If you want to buy Bitcoin, you’re likely making a sound investment, given its rising value. But savvy investors are also looking into Bitcoin mining, despite it becoming increasingly difficult to mine cryptocurrency.
Even though the return on your investment might take longer with crypto mining, it’s still a popular option, especially if we’re talking about Bitcoin cloud mining.
In this article, we’ll tell you everything you need to know about cloud mining, including how it works and what it takes to be successful.
Bitcoin Mining Explained
Let’s take one step back and define crypto or Bitcoin mining. Essentially, it’s a process of producing new Bitcoins by solving complicated computational equations.
These are the type of math puzzles that are so complex, even powerful computers take a long time to solve them. There are two main features of Bitcoin mining. First, new Bitcoins are released into the population and users can buy and sell them.
The second feature is that the Bitcoin payment network becomes more secure and trustworthy because miners verify each transaction. However, solving these mathematical puzzles requires a significant amount of computing power.
Therefore, Bitcoin miners must have adequate hardware to ensure they’re running a profitable operation. The bottom line is that if you want to be a successful Bitcoin miner, you need the technical capabilities, initial capital, and commitment to have any chance of success.
What Are Mining Pools?
Before we delve into the concept of Bitcoin cloud mining, we also have to reflect on the idea of a Bitcoin mining pool. What is it precisely, and how does it work?
Basically, a mining pool represents a group of crypto miners who have combined their resources over a single network to enhance the probability of mining new bitcoins or building a new block in the blockchain.
Their reward is a new crypto coin which is then divided between the individuals in the mining pool. Multiple miners link their devices which leads to hashing output enhancement.
While the Bitcoin mining pool can lead to faster rewards in the form of coins, it also means that the rewards are smaller for each person in the pool.
Cloud Mining – an Evolution of Bitcoin Mining Pools
In a way, cloud mining is a revolutionary concept in crypto mining. Bitcoin data centres quickly realised that there were just too many people who wanted to join a Bitcoin mining pool, but they didn’t have the mining rig to make it possible.
The solution became obvious – data centres started renting their hash power in the pool. Never before was there a way to mine Bitcoin, or any other cryptocurrency, by renting cloud computing power.
Users pay third parties to do all the work for them. You don’t need a specialised mining rig, nor do you need to run a blockchain node.
Cloud mining providers must invest in high-quality mining hardware. They should also establish a “farm” at a location to have access to cheaper electricity.
Preferably, it would be someplace with a cool climate to ensure that overhead costs of running such a farm will be acceptable. Also, there are two types of cloud mining.
As mentioned, this process involves leasing a rig on a mining farm. Usually, users have to pay for the set-up of the rig and any subsequent maintenance.
The benefit of this option is that it typically reduces the overhead cost that comes with accessing enough electricity. It also gives you more control in terms of choosing where to redirect the hash power the rig generates.
This will increase your chances of finding a new block in the network. But most importantly, cloud host mining offers complete control of all the generated coins, as you already paid the fees to the cloud mining provider.
Leasing Hash Power
Compared to host mining, leasing hash power doesn’t burden you with set-up and maintenance fees. Instead, you lease a share of the hash power generated by the crypto mining farm.
Typically, users subscribe to a plan and receive a share of the profit. Once the farm finds a new block and receives new coins as a reward, users share according to their subscription plan.
Benefits of Cloud Mining
The main benefit of cloud mining is that it doesn’t require any equipment apart from your smartphone. You can be located anywhere and have the ability to utilise a data centre to earn some Bitcoins.
Purchasing mining equipment is costly, however, and could prevent many from participating in this process. Third-party providers solve this problem by creating universal participation. Another benefit is that you don’t require huge amounts of technical knowledge to become a Bitcoin miner.
When Bitcoin was in its early stages, miners had to understand coding and learn how to verify transactions. However, one of the most significant benefits of cloud mining is that it doesn’t require any power consumption.
Did you know that the entire Bitcoin network uses more electricity than several developed counties in Europe? The issue of Bitcoin mining and energy consumption is somewhat controversial, that’s for sure.
If you opt for cloud mining, you don’t have to worry about energy-related concerns. But if you’re concerned about environmental issues, you have the option of choosing a provider that focuses on using renewable energy for their farms.
Risks of Cloud Mining
The biggest problem with cloud mining is stumbling upon an untrustworthy provider. As with everything related to cryptocurrency, it’s essential to know what you’re getting into.
The fact that you don’t actually see any of the equipment used for the mining opens many doors for scams. Therefore, it’s essential to perform due diligence when it comes to research and remember that if something sounds too good to be true – it probably is.
Is Cloud Mining Right for You?
Cloud mining is an important sector in the crypto community. It’s also the only way some people can give Bitcoin mining a chance. These days “solo” crypto mining is nearly impossible, so Bitcoin mining pools are the only realistic approach to getting new coins into your Bitcoin wallet.
However, that still requires a significant investment in terms of hardware and electricity. Cloud mining is the future of crypto mining as it’s widely available and requires almost no expertise. The returns are lower too, but with time you can see a significant return on investment.
I have over 10 years of experience writing about cryptocurrency and blockchain technology. I have been published in major publications such as CoinDesk, Bitcoin Magazine, and Blockonomi. I am a regular speaker at crypto events and conferences.I am passionate about helping people understand this complex and rapidly-growing industry. My goal is to make complex concepts easy to understand for the average reader. I believe that blockchain technology will change the world as we know it, and I want to help people navigate this exciting new landscape.