How Cloud Mining Profitability is Calculated?

Factors influencing Cloud Mining Profitability

Before learning about calculations, first understand the factors that are taken into consideration before calculating the profitability in cloud mining. 

Contract type

Each cloud mining platform offers users a variety of contract types to choose from. These contract types have specific fees, which the platform explicitly mentions. Users can compare these contracts and choose the best one for them based on their needs.

Hashrate

Hashrate refers to the total computing power available from the cloud mining platform to solve mining mathematical problems. The higher the hashpower, the more mining coins can be obtained.

Market price of cryptocurrencies

Cloud mining ultimately mines cryptocurrencies. Thus, market volatility in these cryptocurrencies has a significant impact on mining rewards. Price drops have a negative effect on the outcome, and vice versa. 

Size and duration of Investment

Another important factor influencing profitability in the mining industry is the size of the investment and the amount of time you are willing to devote. Large investments in linger duration frequently result in higher rewards. However, this can also lock up your capital. Short-term contracts, on the other hand, have lower yields. 

Platform reliability

Each platform provides several lucrative options to entice miners. However, selecting the right platform is the most important step. Audit reports are now available to verify the platform’s reliability. Other options for determining the authenticity of the platform include social media handles and reviews on sites such as Trustpilot.

Other Associated Operational Costs

Profitability is calculated by deducting operational and other costs. As a result, it is critical to understand how much each platform charges. Furthermore, electricity charges are not collected directly from miners.

Understanding the Investment and Payback Period

The investment in relation to the payback period reflects the time required to cover the total upfront costs as well as the average daily net profit. Here is the breakdown of the variables. 

Daily Output

• Hashrate is calculated in TH/s
• Difficulty is adjusted dynamically
• Pool fees is ideally around 2.5%
• Block rewards is revealed by respective cryptocurrency in the mining contracts.

Electricity Cost

Net Daily Profit

The total investment cost of the mining rig includes the cost of machinery, customs duties, shipping, setup costs, infrastructure costs, and others. The upfront costs could be in tens of thousands and could also include maintenance costs. Therefore, managed hosting is the best option for small and medium-sized miners. 

Hence, Payback Period formula is. 

Realistic Earning Expectations

To further explain the actual cloud mining profitability calculation, here is an illustration 

How to maximize cloud mining profitability?

The factors mentioned above that affect profitability are mostly variables, so higher yields can be achieved with a few simple steps.

Lowering Electricity Costs

Electricity costs in some regions, such as Africa, Argentina, and other similar places, are relatively less than in the U.S. Moreover, selecting renewable energy rigs can also help in increasing the profitability of cloud mining.

Controlling Hidden Costs

Optimizing or bundling utility costs can help to reduce overall operating costs. Furthermore, by choosing platforms with lower operational costs, you can increase profits.

Operating Stability

If the mining rig goes offline for 2 hours, the profit can be at risk by 5-10%. Therefore, ensure the platform runs regularly and has the maximum number of satisfied users.

Enter Mining During Bull Run

The block reward is at the maximum when the selected coin is in the bull run. However, with cryptocurrencies there is no specific timing for a bull run or bear run, yet the market sentiments can play a vital role in assessing the right time.