Ever since Bitcoin (BTC) saw a huge increase in popularity as well as value, a lot of people have been curious about how they can mine cryptocurrencies. Specifically, Bitcoin, as well as other altcoins that have been inspired by it, utilizing the Proof-of-Work (PoW) consensus mechanism, and while there are projects which are moving away from that consensus, it is clear that with BTC, as well as other coins, it is here to stay.
However, buying the initial hardware required to mine cryptocurrency can be extremely expensive, especially when we take into consideration the high electricity costs associated with it.
As such, a new type of solution was introduced within the crypto sphere, which is known as cloud mining.
Today, we are going to be jumping into everything you need to know when it comes to cloud mining and how you can build a passive income stream by utilizing it, so let’s dive in.
Cloud Mining Explained: Everything You Need to Know
Cryptocurrency mining is a process where nodes, known as miners, can contribute their processing power as a means of competing against other miners within the network, dependent on the consensus mechanism used, as a means of solving complex cryptographic puzzles. Once the puzzle is solved, and the batch of transactions gets into a block, which forms a chain, the miners are rewarded in the form of the network’s native cryptocurrency, which in the case of Bitcoin would be the BTC cryptocurrency.
The Proof-of-Work (PoW) consensus mechanism on the other hand is a dedicated mechanism that requires members of a network to essentially expand their overall efforts when it comes to solving the complex mathematical puzzle, which can prevent anyone from gaining control over the system.
Cloud Mining services were created as a means of overcoming challenges that are typically faced by people who are interested in setting up a mining rig or farm for themselves but either lack the budget, time, or technical know-how to set things up and maintain them.
Cloud mining websites will allow people to create an account where they can participate in the mining process remotely and will be able to access and rent out the hardware that they require in order to start the mining process.
For example, instead of physically buying a motherboard, processor, and graphics processing units (GPUs), they can instead rent all of that hardware, which will be set up, maintained, and even provided with electricity and a stable internet connection through the cloud mining provider in question.
How to Get Started with Cloud Mining
By creating an account at a cloud mining website, you are essentially going over the process of leasing or purchasing mining equipment from a third party, one that gets the responsibility of filling the role as a cloud provider, which means that they will manage, and maintain all of the equipment required for the mining process to be active and successful.
Popular cloud mining solutions, however, might include features such as leasing power instead of just the raw hardware. Cloud mining websites will enable a service for users where all they have to do is pay a monthly fee and gain access to mining gear that can be located in a different part of the world.
There are different cloud mining models that users can take advantage of. For example, there is hosted mining. This is the most popular type of cloud mining due to the fact that the customer is only required to purchase or lease the mining hardware.
This way, each user can get full control over their cryptocurrencies, and the economics of scale of a mining farm can also ensure that the costs associated with mining, such as electricity and storage, become a lot more manageable.
Another model is known as leased hashing power. Through this method, the hash power, which is the computing power associated with mining, is leased directly from the farm. The customers get a share of the farm’s overall profits this way from the procedure of mining the cryptocurrencies.
Another way through which users can engage with cloud mining is to open an account with a cloud mining company, after which they can configure and select the device they want to use, as well as the hashing power.
The Two Main Types of Cloud Mining:
- Hosted Mining – here you are essentially renting out an entire server, where you can take advantage of 100% of the mining power as a means of achieving your goal. This is not shared with anyone else.
- Leased Hash Power – this is a procedure where a person aims to buy the mining service from someone else. In other words, instead of renting out the entire server, and raw hardware, they can just rent out a predefined amount of power that someone has on a full server that has been established. Think of hosted mining as having 100% of the rig to your disposal, whilst think of hashing power as a specific percentage, such as 10% of that power being dedicated to your needs.
Things to Keep in Mind
There are, however, a few things that you need to keep an eye out for. There are numerous advantages to cloud mining. However, there have been industry scams due to the rapid increase in the popularity of crypto mining. Ensure that you do your due diligence, background-check each provider, and decide which cloud mining site will work best for you by making well-educated decisions.
Remember that cloud mining also promotes the centralization of cryptocurrencies, as multiple mining rigs or farms are located at one centralized location.
Here are some of the trusted and popular cloud mining websites today:
- StormGain – supports Bitcoin, Bitcoin Cash, Ethereum, Litecoin, and others.
- Hashing24 – supports ZCash, Dash, Ethereum, Litecoin and Bitcoin.
- ScryptCube – supports Bitcoin and Ethereum.
Despite the fact that getting into the cryptocurrency mining industry was hard initially, today, it is simpler than ever before to build a passive income stream by cloud mining. Here, you would essentially receive cryptocurrencies directly to your cryptocurrency wallet from machines that you do not have to manage for yourself.
All you have to do is calculate the math and ensure that the monthly expense associated with renting the cloud mining devices is lesser than the money earned by mining the cryptocurrencies.
How to Setup Cloud Mining:
- Step 1: Create an account at an online cloud mining provider
- Step 2: Select the proper hardware or hashing power that you are interested in.
- Step 3: Calculate the profits you would receive from the cryptocurrency you are mining, and ensure that they are higher than the amount spent renting.
- Step 4: Connect your cryptocurrency wallet and start seeing your earnings pile up.
Advantages and Disadvantages of Cloud Mining
There are numerous advantages, as well as disadvantages when it comes to cloud mining, so here’s everything that you need to know surrounding them.
Advantages of Cloud Mining
- Users are not required to have any technical knowledge.
- No need to set up hardware mining rigs or maintain the hardware.
- No operating costs, no heat and no noise.
- Easy access and affordable pricing plans.
Disadvantages of Cloud Mining
- A large number of scam websites are out there.
- The earnings can be lower when compared to manually setting up rigs.
- Contributes towards centralization of a blockchain.
- Typically, a limited amount of coins can be mined.
Is Cloud Mining Profitable and Under What Circumstances?
Cloud mining can be a profitable investment, and one that can guarantee you passive income with minimal effort required when it comes to setting up and managing mining rigs.
This provides a solid hands-free investing experience.
However, the profitability is dependent on you, as you need to pick the right cryptocurrency to mine and ensure that the amount you are earning on a monthly basis exceeds the expenses you have when it comes to renting out either the entire server or the hashing power.
You also need to do your due-diligence and complete proper research as a means of avoiding cloud mining scam websites, or otherwise, you could lose much of your investment within this sphere. Cloud mining can be profitable, assuming you know what you want to mine, and can calculate the earnings properly whilst also comparing them with your costs.
We have gone over just about everything you need to know when it comes to building a passive income stream through the utilization of cloud mining. It is important to always check the reputation and offerings of the cloud mining service that you are interested in and to always go over all of the available options you have prior to making a full decision on which service you are willing to go with.