Cloud mining has gained a lot of popularity, especially since the inception of cryptocurrency. And for those who are just learning about this term, it will interest you to know that cloud mining is a mechanism designed to mine digital assets like bitcoin. What’s different between cloud mining and actual mining is that cloud mining leverages cloud computing power. This simply means that you don’t have to install or directly run hardware or related software.
Some of the leading cloud mining companies out there allow people to set up accounts on their platform and remotely engage in the process of crypto mining for a basic fee. What we love most about this type of mining is that it makes crypto mining accessible to a wide number of people globally. And since this aspect of crypto mining happens via the cloud, you don’t have to worry about the cost of energy or the cost of maintaining the equipment.
Cloud miners become participants in a mining pool, where users buy a portion of hash power. Each user then earns a share of profits according to the amount of hash power provided to the mining pool.
Cloud mining: A deep dive
Cloud mining uses cloud computing to produce or create blockchain-based cryptocurrencies. Given the continued advancement in the crypto world, it’s easy to see why cloud computing is among the fastest-growing technology trends. Cloud computing includes services such as server capacity, software, processing, and file storage that are seamlessly accessed via the cloud or internet. The majority of companies that offer cloud computing services charge on a usage basis, just as you’d typically pay for water or electricity.
On the flip side, mining is the crux of the cryptocurrency model, especially for top assets like bitcoin and Ethereum. For newbies, you’ll be happy to know that mining is a process of verifying transactions that are added to the blockchain network. The combination of cloud computing and mining ushers people into the world of mining. Plus, you don’t need to have robust technical knowledge or hardware infrastructure to navigate the world of cloud mining.
Cloud mining models
Hosted mining is among the most popular forms of cloud mining. This remarkable digital asset mining model allows people to rent or purchase mining hardware at a miner’s facility. Thanks to this model, it is the responsibility of the miner to ensure that its hardware is properly maintained and functions correctly.
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This mining model gives users direct control of their cryptocurrency. The economies of scale of a mining farm ensure that some of the overwhelming expenses of crypto mining, especially the cost of electricity and storage, become manageable.
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That said, there is a significant upfront cost for this type of cloud mining model.
Another popular cloud mining model is leased hash power. This model allows interested parties to rent hash power or computing power directly from a mining farm for digital asset mining. Users get rewards according to the overall profits generated from mining cryptocurrencies through this model. According to reports, this model is famous for mining altcoins (cryptocurrencies that aren’t bitcoin). To get plugged into this cryptocurrency cloud mining model, you’ll need to set up an account with a cloud mining company through their website and choose your preferred contract period and hash power.
Even though cloud mining offers incredible benefits, including less investment in hardware and recurring costs, cloud mining also has many disadvantages. On the one hand, there is the potential of diminishing profits. Plus, altcoins are incredibly vulnerable to demand. Similarly, a reduction in their hash power could result in fewer profits for miners. Finally, keep in mind that cloud mining can promote the centralization of cryptocurrencies, which isn’t how the crypto space is designed to work as it is supposed to be a decentralized system.
Cryptocurrency mining: How it works
Mining for top cryptocurrencies, such as bitcoin, either via cloud mining or locally, doesn’t involve actual mining. While bitcoin mining creates new cryptocurrencies that are awarded to miners for providing hash power, the mining operation is even more crucial for maintaining the security of the bitcoin network or blockchain. Bitcoin mining is executed using high-powered computers to solve complex computational problems. These problems are challenging, and it’s impossible to solve by hand. And even the most incredibly powerful computers will find it pretty hard to level up.
When digital asset miners add a new block of transactions to the blockchain, they will also need to verify that every single transaction is accurate. To be more precise, bitcoin miners ensure that bitcoin is not duplicated, a unique feature of digital currencies called double spend. With fiat, there is always the issue of counterfeiting. For instance, once you spend, let’s say $40 at a store, the bill is now in the hands of the clerk. With digital assets, the story is a little different. Miners leverage computational power to solve cryptographic puzzles, which prevents the issue of double spend.
Key takeaways
Cloud mining is the process of creating digital assets by leasing or buying mining hardware from a third-party cloud provider. It is the responsibility of the cloud provider to maintain the equipment.
Some of the popular cloud mining models include leased hash power and hosted mining. There are lots of remarkable benefits that come with cloud mining including the reduced overall cost of mining. Plus, you don’t need to have robust technical knowledge before you can mine cryptocurrencies.
The not-so-cool aspect of cloud mining is that it centralizes the crypto ecosystem. Plus, profits are susceptible to demand.
