS, offer monthly plans with no commission.

Cloud mining models and types

There are two common models for cloud mining:

Both of these models have their advantages and disadvantages. It’s important to choose the right model for your needs before getting started with cloud mining.

Hashing power leasing

Hashing power leasing is a popular model for cryptocurrency cloud mining. With this model, you lease a certain amount of hashing power from a cloud mining provider, so you can mine cryptocurrencies. The advantage here is that you do not have to invest money to set up your own mining rig.

The mining provider provides rented cloud computing power from a mining farm, which means you also don’t have to worry about the upkeep of mining equipment. All you need to do is pay for the hashing power you want to lease, and you can start mining.

A miner has to register for an account with a cloud mining provider and provide certain details during signup. These include details such as the hashing power needed, as well as their desired contract period.

Hashing power is determined by the amount of mining power you need. It’s important to choose the right amount of hashing power, as this will determine how much you’ll be paying for the service.

A hash refers to the mathematical function used to mine cryptocurrencies. The hash rate is the speed at which a miner can complete this function. This means you’ll need to pay more for a higher hash rate. However, a higher hash rate also means you’ll be able to mine more cryptocurrencies.

The contract period is the length of time for which you want to lease hashing power. Most providers offer short-term and long-term contracts.

Hosted mining

With hosted mining, miners rent physical equipment from a cloud mining provider. Since the cloud mining hardware will be located in your home or office, you’ll need a good internet connection. You also have to ensure it’s in good working condition for mining by providing adequate cooling and ventilation.

One of the advantages of this model is that you don’t have to worry about the cost of maintaining the mining equipment. However, a downside is that it can be quite noisy. Keep this in mind if you’re planning on setting up a hosted mining rig in your home.

You’ll also have to shoulder the electricity costs when using this model. However, many hosted mining providers offer discounts if you opt for a longer contract.

In addition, the replacement of old equipment won’t be at the cost of the miner. A provider will typically replace it at no extra cost, provided the equipment was used responsibly and not damaged due to improper use.

Many miners go this route because they want better control of their mining rigs without needing to spend thousands of dollars on brand new equipment.

Cloud mining for earning passive income

Cloud mining can be a great way to earn passive income. This is because you can mine cryptocurrencies without putting much effort. Additionally, you can typically reinvest your earnings into the cloud mining service to increase your hashing power or lease more resources.

Cloud mining may be a good option if you are looking for a way to build a passive income stream from cryptocurrency mining. Just be sure to research and understand the costs involved in cloud mining before getting started.

Those who want to mine Bitcoin for passive income, for example, can use a platform like StormGain to do so.

StormGain

StormGain is a good example of a cloud mining service that allows miners to earn passive income by mining Bitcoin. All users have to do is download their application, register and start mining. They charge reasonable commissions and have low trading fees as well. How much you earn will depend on your mining speed, as well as the trading volumes reached:

ECOS

ECOS is another trusted cloud mining provider. It supports Bitcoin mining and offers a wide range of flexibility when it comes to cloud mining contracts:

ECOS also has a wallet and exchange, so interested miners only need to sign up for an account and download the ECOS mobile app to start mining. Mining contracts range from 24 months to 50 months.

Advantages of cloud mining

There are several advantages of cloud mining that make it an attractive option for miners:

You don’t need to be tech-savvy: You don’t need to be a tech expert or cryptocurrency guru to start cloud mining. All you need is an internet connection, a computer and a good understanding of the cryptocurrency you wish to mine.

You can start small: You can start with a small investment and gradually reinvest your earnings to increase your hashing power. You can also spread your investments out across different cryptocurrencies to mitigate risk.

Sense of security (through contracts): When you lease hashing power, you typically sign a contract. This means the provider is legally obligated to give you the agreed-upon amount of hashing power. This gives miners a sense of security, as they know they won’t be cheated out of their money.

Cloud mining disadvantages

Cloud mining also has its drawbacks, which you should be aware of before getting started:

Risk of scams: There have been some scams associated with cloud mining, so ensure you only invest in reputable services.

Crypto volatility: Cryptocurrency prices are volatile, and cloud mining may not always be profitable. Be sure you understand the risks before getting started.

Limited control: When you lease resources from a cloud mining provider, you don’t have complete control over the operation. This can be a risk if the provider is not reputable.

How to start crypto cloud mining?

If you’ve decided that cloud mining is right for you, there are a few things you’ll need to get started:

A computer with an internet connection: You’ll need a computer or other device with an internet connection to access your cloud mining account.
An account with a cloud mining service: You’ll need to create an account with a reputable cloud mining service provider.
Bitcoin or other cryptocurrencies: To mine cryptocurrency, you’ll need to have some Bitcoin or other cryptocurrency to begin with. You can use this to pay for your resources or reinvest them into your operation.
A crypto wallet: You’ll need a cryptocurrency wallet to store your mined coins. Be sure to choose a wallet that supports the coin you wish to mine.

Is cloud mining profitable?

This depends on a number of factors, including the type of mining you’re doing, the cryptocurrency you’re mining and the size of your operation. The fees and commissions charged by your cloud mining service provider will need to be factored in as well.

So, can you make money with cloud mining? Yes, typically, you can expect to earn more from cloud mining than you would from traditional mining. This is because you’ll save a lot of money since you do not have to purchase expensive hardware, cooling and ventilation equipment. You’ll also save on electricity and maintenance costs.