Introduction
Anyone familiar with the concept of cryptocurrencies like Bitcoin is sure to hear the word mining now and then. Cryptocurrency miners are not trying to pick raw Bitcoins out from an underground cave, but rather they work on solving the encrypted puzzle using computing power in every new Bitcoin block. There are thousands of types of cryptocurrencies, and in the same manner, there are also many types of mining methods, such as cloud mining.
What is Cloud Mining?
The people who are not very tech-savvy may imagine that cloud mining has anything to do with hydro or solar power. However, in reality, the cloud is a term used by computing professionals to refer to any operations where the data can be saved on a universally accessible server. It means that users can store their data streams for any computing process, such as financial transactions, online and do not have to store them on their local hard disk.
Cloud mining is a way for cryptocurrency miners to solve the encrypted blockchain puzzles without needing massive storage locally. Cryptocurrency miners can use borrowed or rented computing power or offer to share in the hash rate contribution of a mining pool. By participating in the hash rate production, the cloud miners can earn revenues following their contribution ratios.
What is Cryptocurrency Mining?
To grasp the concept and inner workings of cloud mining, the readers need to take a step back and start from the basics. Establishing the core layout of cryptocurrency mining is necessary to understand the importance and need of cloud mining operations. In layman’s terms, mining is a process that allows the users to verify all financial transactions and create new coins on the blockchain.
How does Cryptocurrency Mining Work?
Blockchains like Bitcoin are decentralized financial ledgers that are hosted on several servers around the world. Every blockchain stores a specified number of transactions on a single block that is protected by a massive encryption code to prevent hackers from manipulating or editing the data. The job of miners is to set up computation devices to solve the encryption puzzle on every block that verifies the transaction.
When the block is verified, it is added to the main blockchain, and miners get Bitcoin or any other native coin as a reward for adding the block. The mining rewards are collected in the form of transaction fees and encourage the miners to be the first ones to mine as many new blocks as possible and solve the encryption puzzle effectively.
Types of Cryptocurrency Mining
Another important aspect of cryptocurrency mining is to learn about the most basic types of cryptocurrency mining methods:
ASIC Mining
An ASIC stands for Application-specific Integrated Circuit, and it is a device that is used for mining and solving encrypted codes. ASIC mining is considered one of the most secure and effective methods to mine cryptocurrencies such as Bitcoin. However, ASICs are also expensive hardware since they offer a limited functionality that can be harnessed for crypto mining only.
GPU is the abbreviated form of Graphics Processing Unit. GPUs are a cheaper option for cryptocurrency mining, and they come in the form of graphics cards for gaming and 4k HD screens. GPU mining is not very effective for massive blockchains like Bitcoin due to their comparatively lower processing capacity.
CPU Mining
CPU Mining is done using the Central Processing Unit of a PC as the core hardware for the mining procedure. CPU Mining was feasible for blockchains like Bitcoin in the early phases of the project; however, now that almost 75% of Bitcoins have been mined, it is mostly discarded since it cannot compete with ASIC mining units.
Cloud Mining
Cloud mining allows the miners to pay a company’s cryptocurrencies for a personal reserve. It means that the mining services are rented or borrowed from an external source. However, the renter is still able to share in the profits that are generated using cloud mining.
Mining Pools
Mining Pools are different mining farms coming together to form a pool for Bitcoin mining that allows them greater security. With a collective front, a mining pool can get a chance to mine more blocks and increase its percentage quota. Furthermore, they are also able to share costs like power charges and maintenance costs and lend technical skills for problem-solving.
Types of Cloud Mining
It has been established that cloud mining is one of the types of cryptocurrency mining methods. It means that cryptocurrency investors have the option to go for different types of mining procedures, but since cloud mining is a lot cheaper and manageable in comparison to other options, it is ideal for a solo or a retail cryptocurrency miner. Here are some of the most important types of cloud mining:
Physical Farm Rental
Physical farm rentals are the cloud mining setup where the cryptocurrency miners lease an entire data center or mining farm to conduct their operations. In this case, the renter may agree to provide power and maintenance as part of the leasing contract, which can save costs for the cryptocurrency miner.
