The problem with the cloud mining business model is this: if 1 GH/s can make a profit of X, then it doesn't make sense for an operator to sell the GH/s for less than X and it doesn't make sense for a customer to buy the GH/s for more than X. There is no win-win scenario, so there is no real sustainable business opportunity.
I can't think of a good reason for the customer to pay more for 1 GH/s than it will mine, unless perhaps it is a way to avoid taxes. There are people that are happy to pay more for GH/s than it will mine (just look at cex.io), so maybe I am wrong. However, some operations actually charges a reasonable price for their GH/s -- customers can possibly buy GH/s for for less than it will mine.
Assuming that an operation is selling GH/s for less than it will mine raises a big question. Obviously, they could just keep the mining income instead of selling it, and they would make more money. Why do they sell the GH/s for less than it will mine?
It is strange that cloud hashing companies never address this conundrum. Perhaps it is simply because nobody thinks to ask them. Perhaps it is that they are afraid of the answer -- they are not operating a sustainable business. However, I can think of two scenarios in which cloud hashing might make sense for the operator. Both scenarios rely of the fact that the operator initially has no equipment and the customer pays in-full up-front.
First, cloud hashing could be a way to sell mining equipment. Removing the need to setup and maintain the equipment could be a strong motivation for a customer to make the plunge. If the operator can buy the equipment cheaply enough, they can perhaps make a small profit after operating for the benefit of the customer. The business may be sustainable because of the rising difficulty -- equipment becomes obsolete and the customer buys more.
Second, it could be a way to borrow money and/or to finance building of a mining operation. At first, the mining operation is paid for by customers and customers receive most of the income, but eventually the operator has enough capital to sustain the operation without any customers and then they can maximize their profits. On the other hand, it seems like borrowing money to finance a mining operation would be cheaper and more effective.
I would like to hear an answer to this conundrum, wouldn't you?
