Wondering what is cloud mining, how does it work, and why is it important? Dive in to find the answers to all these questions.
The ways in which technological advancements continue to simplify everyday tasks are beyond anyone’s imagination. A few years ago, software companies had to depend on a massive array of computers for storing their data and crunching their numbers. Data warehouses and server rooms served as one of the mandatory requirements for building a software company. However, cloud computing changed the concept by renting computing power.
The concept of cloud mining is the same as cloud computing, only with the difference that you can rent computing infrastructure from miners. Therefore, you don’t have to purchase expensive, powerful computing systems for mining crypto assets such as Bitcoin. However, many people don’t have a clear understanding of what is cloud mining and how it works. The following discussion helps you discover everything you need to know about the cost-effective alternative to traditional crypto mining.
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Definition of Cloud Mining
Many individuals interested in the crypto space want to discover the possible cloud mining profit they can have over crypto mining. The cloud crypto mining concept is basically an alternative to the traditional crypto mining procedure. It has gained popularity as a suitable method for generating digital currency for less tech-savvy people.
Cloud mining is a reliable answer for crypto miners who don’t want to operate mining hardware and related software or take care of the maintenance of the mining infrastructure. While cloud crypto mining provides a clearly evident assurance of cost-effectiveness and many other advantages for miners, the procedure has been vulnerable to various scams.
How Is Cloud Mining Special?
The formidable strength of cloud crypto mining is the fact that it is better than the traditional hardware mining method. In the case of cloud mining for Bitcoin or other cryptocurrencies, miners have to invest in mining operations. The only investment on behalf of miners in cloud crypto mining is the money. Subsequently, the cloud mining company takes care of the operations of a mining farm, including mining rigs.
The company allows miners to rent or purchase a share of the hashing power of their mining farm. Generally, cloud crypto mining providers offer top-tier hardware alongside developing mining farms in locations with lower temperatures and cheaper electricity. As a result, the overall cloud mining profit is evident in the lower costs of running the mining farm. At the same time, miners don’t have to worry about anything in the whole mining process.
If you look closely, cloud mining offers many plausible improvements over traditional hardware mining. Miners had to purchase a mining rig and decide on joining a mining pool or the solo route for crypto mining. In the case of a mining pool, miners have to contribute to the pool’s computing power to earn a share in the rewards from the mining pool. However, miners have to incur costs pertaining to maintenance and upgrades in the mining hardware. At the same time, hardware mining also requires a seamless internet connection.
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How Does Cloud Mining Work?
The overview of the basic definition of cloud mining and its advantages over traditional hardware mining must have piqued your interest in the procedure. Any curious reader must be eager to discover the working of cloud crypto mining. From the looks of it, you don’t have to do anything as a miner in cloud crypto mining other than handing your money to the mining farm providers. The basic answer for “How does cloud mining work?” suggests that it generates cryptocurrencies by leveraging computing power from third-party mining service providers. Let us dive deeper into the working of cloud crypto mining by breaking down the procedure into steps.
- Miners can participate in cloud mining through a mining farm of a mining service provider. The mining farm is generally a data center in a remote location dedicated to crypto mining. Miners can participate in the mining farm after purchasing a share of ‘hash power’ from the mining service provider.
- The mining service provider offers access to cloud mining profit and rewards for miners according to the amount of hashing power bought by miners.
- All the mining operation happens through the cloud, thereby ensuring freedom for miners from the costs of computer equipment maintenance and energy bills.
- Miners can just select a trustworthy cloud mining service provider and choose the type of contract alongside the expected duration. Take note of the fact that miners have to provide an upfront payment in digital or fiat currency. Subsequently, the provider can set up the miners with all resources they need for the mining operation.
- Miners have the option of selecting contracts with 500 to 1000 Giga hashes per second of hashing power and a duration of one year. On the other hand, some providers also offer short-term cloud crypto mining contracts for a 6-month or 24-month duration.
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Cloud Mining Models
Another important highlight in answers for “How does cloud mining work?” also draws attention toward cloud crypto mining models. Miners can use two different types of cloud crypto mining models according to their preferences. Here is an overview of the two cloud crypto mining models.
Hash Power Leasing
In this model of cloud mining, miners work on leasing a specific portion of the hashing power generated by a mining farm. Miners have to subscribe to a particular plan of the cloud mining company that would entitle them to a specific share in the profits of the mining farm. As a miner, you don’t have to pay any maintenance or setup fees while leasing the hash power of the farm. In addition, the share of the hashing power of every miner determines the allocation of mining rewards.
Another notable model you would come across in discussions on what is cloud mining and its working is host mining. Host mining basically implies that miners would purchase or lease mining rigs on the farms of the mining service providers. In this case, miners have to pay for the maintenance and setup of mining rigs, although it reduces the costs pertaining to electricity.
Furthermore, host mining also guarantees better cloud mining profit for miners with better control over the mining rigs. Miners can leverage their control over the mining rigs for redirecting the hashing power toward mining pools. Most important of all, miners can enjoy complete control over the rewards in the host mining model.
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Bitcoin Cloud Mining
The way cloud mining works tells a lot about the effectiveness of the procedure. However, it is important to find the possibilities for its applications in generating cryptocurrencies. One of the most popular cryptocurrencies luring the interests of crypto miners worldwide is Bitcoin. On the contrary, you cannot undermine the difficulty in Bitcoin mining by using the traditional hardware mining methods.