Virtual Farm Rental
The cryptocurrency miners who are renting out a portion of the mining farm property from an already operational farm can come under the purview of Virtual Farm Rental. It can also account for the lease of a VPS or Virtual Private Server by the cryptocurrency miner to set up a personalized mining operation.
Computing Power Rental
Computing Power Rental is a cloud mining lease where the miners borrow computing power from a dozen or a couple of hundred mining machines from a third-party provider.
Hash Power Lease
Hash Power Lease is a Cloud mining option where a vast network of retail investors leases out their computing machine power for carrying out mining operations. In this manner, the crypto miners do not require a big budget to set up a dedicated mining farm and power supply.
Advantages of Cloud Mining
The main reason that most individual cryptocurrency miners chose cloud mining is that it offers them a considerable amount of benefits in comparison to other options. Here are some of the most noteworthy benefits of cloud mining:
Remote Location
With cloud mining, the most likely scenario is that the mining machines and equipment are present away from the residential space of the cryptocurrency miner. It means that the miners do not have to deal with the issues like heat, sound, and smoke created by the constantly operational mining machines.
Cost Effective
Cloud mining is ideal for retail cryptocurrency investors and blockchain startups who do not have a big budget to set up all the mining equipment. They can reach out to a cloud mining organization and acquire their services for a comparatively smaller rental fee.
Computing Knowledge
Cloud mining calls for the average retail cryptocurrency investors to learn about blockchain and cryptocurrencies in greater detail. The miners also need a basic knowledge of the encryption method and different programming languages in addition to hardware specifications. It means that while their bank accounts are fattening with mining profits, their technical skills also grow at the same time.
Maintenance and Repair
Maintenance and repair costs are some of the biggest head of expenses for keeping any fixed asset. A typical mining farm is in constant need of supervision and maintenance as the mining machines need to keep operating 24/7 until the encrypted puzzle is solved.
At the same time, the miners also need to keep an eye on the weather and temperature of the mining equipment to prevent an increased depreciation rate. However, with cloud mining, all the hassle of maintenance and repair is outsourced.
Automatic Profit Sharing
While cryptocurrency miners are happy with earning profits by investing in digital assets. They have the option to add a side income using the same skills by participating in cloud mining and become eligible for earning added mining rewards every time a new block is verified and added to the blockchain.
Disadvantages of Cloud Mining
Cloud mining indeed offers a considerable amount of profits for cryptocurrency miners, but at the same time, Cloud mining is not free from a few limitations. Some of the drawbacks of Cloud mining are listed as under for the benefit of the reader:
Mining Scams
The cloud miners may not have all the necessary information at their disposal when they are starting. Therefore, sometimes the cryptocurrency investors end up giving up their digital wallets or key phrase with the miners, which can put them at a greater risk for a breach of trust and crypto heist or theft of their reserves.
Lack of Privacy
When it comes to cryptocurrency miners, they have all the technical knowledge and hardware at their disposal to inspect every part of a blockchain. It means that the cloud miners can track every financial transaction on the block, and therefore they are placed in a vulnerable position.
Unpredictability
Cloud mining is not the most traditional and reliable way to generate an income. The mining rewards from a mining operation can lose their value on account of the price fall in the said cryptocurrency that can diminish profits to null.
On the other hand, several mining pools are competing with each other to decrypt the block before everyone else, which means that despite all the efforts, only one miner can qualify for mining rewards.
How to Setup a Cloud Mining Operation?
It is important to note that different types of cryptocurrency have different requirements for Cloud mining. However, this article is going to focus on the mainstream cryptocurrency Bitcoin and tell the reader about the specific steps that will enable them to set up a personalized Cloud Mining setup.
Hardware Selection
The first step in setting up a mining farm is to look into all the available options for mining equipment. As mentioned before, cryptocurrency miners require devices like ASICs, GPUs, CPUs, and other core hardware devices to allow them to set up their mining farm. With Cloud mining, the leaser does not have to purchase or set up the hardware, but they need to research the hardware specifications that their renters are using to ensure that they can maximize their profits.
