In this article, we will explain what cloud mining is and take a look at its pros and cons. We will also briefly cover the different types of cloud mining.
What Is Cloud Mining?
Crypto mining involves a sequence of operations that are designed to secure a given blockchain network and do so in a decentralized manner. The transactions for a cryptocurrency are thus verified and then added to the blockchain. Following the completion of these processes, the miners are rewarded with new coins.
However, crypto mining requires high-performing mining rigs and technical expertise. Then, the entire operation is power-intensive. Here is where cloud mining comes in.
Instead of running such expensive equipment, through cloud mining, a user can rent cloud computing power. So, cloud mining is a mechanism used to mine cryptocurrencies that lets people participate in mining remotely without them having to actually install and run the hardware and related software.
Basically, users pay third parties to do the work for them. A cloud mining provider owns and operates a mining farm or facility that hosts and runs mining rigs. Such a provider offers people the possibility to rent or buy a part of the hash power it generates.
So, those interested open an account and go through a simple setup process choosing the amount of hash power they want to rent. This will determine how much they will earn from this type of mining as the pro-rata share of the profits depends on the hashing power they rented.
Types of Cloud Mining
The two main types are hosted mining and leased hashed power. Let’s see what each of them entails.
- Hosted Mining – This cloud mining model enables customers to buy or rent mining hardware that remains in the cloud mining company’s facility. The company is the one responsible for setting up and maintaining the equipment and the customer pays fees for these services.
- Leased hashed power – In this case, customers rent hash rate or computing power from a mining farm for a certain amount of time. The farm’s revenue generated from crypto mining is then shared among users based on the share of the hash power they control. The entire process is simple as the customer has to open an account with a cloud mining company and subscribe to a plan.
Pros and Cons
Cloud mining comes with various advantages. Costs are lower and the setup process is simple, so it is easier for those with little technical knowledge to get involved in mining and earn passive income.
By renting or buying hardware that remains in the mining company’s facility, customers don’t have to fill their homes with computer equipment and deal with the resulting noise, heat, and power consumption. Plus, they don’t have to maintain the hardware as the mining farm does that for them.
However, this is not free of risks and downsides. Mining is centralized to farms, and profits can be susceptible to demand, so they can diminish. Even if it is easy to buy or rent computing power or mining equipment, there is no guarantee that mining will be profitable or that the company isn’t a scam. Another drawback is that you must trust the cloud provider, and this sector has not been free of fraud.
Then, when using cloud mining companies, you may not have as many choices of equipment or mining specifications as you would when on your own. Plus, you’re not in control of the equipment or how it is used.
Conclusions
Cloud mining could be seen as an easy and accessible way to earn passive income from crypto mining. It frees those interested in this practice from the burden of a high initial investment, high energy bills, finding a place for the equipment, maintenance, and so on. Still, the fact that it is simpler to benefit from crypto mining rewards when using cloud mining doesn’t guarantee it will be profitable.
As is always the case with investments, make sure to carry out extensive research on the provider you want to opt for and think twice when it comes to platforms that have complete control over your earnings.