In the past there was a time when every major software company had basements filled with computers that ran calculations all day and at night. The dimensions of gymnasiums would be filled with servers that kept running the light on.
All that changed with the age of cloud computing. Instead of losing valuable underground real estate, software companies began renting computers from storage facilities that were filled with powerful computers hosted elsewhere.
Cloud mining applies the same concept of outsourcing computation tasks – in the field of cryptocurrency mining. which is the process of using powerful computers to mining for currencies such as bitcoin, litecoin and dogecoin. Instead of purchasing expensive machines that can mine the coins on your own you can lease the power of a specialist miner from a cloud-based mining company that is located wherever in the world.
Furthermore When you pay for the cloud mining service, it’s leasing part of with a significant amount of computational power. This means you’re more likely to outdo other less powerful bitcoin miners in a race to create an effective hash, which will earn them bitcoin.
Cloud mining is only applicable for Proof-of-work systems, such as Bitcoin as well as that first Ethereum blockchain that generate new crypto currencies using computational force.
What is Crypto Mining ?
Crypto mining is a set of procedures designed to protect the decentralization of the blockchain network. By their actions miners verify transactions, and in turn create the supply of new cryptocurrency.
A cryptocurrency miner must:
- operate a node in the Blockchain network.
- Complete specific tasks to locate the next block
- Add new transactions to the block
- make sure there is no duplicate spending of cryptocurrency.
After the conclusion of these processes After these processes are completed, the Blockchain network will pay successful miners new coins. This is the principal distribution mechanism employed for Proof-of-Work (PoW) blockchains (blockchains that allow mining). Be aware that the particular tasks assigned to miners is contingent on the kind of PoW mechanism used.
For instance, the bitcoin network as well as other blockchains that use the SHA-256 (secure hash algorithm 256 bits) method requires miners to solve extremely complex mathematic equations before an entirely new block is identified. This requires a significant degree of computing power meaning that miners who are determined to succeed should be in a position to invest a specific amount of money into the proper equipment to ensure that they have an opportunity to run a profitable mining business.
It is important to take note that blockchain networks have been constructed in such a way that they constantly alter the mining difficulty for new blocks to be discovered every day at a predetermined time.
Thus, whenever there is a growth in number of nodes mining in any given network as well as an improvement in the computational capacity of the existing mining nodes the difficulty of mining on the network rises accordingly. If this isn’t the case the network adjusts itself to make it easier to solve solving the equation SHA-256. Most of the time, new miners must invest in high-end and specialized mining equipment to get a chance of becoming profitable.
In this regard you will need the following to be a successful cryptocurrency miner:
- Investment in high-performing mining rigs. A quality mining machine could cost upwards of $8,000, and a single rig will not be enough for any miner looking to earn an income.
- Achieving the coding skills and technical knowledge required for running a fully functioning node on a blockchain.
- The cost of electricity for operating and cooling mining equipment continuously can eat into mining companies’ profits. Therefore, miners should look for a power source that is affordable or pick locations with colder temperatures to decrease the amount of power required to cool the mining equipment.
In the end the term “independent” means that a crypto miner must possess the technical expertise along with a sufficient amount of dedication and capital to be able to achieve being successful. Because not all crypto mining companies can meet these standards and scale up further in a hands-off manner, other options are viable. Cloud mining comes into the picture.
Cloud Mining | What is Cloud Mining ?
Once you’ve grasped the basics of crypto mining, it’ll be simpler to comprehend the meaning about cloud mining. It is, as the name suggests cloud mining involves the act that makes use of cloud computing power to mine cryptocurrency. In this scenario you pay third party to perform the entire task for you. In most cases, you do not have to purchase or maintain specific mining equipment and you don’t need to operate a blockchain node.
Cloud mining involves the use of typically either lease mining equipment or lease hash power. This is a measure of the strength of mining rigs and is usually determined in units of Gh/s or Th/s. Cloud mining company owns and manages a facility or farm equipped with mining rigs and gives users the possibility of purchasing or renting a part in the power that it generates.
The cloud mining company needs invest in the best mining equipment and, ideally it should have its farm set up in an area that has access to affordable electricity and a cooler temperature. This ensures that expenses of running the farm stay within a certain amount.
This is a great option for those who aren’t looking to get involved in the technical aspect of cryptocurrency mining. In the majority of cases, users can monitor their hash rates and cloud mining earnings by using their mobile phones. Certain cloud mining setups automatically redirecting created hashpower to the highest-profitable mining cryptocurrency during a specific time.
Benefits and Drawbacks of Cloud Mining?
Cloud mining is a great option for those who wish to benefit from the economic advantages of mining without having to meet the hardware and technical specifications outlined in the earlier guide. Cloud mining could also aid in decreasing the costs associated with operating a mining equipment.
But, there are some possible drawbacks be aware of before deciding on the cloud mining model. One of them is the high number of scams within the cloud mining industry. Since its inception the industry has become an ideal place for scams. Since investors might not be able to evaluate the mining farms personally It is often difficult for them to verify claims that are made by cloud mining companies.
Certain cloud mining companies have pyramid schemes where investors who are early receive payments through deposits from investors who are new. Since this isn’t sustainable it is inevitable that the companies will carry out exit frauds. So, it lies with you to conduct due diligence before deciding on the cloud mining service you are considering. Review the reviews, look into the credibility of the company in crypto-related forums. You should also take note of the withdrawal limitations and stay clear of deals that claim to be extremely lucrative deals.
Another thing be aware of is the possibility of profit for the offer. If the cost you pay to lease, purchase or keep running cloud-based equipment do not correspond with the power of hash offered and you are unable to meet the requirements, you may suffer losses. Take a careful look at the mining capital as well as the potential revenues before you go all in with a cloud mining proposal.
Beware of cloud computing platforms which have the complete control over your income. It is recommended to select ones that provide a certain amount of freedom in the management of your cryptocurrency wallet.
1. How does Cloud Mining Work ?
Cloud miners join mining pools that allows users to buy a specific quantity of “hash power.” Every participant receives a pro-rata portion of the profits in proportion to the hashing capacity they rent.
2. Is Cloud Mining is legal ?
If you’re wondering if Bitcoin mining can be considered legal The answer is generally yes. But It will be better to check the local laws in your area however, in the majority of nations, Bitcoin mining is legal.
Also Read :- How Cryptocurrency works?