WHAT IS CLOUD MINING?
is a mechanism to mine a cryptocurrency
, such as bitcoin
rented cloud computing
power and without having to install and directly run the
hardware and related software.
Cloud mining firms
allow people to open an
account and remotely participate in the process of cryptocurrency mining
basic cost, makes mining accessible to a wider number of people across the
world. Since this form of mining
is done via cloud, it reduces issues such as
maintenance of equipment or direct energy costs.
in a mining pool
, where users purchase a
certain amount of "hash power
." Each participant earns a pro-rata share of the
profits in proportion to the amount of hashing power
Cloud mining involves mining for cryptocurrencies by leasing or purchasing
mining equipment from a third-party cloud provider, who is responsible for
maintaining the equipment.
Popular models for cloud mining include hosted mining and leased hash
The advantages of cloud mining are that they reduce overall costs
associated with mining and allow everyday investors, who may lack
sufficient technical knowledge, to mine cryptocurrencies.
The disadvantages of cloud mining are that the practice centralizes mining
to farms and profits are susceptible to demand.
Understanding Cloud Mining
Cloud mining leverages cloud computing for the purpose of producing blockchain based
. Cloud computing, more generally, is one of the fastest-
growing technology trends wherein computing services such as processing, server
capacity, database services, software, and file storage are accessed via the cloud,
over the Internet. Such companies charge on a usage basis just like we pay for our
water or electricity usage.
On the other hand, mining is the backbone of the cryptocurrency
model, such as
bitcoin. It is the process by which transactions are verified and added to the
public ledger, known as the blockchain
. It is also the means through which new
coins are released. A combination of the two opens the world of mining to people
at distant locations with little or no technical knowledge and hardware
Cloud Mining Models
Hosted mining is the most popular form of cloud mining
. In this model, the
customer purchases or leases mining
hardware located in a miner's facility. The
miner is responsible for maintaining the equipment and ensuring that it functions
as performed. Through this model, customers have direct control over their
cryptocurrency. The economies of scale of a mining farm
ensure that expensive
costs associated with mining
, such as electricity and storage, become
manageable. But there is a considerable upfront cost associated with this type of
Leased hash power is another model that is used in cloud mining
. In this model,
hash power, or computing power associated with a cryptocurrency
, is leased from
a mining farm. Customers get a share of the farm's overall profits from mining
cryptocurrencies. According to reports, leased hash power is a popular form of
mining for altcoins
other than bitcoin). The process requires
a person to open an account with a cloud mining company via its website and
select certain things like the contract period and hashing power.
While there are advantages to cloud mining, such as less investment in hardware
and recurring costs, the process also has several disadvantages. For example,
industry scams have proliferated rapidly with the popularity of cryptocurrencies
Then there is the prospect of diminishing profits. Altcoins
vulnerable to demand, and a reduction in their hash power could lead to fewer
profits for miners. Cloud mining
models also promote the centralization of
, otherwise a decentralized ecosystem.