Mining is a way to validate transactions and generate new coins. Normally, miners need expensive equipment to start mining. However, cloud mining allows to perform all the mining activities without the need to buy physical hardware equipment. Instead, miners can rent computational power from remote data centers that specialize in crypto mining.
Table of contents
- How Cloud Mining Works
- Types of Cloud Mining
- Advantages of Cloud Mining
- Risks and Disadvantages of Cloud Mining
- How to Choose a Reliable Cloud Mining Provider
- Who Should Consider Cloud Mining?
- Conclusion
Why Cloud Mining Has Become Popular
Cloud mining is growing in popularity. There are several reasons for that.
- First of all, there are no excessive costs involved if you compare cloud mining with traditional mining. Miners don’t have to buy equipment, they just rent some computational power from a data center.
- Secondly, there are no excessive electricity costs.
- Finally, one doesn’t need to have technical knowledge to start mining in a cloud. Also, there is no need to maintain the mining equipment.
Differences Between Cloud Mining and Traditional Mining
Here are the main differences between cloud mining and traditional mining.
- In traditional mining, one has to buy expensive equipment, set it up, and maintain it. In cloud mining, this is not the case. Miners rent all from third-party providers.
- Traditional mining is energy-demanding. Normally, miners pay high electricity bills. In cloud mining, miners rent computational power and do not care about the rest.
How Cloud Mining Works
Cloud mining is performed in a huge mining farm. That farm leases computational power to users. These users buy mining contracts and then, based on the contract, they get their share of the mining rewards that the farm receives.
Here is how you can participate in cloud mining.
You choose a cloud mining provider and revise the contracts that it offers. Then, you select the contract that suits your budget and has the crypto you would like to mine.
The provider allocates your share of mining power to you, and you start earning your share from all mining rewards that the provider gets.
What do cloud mining providers do?
Cloud mining providers maintain the entire mining infrastructure, the farm. They buy and maintain hardware, set it up, handle the cooling processes, and manage the distributed power. All in all, they are responsible for keeping up all operations and distributing the rewards to users based on their plans.
Types of Cloud Mining
There are different types of cloud mining.
Hashrate Rental
In this case, users rent some amount of hashing power for a specified period. The mining provider manages all operations, and users get their share of rewards based on the hash rate that they have rented.
Hosting Mining Equipment
Some cloud mining providers allow users to buy mining hardware. Then, these providers can host the equipment at their facilities.
If you choose this model, you have more control over mining settings, and you don’t have to set up a mining farm at your home.
Differences Between Different Mining Models
Renting hash rate requires a lower upfront investment, it is more accessible. Also, it doesn’t require technical knowledge because everything is managed by the cloud provider. In the case of hosted hardware, you have to invest more but you get more flexibility. Also, you should know how to set up the mining equipment.
Advantages of Cloud Mining
Cloud mining has the following benefits.
It helps to save on equipment and electricity. You don’t have to set up expensive mining rigs and pay huge electricity bills. Also, you don’t have to maintain equipment.
Cloud mining is accessible for beginners because users get a straightforward offer, pay for a selected plan, and start receiving rewards based on the plan.
While in traditional mining, you buy equipment to mine a specific coin, in cloud mining, you can choose to mine different coins. This helps you to reduce risks connected with the high volatility of crypto.
Risks and Disadvantages of Cloud Mining
Cloud mining is a very good option in many regards, but it has also drawbacks.
For example, some cloud mining providers operate fraudulent schemes. This is why, before buying a plan from a provider, you should research the company. Check user reviews online, and see whether there are no scam reports.
Mining difficulty increases over time, this is why profitability drops. If the provider doesn’t upgrade its equipment, your rewards may be very low. Also, mining providers charge fees, and they can impact your earnings a lot. This is why in some cases, users prefer traditional mining if they have enough money to buy equipment and if their technical expertise permits it.
Many contracts include fixed terms and conditions. Also, some providers impose hidden fees that impact the earnings. This is why users should be very careful and read the agreement with the cloud mining provider very carefully.
How to Choose a Reliable Cloud Mining Provider
Here are some tips that will help you to choose a good cloud mining provider.
1 - Check the reputation, reviews, and terms & conditions of the company. This will help you to determine whether the company is legit and whether it is profitable to buy a plan with it.
2 - Check the company's transparency and legal documentation. Reliable businesses provide clear documentation and disclose all details of collaboration. If the company is not transparent, and the details of the collaboration are not clear, it is a red flag.
3 - It is recommended to choose well-known cloud mining platforms such as Genesis Mining, Hashflare, and Bitdeer. They are transparent and have already track record that helps new users to access their performance. New platforms still have to earn their reputation.
Who Should Consider Cloud Mining?
Cloud mining is not suitable for anyone. Some users will still prefer independent mining because they can control the entire process. So, cloud mining is more suitable for the following categories of users.
Beginners
If you have no experience with mining, cloud mining is a good option for you. It doesn’t require specific knowledge, and the upfront investment is not high.
Those Users Who Look for Passive Income Sources
Those users who look for passive income may find cloud mining suitable because it doesn’t require the constant presence of the user.
Users Who Avoid Technical Complexity
In cloud mining, the provider takes care of setting up the equipment and maintaining it. This is why users can use cloud mining without being involved in those technical matters.
Conclusion
So, can cloud mining become a good investment? Yes, it can, but it all also depends on the market conditions, the reliability of the provider, and contract terms. This is why we recommend to double-check everything before buying a plan.
Cryptocurrency adoption grows, and over time, cloud mining will evolve and become even more attractive in the future.