First of all, you have to incur huge costs in purchasing the mining equipment and its upgrades and maintenance. In addition, you have to invest efforts and time in mining operations to earn desirable rewards. Bitcoin cloud mining presents a favorable alternative to conventional Bitcoin mining by removing the need for purchasing expensive computing equipment. Another striking highlight about cloud crypto mining for Bitcoin is that miners don’t need any technical knowledge.
The concept of cloud mining for Bitcoin is the same as that of any cloud crypto mining procedure. You have a remote data center with grants you shared processing power you can use for mining. It is also important to note that the expected returns on cloud crypto mining for Bitcoin are quite rewarding.
However, the rewards from Bitcoin cloud mining depend predominantly on the existing valuation of Bitcoin and the upfront costs required for the procedure. As miners borrow computing power from the mining service provider, the returns on cloud crypto mining would also depend on other factors. For example, the service charges and the price for hashes per second can affect the returns on cloud crypto mining.
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Value Benefits of Cloud Mining
Another mandatory highlight in any discussion on cloud mining would obviously draw attention to its valuable benefits. The basic concept of cloud crypto mining ensures evident benefits of cost-effectiveness and freedom from the burden of maintenance. Let us learn more about the benefits you can find with cloud mining Bitcoin or any other cryptocurrency.
The obvious benefit associated with cloud crypto mining is cost-effectiveness, as miners don’t have to buy mining equipment. In addition, miners don’t have to worry about upgrading or maintaining the mining equipment. Miners don’t need to worry about electricity bills or the heat and noise from mining rigs.
Free from Troubles
The most important highlight of cloud mining is the freedom from maintenance requirements. Miners don’t have to worry about the maintenance of their equipment as the mining service company deals with the same. In most cases, mining service companies use chilling towers and proper location of mining farms in cooler climates to avoid maintenance troubles.
You should also take note of the benefits of technological support from the mining service provider. An individual doesn’t need any specific technical knowledge about cryptocurrency, mining rigs, and protocols for using cloud crypto mining. All you need to do is open an account with the mining service provider and pay the fees required for purchasing desired hashing power. You can receive all rewards in the account, and you can check them by using your tablet or smartphone.
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How Can I Start Cloud Crypto Mining?
Following a detailed impression of what is cloud mining, it’s working, and its benefits, you can explore the methods to start cloud crypto mining. You can start cloud crypto mining by choosing a popular mining pool or service provider. Just rent some hardware or computing power and wait for the mining pool to generate profits. In addition, you must choose a specific cryptocurrency such as Bitcoin and Ethereum, which include the largest mining pools. The process to start cloud crypto mining is quite simple, and a two-step method can help beginners get started conveniently.
Risks in Cloud Mining
Many of you might be so concerned about cloud mining profit that you may ignore the risks associated with it. For example, you don’t have any ownership over the mining equipment. Therefore, you don’t have any control over the mining rigs you use in cloud crypto mining. On the other hand, the possibilities of profit in cloud mining depend on a wide range of factors.
The contracts for cloud crypto mining generally suggest that the mining service provider would offer a specific hashing power for a fixed duration. However, the contract does not provide an assurance of profit to miners. Furthermore, additional fees paid to the mining service provider during the contract’s term can reduce the profits for miners. Most important of all, you can come across many cases of scams in cloud crypto mining as a formidable concern.
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How Can I Identify Cloud Mining Scams?
One of the biggest risks in cloud mining for Bitcoin or other cryptocurrencies is the concern of fraudulent behavior. In most cases, miners pay a hefty upfront amount to mine service providers only to receive no rewards. On the other hand, some miners may not find the rewards as promised. Another common form of scam in cloud mining includes advertisements for fake mining rigs.
Some providers can list plans for mining farms with comprehensive details, albeit without any images or verification of address. In such cases, miners must practice caution in selecting a mining service provider. Here are some important pointers which can help you stay away from scams in cloud crypto mining services.
Avoid the mining service providers or mining pools promising massive profits on minimal investments without any effort. Such claims are generally suspicious, and it is better to avoid them when the minimal upfront investment is actually a hefty sum.
Do your research and homework thoroughly on what is cloud mining to understand what you can expect from a reliable mining service provider. Review the mining service provider and the authenticity of their operations. Look for proofs of address and ownership details of the mining service providers.
Evaluate all the costs you have to pay on the mining platform, including any setup and maintenance costs included in the contract. A detailed overview of all the costs in the rental agreement will help you avoid unwanted fees which might water down your profits.
Avoid the service providers who are not confident about showing the location or photos of their mining farms. Any reliable mining company or platform would never have any trouble disclosing the details of their mining farms. If the company does not offer any verification details about their mining farms, then you should reject it as a scam.
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The best overview of cloud mining suggests that it is an effective alternative to traditional hardware crypto mining. Miners don’t have to purchase expensive mining equipment or worry about their maintenance and upgrades. In addition, the cloud crypto mining process is quite simple, and anyone could try it without technical knowledge of the crypto landscape.
If you look closely, cloud crypto mining can pave the road for large-scale crypto adoption in the future. However, you should keep in mind that cloud crypto mining is ideal for proof of work systems only. Therefore, you cannot apply the process in proof of stake blockchain networks. Learn more about cloud crypto mining and explore its practical benefits now.
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*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!