Mining Bitcoin and other proof-of-work crypto is an excellent income source for many people. Unlike traditional crypto mining, cloud mining doesn’t require solid tech skills or the ability to set up large-scale computer hardware.
Essentials of Crypto Mining
Crypto mining is basically the process of creating a cryptocurrency unit using the proof-of-work method. Maintaining the blockchain network where cryptocurrency functions requires creating and validating transaction blocks with the help of computing power. Miners use computing capacity to perform particular calculations and find a digital signature (hash) that will close the block. They receive crypto rewards for every validated transaction.
Originally, crypto mining wasn’t a niche activity. In the early stages, almost any computer owner could mine Bitcoin using CPU capabilities. However, in less than two years, mining crypto with an ordinary PC became unprofitable. It started requiring more powerful equipment, hence, more space and upfront investment. Therefore, traditional hardware mining has become more profitable for large companies.
Cloud Mining
Another way to participate in crypto creation is cloud mining. It enables individuals to mine cryptocurrencies like Bitcoin without the need to own or manage physical mining hardware. Instead, they might lease computing power from a third-party mining operator.
While the cloud mining service provider handles all the technical aspects, including maintenance, setup, and electricity costs, users lease a portion of the mining power (hash rate) and receive rewards based on the amount of hash rate they use. Some of the most notable cloud mining projects include Genesis, NiceHash, and Bitdeer. Large crypto exchanges like Binance also provide cloud mining services.
Benefits of Cloud Mining
Cloud mining is increasingly gaining popularity among crypto enthusiasts. It is only natural, considering the benefits it may bring.
To begin with, cloud mining is cheaper than setting up and running a full-scale mining operation. It is also less burdensome, requiring less effort and technical knowledge from cloud mining service users.
Users are not involved in the setting or maintenance of cloud mining operations. There is no need for them to find enough space for mining equipment in their home or office. They receive rewards from the convenience of their homes, so what can be better than effortless passive income?
As for the future prospects, traditional mining is becoming more complicated and expensive every year. Many smaller mining firms have long amalgamated with big corporations to remain operational. It is also challenging for hardware crypto miners to maintain their profitability during the regular Bitcoin halving events. They must look for more sustainable energy-efficient operation models to keep afloat during that time.
Meanwhile, those users renting computing power from mining operators can participate in the reward pool on a smaller less risky scale or withdraw from cloud mining altogether without significant monetary losses.
Risks Associated With Cloud Mining
At the same time, as any other investing activity, cloud mining has potential drawbacks and challenges.
Cloud mining is facilitated by software and carries certain risks, such as scams or security breaches. The crypto industry has seen numerous scams and fraudulent companies. Besides, many users are poorly aware of the crypto nuances and fully rely on digital asset service providers, so it’s essential to choose reputable providers.
Besides, the service provider takes a cut of the mining profits, which can reduce the overall profitability compared to self-mining. However, that depends on the scale of your investment. If your share in cloud mining operations is not too big, it is unlikely that you can start your own mining business, missing the opportunity altogether.
Another solid drawback is that users have no control over the cloud mining operations and must trust the service provider. It is just another reason to treat the provider choice with utmost responsibility.
One must also be attentive to the terms of the mining contract, which might not be flexible. Make sure you’re aware not only of the benefits you receive but also of the obligations and potential risks you face.
How to Engage in Cloud Mining
Once you’ve carefully weighed all the pros and cons of cloud mining, you might wonder how to participate in the process. Here’s a quick step-by-step guide.
- Choose a cloud mining provider. As we’ve already said, the miner must be reputable. Carefully check its reputation records, customer reviews, history of operations, funding sources, media reports, etc. Do not forget to take a look at the cost of services and cloud mining terms before signing up.
- Register on the cloud mining platform. Whether it’s a website or a cloud-mining app, registration usually requires you to provide an email address, choose a password and pass all necessary verification procedures.
- Choose a suitable cloud mining plan. They vary in hashing power, contract duration, and price. Make sure the chosen plan fits your budget and goals.
- Purchase hashing power. It is required to validate transactions on the blockchain. You can pay for the agreed term with any supported methods. Often, you need to pay upfront for the entire contract term. However, in some cases, partial payments are accepted.
- Monitor the cryptocurrency mining process on the platform. As payment is accepted, the cloud mining provider allocates a portion of its mining infrastructure to your account. It will handle the mining validation process on your behalf. All you have to do is monitor how well your computational power works.
- Handle the rewards. Once the provider has mined the cryptocurrency, you receive a proportional share of the reward. It depends on the hashing power allocated to you. As you get the reward, you can either withdraw it from the platform or reinvest it in additional hashing power to earn more.
Summary
Cloud mining is one of the most convenient ways to profit from crypto mining operations. It takes less upfront investment, time, effort, and industry knowledge than traditional self-mining. However, the activity is not 100% protected from scams or cybersecurity issues. Less responsibility also means less control over the process and your investment share. Therefore, due diligence is essential in choosing a reputable cloud mining service provider.
