Cloud Mining: Here’s How You Can Mine Bitcoin or Altcoins without the Mining Rigs
From pool mining to solo mining and cloud mining, there are pretty many ways of obtaining Bitcoin. Well, going on point, cloud mining is a form of bitcoin mining that employs a remote datacenter with shared processing power to allow users to mine bitcoins or alternative cryptocurrencies without actually owning or managing mining hardware.
In such an arrangement, users need to register on the platform and purchase mining contracts or shares with the mining company running and maintaining mining rigs. Crypto mining presents an avenue for crypto enthusiasts to begin mining cryptocurrency without technical knowledge regarding mining or large capital investment in mining hardware, which are extremely expensive.
While it’s quite profitable, cloud mining comes with several risks, including the risk of being scammed or receiving lower returns. So, here is a guide on all the nitty-gritty details you need to know about cloud mining.
Cloud Mining in a Nutshell
Cloud Mining is essentially leveraging cloud computing to conduct the process of mining via the cloud. In cloud computing, computing services such as software, databases, servers, or storage are accessed via the cloud. Bitcoin mining, as you may be familiar with, is solving complex computational problems to verify and add transaction records to Bitcoin’s public ledger and, in turn, receive rewards in the form of Bitcoin. Cloud mining, therefore, refers to Bitcoin mining from a distant location with miners having little or no knowledge of mining and with no hardware infrastructure. They can thus be termed as passive miners.
There are three models of cloud mining as below:
- Hosted mining – Hosted mining refers to a form of cloud mining where the mining hardware is hosted in a remote data center with users assuming full control over the mining hardware setup and configuration. Under such an arrangement, users must have in-depth knowledge about mining and technical know-how of controlling mining hardware. In hosted mining, miners pay a fee to the hosting company to cover maintenance and electricity costs. Miners are also required to make an initial investment in the hardware, plus it requires time and technical understanding to manage mining hardware.
- Virtual Host Mining – Virtual Host Mining involves utilizing a Virtual Machine to mine crypto.
- Leashed Hashing Power – As the name implies, leased hashing power is renting to buying hashing power from mining rigs. Buying hashing power is done via an online hash market such as WariHash.
How Does Cloud Mining Work?
Cloud Mining involves purchasing hashing power from a mining company to mine Bitcoin or other cryptos without running the mining hardware. The company owning the mining rigs can either rent a physical mining server or a Virtual private server and install mining software on to the server. Instead of leasing a dedicated server, some services offer hashing power hosted in data centers for sale marked in Gigahash/seconds (GH/s).
To purchase mining power, a person is required to open an account with a cloud mining company via its website and then select the options in the mining contract, such as the hashing power and the contract period. Users are also allowed to trade their hashing power with other persons.
The mining company or service provider must continuously configure the hardware, maintain uptime, pay electricity fees, and select the most profitable and reliable pools.
Benefits of Cloud Mining
Several benefits come with cloud mining, as discussed below:
- Instant Connection – The major benefit of cloud mining is that you begin to mine immediately on signing up for a mining company’s website. Hardware shipment, wait times, and delivery risks do not come into play.
- The mining company has fixed maintenance and electricity fees, so you don’t need to worry about such.
- You do not have to keep up with mining nuisance at home with cloud mining, like noise, heat, or space, since mining is done remotely.
- Cloud mining requires no technical experience. You become a miner without having to understand the mining process.
- Cloud mining profitability is dependent on the customers’ level of investment as they can purchase any amount of mining power they wish. Thus, the initial capital and level of risk in cloud mining and the subsequent risk are far less than hosting mining equipment.
Disadvantages of Cloud Mining
While it has numerous benefits, cloud mining has its own fair share of disadvantages. Here are some downsides:
- Low profitability since the lease expenses increase the final mining cost, thus influences the final income.
- Centralization and minimum control of the mining rig. Cloud mining company exercises full control of the mining rigs; therefore, you may not be able to choose a mining approach or mine other cryptos.
- Risk of scams. Cloud mining has witnessed lots of scams as any authority does not regulate companies. Additionally, customers are not given leverages.
- Cloud mining companies are not usually transparent and don’t put the mining profitability financial statement to the public. You, therefore, are not sure if the profit you are receiving is really true.
- With cloud mining, you don’t get to own mining equipment, which you could later sell at a profit.
- Almost impossible to change the software used in mining.
Scams in Cloud Mining
As mentioned earlier, cloud mining has a history of scams since it’s unregulated, just like ICOs. It’s straightforward to scam people in cloud mining by simply setting up a website and claim that the company has a large mining facility. Initially, the company may pretend to be legit by sending payments to its customers. The company may then make no further payments. In recent times, two cloud mining scam companies that were uncovered are HashOcean and Bitcoin Cloud Services.
However, in the midst of the scammed filled sector, there are some proven legit cloud mining companies, including:
- Hashflare: Mines Bitcoin using the SHA-256 and SCRYPT technology and pays clients in BTC. The minimum hashing power to be purchased is 10GH/s.
- Genesis Mining: It’s the largest provider of Bitcoin cloud mining services. It also offers Zcash mining services. Users buy a two-year lease contract for the power of 30 MH/s at the cost of $869.
- Hashing 24: Hashing 24 has been offering Bitcoin cloud mining services since 2012 with mining rigs in Georgia and Iceland. A one-and-half year contract involving 100 GH/s costs $34.
Cloud mining refers to remote mining where a miner purchases hashing power from a Cloud Mining service provider. The mining company is responsible for maintaining the mining equipment, configuring the hardware, and paying for the electricity fees.
Cloud mining is best suited for novice miners who would like to mine crypto but don’t have the technical know-how or sufficient capital to purchase mining equipment, which is pretty expensive. It’s also ideal for seasoned miners who can’t put up with the risk, expenses, and hassle of mining crypto at home. With so much scam associated with cloud mining, you should do sufficient research before settling on a cloud mining service provider.