Software Finalization
Software is the second more important step when it comes to cryptocurrency mining. There is dedicated mining software available in the market, and the miners with the most updated programs have better chances of mining more blocks. At the same time, the Cloud miners should inquire about the type of software that their rented service providers are using to warrant a higher success rate.
Mining Pool Options
Independent mining can seem like a great idea at first, with all the benefits of an autonomous business operation. However, eventually, miners are forced to join forces and form mining pools or apply for addition to an already existing poo to combat the increasing competition and decrease mining costs. Cloud miners should prefer renting services from reliable and established cryptocurrency pools such as F2Pool.
Lease Contract
Cloud miners who are renting out services should preferably get a professional law practitioner to draft an advantageous and secure leasing contract. With the support of a bona fide legal practitioner, the renters will dodge any loopholes that can surprise them in the future. Furthermore, they can also negotiate a more profitable lease agreement that saves costs and increases their profit share.
Digital Wallet Account
A digital currency trader needs to have a digital wallet address or account to store and manage their Bitcoin or any other cryptocurrency earnings from cloud mining. Cloud miners can also use a combination of hot and cold wallets to increase their security and improve liquidity options.
Update Schedule
It is important for cloud miners to always stay on their toes and stay updated about the latest changes in the cryptocurrency market. Get regulator status and performance updates from the mining leaser and also keep an eye on the main cryptocurrency market to hear about the latest mining innovations that can increase their profits and reduce their incurred costs.
Top Cloud Mining Sites in 2022
When it comes to cloud mining, the users who are associated with the top-rated Cloud Mining companies are the ones who put them in a position to reap the biggest rewards. Here are some of the top Cloud Mining Companies in 2022.
Genesis Mining
Genesis Mining has gained popularity as a Cloud mining platform with easy-to-navigate and understood cloud mining operations. It offers more than ten cryptocurrency mining options, including top coins like Bitcoin, Ethereum, Litecoin, and Dash, among others. There is also 24/7 dedicated customer service. The platform allows users to make payments with popular digital payment options like MasterCard, digital wallets, bank wire, PayPal, and debit cards.
Pionex is more than just a Cloud mining site; it also offers options for the leasers to use their mining income for leverage or margin trading. The platform has 12 dedicated bots to guide the leasers through the margin trading process. The platform also has a DEX where the digital currency investors can trade with USDT and USDC stablecoins. There is also the option for credit card direct deposits. Pionex Lite app is available for Android and iOS users.
Hashnest
Hashnest is run and owned by Bitmain Technologies, and it is also associated with one of the biggest crypto pools in the world, namely Antpool. Users can access their cloud mining statistics and commitments using the smartphone application. Leaser accounts are debited daily with cloud mining rewards. With PACMiC or users can qualify to enjoy the services free of all charges. There is also the option to purchase or sell a Hashnet Cloud mining contract on the open market.
IQ Cloud Mining
IQ Cloud mining is a one-stop shop for cryptocurrency investors to avail of mining rewards, conduct forex trading, leverage cryptocurrencies, and even explore the latest stock options. IQ Cloud Mining services are present in many countries like Algeria, China, Iceland, Russia, Canada, and the UK with dedicated CS support. Leasers can also opt for a fixed payment option for USDT mining. Portfolio management services allow the traders to conduct mirror trading, taking references from professionals. The income booster option can increase the profits to increase by 180% annually.
Freemining
Freemining is a cloud mining platform for Bitcoin only, but it is considered ideal for gamers. Rather than traditional cloud mining leases, the buyers can rent investment plans offered by the site upon registration. Users can get paid Bitcoin daily. Furthermore, there are also lucky draws that allow the users to earn a little extra income. Leasers can benefit from affiliate income based on a five-tier investment plan from 1% to 8%.
Conclusion
Cloud mining is a type of cryptocurrency mining option that is considered ideal for cryptocurrency investors who lack extensive technical knowledge or lack sufficient funds to set up a new crypto mining farm. It is a great way to add additional cloud mining income to the already existing cryptocurrency trading profits.
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