The Ultimate Guide to Cloud Mining Explained in Detail

How does cloud mining work? Can I just buy some hashing power and have it do all the work of mining for me? What can I do to make sure I’m getting the most from my purchase? These are just a few of the questions that many people have when they decide to look into this exciting investment opportunity. Thankfully, you don’t need to be an experienced computer scientist or cryptocurrency expert to understand how cloud mining works.

Cloud mining is a hands-off method of earning cryptocurrencies through the rental of computing resources from third parties.

Every large software computer company used to keep basements full of computers that crunched numbers 24 hours a day, seven days a week. The servers that keep the lights on would be housed in gymnasium-sized rooms.

With the advent of cloud computing, all of that changed. Software companies began renting computer power from warehouses full of powerful machines located elsewhere, rather than sacrificing valuable underground real estate.

Cloud mining, the technique of using powerful computers to mine for coins like bitcoin, litecoin, and dogecoin, applies the same principle – outsourcing computing effort – to cryptocurrency mining. You can rent the computing power of a specialized miner from a cloud mining company headquartered anywhere in the world instead of buying expensive computers to mine these currencies yourself.

Furthermore, when you pay for cloud mining services, you're renting a piece of a massive computing pool, which means you're more likely to beat out other, less powerful bitcoin miners who are competing to generate a winning hash that would reward them bitcoin.

Continue reading: What is Bitcoin Mining?

Cloud mining only applies to proof-of-work systems, such as Bitcoin and the original Ethereum blockchain, which use computational brute force to mine new coins.

     

How to Begin Cloud Cryptocurrency Mining?

Cloud mining does not require any of the setups that traditional bitcoin mining entails. You won't have to purchase special hardware, store it, or pay for electricity.

Rather, you must choose a profitable cloud mining pool, rent some hardware from it, and wait for the mining pool to earn revenue. You must also select a coin. According to MiningPoolStats.com, the major mining pools are for bitcoin, ethereum, and dogecoin.

Genesis, Bit Deer and Tavros mining 😍  are two of the most popular cloud mining pools for retail customers.

To begin using a cloud mining service, you must first:

• Choose a cloud mining service and a coin to mine.
• Create a user account.

Each site is unique; fees, as well as the services and miners available, differ.

Is cloud mining a good investment?

Yes, it is possible. You'll have to pay to rent these miners, and mining pools may take a share of your revenues. It can be profitable, but some analysts believe that buying bitcoin is a superior option.

The power of the miners employed by the pools – newer models will have better specs than older models and will likely yield larger returns – and the health of the market will determine your profit. For example, if you keep your bitcoin instead of selling it for ordinary money like the US dollar, you'll be subject to bitcoin's price fluctuations.

Because the market for each coin can change significantly, different coins pose distinct currency risks. If you rent miners with more hash power, all of these little variances can add up over time.

Is cloud mining a risky business?

Cloud mining is unsafe since you're relying on someone else to mine cryptocurrencies without first ensuring they have the requisite hardware to mine bitcoin or whatever coin you select.

Many phony cloud mining firms claim to be mining bitcoin on your behalf but actually take your money. One of such examples is USDminer. They frequently operate in complete anonymity, making it impossible to determine who runs the platform, and they often offer incredibly high rates of return in a short period of time. 

Other warning signs include:

• On the webpage, there are several spelling errors.
• Testimonials include stock photos of people's faces that are anonymous.
• A fictitious or non-existent corporate address.

This risk can be considerably reduced by sticking to well-known mining pools.

You're also relying on the market's health, as previously said. Bitcoin and other mineable cryptocurrencies are extremely volatile, which means that their prices can fluctuate substantially in a short period of time. This puts your money at risk, because any coins you earn from mining have the potential to fall in value.

Cloud mining also poses a significant regulatory concern. A large number of cloud miners used to be housed in China, for example, because the country provided cheap electricity and the sector also employed green energy during wet seasons. However, in the spring of 2021, China tightened its grip on the cryptocurrency mining business, forcing miners to close up shop or relocate.Anyone who rented cloud miners from Chinese pools lost money as a result.

Cryptocurrency mining could be prohibited in other countries as well. The process necessitates enormous amounts of energy, part of which comes from the burning of fossil fuels, and it is viewed as a scourge on the environment by a few nations.

It's worth emphasizing, however, that these hazards are substantially smaller for cloud miners than for those who acquire their own mining gear. Mining may be highly expensive, especially when it comes to specialized technology, not to mention the ongoing expenditures of operation and maintenance. If the need for mining was wiped away by an economic crisis, the hardware you bought to mine cryptocurrencies could not be worth anything.