Cloud mining is the process of mining cryptocurrency without the direct use of mining equipment or hardware. The process allows users to mine Bitcoin or altcoins without having to manage their own resources.
Related: What is an altcoin? A beginner’s guide to cryptocurrencies beyond Bitcoin
In traditional crypto mining, cryptocurrency is produced through a computational process. Miners need to solve complex mathematical problems using mining hardware to be rewarded with coins. The process of cloud mining is similar, but instead of using their own resources, miners rent or buy resources from a service provider.
As more players entered the cryptocurrency scene, mining became more complex, requiring more computing power. For this reason, many people who used to mine crypto using their own hardware now find it unsustainable due to high electricity costs and the wear and tear on their hardware. Cloud mining has therefore become an attractive option.
How does cloud mining work?
In cloud mining, third-party providers rent out computing power to miners. This means miners don’t have to invest in their own resources, which generally requires a large upfront investment. Cloud mining also removes the need for miners to maintain and update their own equipment.
How it works is that the service provider buys or builds a mining rig and then rents out the hashing power to miners. The cryptocurrency mined is then sent to the miner’s wallet. In most cases, the service provider will also offer a mining-as-a-service solution, which allows miners to outsource the management of their mining equipment.
As for the mining process itself, it’s pretty similar to how cryptocurrency mining works. Transactions are verified and added to a blockchain, thereby creating new coins. Each time a transaction is validated and added to the blockchain, a new block is created. Miners are then rewarded with crypto by adding verified blocks to the chain.
Many cloud mining websites offer cloud services for miners. Among these are StormGain, BeMine and ECOS. Most cloud mining sites take a small portion of your earnings as commission. Some platforms, like ECOS, offer monthly plans with no commission.
Cloud mining models and types
There are two common models for cloud mining:
Both of these models have their advantages and disadvantages. It’s important to choose the right model for your needs before getting started with cloud mining.
Hashing power leasing
Hashing power leasing is a popular model for cryptocurrency cloud mining. With this model, you lease a certain amount of hashing power from a cloud mining provider, so you can mine cryptocurrencies. The advantage here is that you do not have to invest money to set up your own mining rig.
The mining provider provides rented cloud computing power from a mining farm, which means you also don’t have to worry about the upkeep of mining equipment. All you need to do is pay for the hashing power you want to lease, and you can start mining.
A miner has to register for an account with a cloud mining provider and provide certain details during signup. These include details such as the hashing power needed, as well as their desired contract period.
Hashing power is determined by the amount of mining power you need. It’s important to choose the right amount of hashing power, as this will determine how much you’ll be paying for the service.
A hash refers to the mathematical function used to mine cryptocurrencies. The hash rate is the speed at which a miner can complete this function. This means you’ll need to pay more for a higher hash rate. However, a higher hash rate also means you’ll be able to mine more cryptocurrencies.
The contract period is the length of time for which you want to lease hashing power. Most providers offer short-term and long-term contracts.
With hosted mining, miners rent physical equipment from a cloud mining provider. Since the cloud mining hardware will be located in your home or office, you’ll need a good internet connection. You also have to ensure it’s in good working condition for mining by providing adequate cooling and ventilation.
One of the advantages of this model is that you don’t have to worry about the cost of maintaining the mining equipment. However, a downside is that it can be quite noisy. Keep this in mind if you’re planning on setting up a hosted mining rig in your home.
You’ll also have to shoulder the electricity costs when using this model. However, many hosted mining providers offer discounts if you opt for a longer contract.
In addition, the replacement of old equipment won’t be at the cost of the miner. A provider will typically replace it at no extra cost, provided the equipment was used responsibly and not damaged due to improper use.
Many miners go this route because they want better control of their mining rigs without needing to spend thousands of dollars on brand new equipment.
Cloud mining for earning passive income
Cloud mining can be a great way to earn passive income. This is because you can mine cryptocurrencies without putting much effort. Additionally, you can typically reinvest your earnings into the cloud mining service to increase your hashing power or lease more resources.
Cloud mining may be a good option if you are looking for a way to build a passive income stream from cryptocurrency mining. Just be sure to research and understand the costs involved in cloud mining before getting started.
Those who want to mine Bitcoin for passive income, for example, can use a platform like StormGain to do so.
StormGain is a good example of a cloud mining service that allows miners to earn passive income by mining Bitcoin. All users have to do is download their application, register and start mining. They charge reasonable commissions and have low trading fees as well. How much you earn will depend on your mining speed, as well as the trading volumes reached:
ECOS is another trusted cloud mining provider. It supports Bitcoin mining and offers a wide range of flexibility when it comes to cloud mining contracts:
ECOS also has a wallet and exchange, so interested miners only need to sign up for an account and download the ECOS mobile app to start mining. Mining contracts range from 24 months to 50 months.
Advantages of cloud mining
There are several advantages of cloud mining that make it an attractive option for miners:
- You don’t need to be tech-savvy: You don’t need to be a tech expert or cryptocurrency guru to start cloud mining. All you need is an internet connection, a computer and a good understanding of the cryptocurrency you wish to mine.
- You can start small: You can start with a small investment and gradually reinvest your earnings to increase your hashing power. You can also spread your investments out across different cryptocurrencies to mitigate risk.
- Sense of security (through contracts): When you lease hashing power, you typically sign a contract. This means the provider is legally obligated to give you the agreed-upon amount of hashing power. This gives miners a sense of security, as they know they won’t be cheated out of their money.
Cloud mining disadvantages
Cloud mining also has its drawbacks, which you should be aware of before getting started:
- Risk of scams: There have been some scams associated with cloud mining, so ensure you only invest in reputable services.
- Crypto volatility: Cryptocurrency prices are volatile, and cloud mining may not always be profitable. Be sure you understand the risks before getting started.
- Limited control: When you lease resources from a cloud mining provider, you don’t have complete control over the operation. This can be a risk if the provider is not reputable.
How to start crypto cloud mining?
If you’ve decided that cloud mining is right for you, there are a few things you’ll need to get started:
- A computer with an internet connection: You’ll need a computer or other device with an internet connection to access your cloud mining account.
- An account with a cloud mining service: You’ll need to create an account with a reputable cloud mining service provider.
- Bitcoin or other cryptocurrencies: To mine cryptocurrency, you’ll need to have some Bitcoin or other cryptocurrency to begin with. You can use this to pay for your resources or reinvest them into your operation.
- A crypto wallet: You’ll need a cryptocurrency wallet to store your mined coins. Be sure to choose a wallet that supports the coin you wish to mine.
Is cloud mining profitable?
This depends on a number of factors, including the type of mining you’re doing, the cryptocurrency you’re mining and the size of your operation. The fees and commissions charged by your cloud mining service provider will need to be factored in as well.
So, can you make money with cloud mining? Yes, typically, you can expect to earn more from cloud mining than you would from traditional mining. This is because you’ll save a lot of money since you do not have to purchase expensive hardware, cooling and ventilation equipment. You’ll also save on electricity and maintenance costs.