Cryptocurrency and Bitcoin Cloud Mining
Cloud Mining Sites
If you have ever wanted to enter the world of cryptocurrency mining, but do not have the time, resources, technical knowledge, or prowess to set up a mining rig for yourself, then there are alternative methods through which you can engage with this process easily.
Currently, there is a lack of graphics processing units (GPUs) due to the fact that there is a shortage in terms of production when compared to the overall demand for these units. This has resulted in many people being unable to enter the world of cryptocurrency mining.
Cryptocurrency mining is essentially a process where nodes, or miners, can contribute their processing power as a means of competing against other nodes in the network to solve complex cryptographic puzzles through which they will be able to mine new cryptocurrency tokens that are brought into circulation.
Let's take Bitcoin (BTC), which is one of the biggest cryptocurrencies in terms of market capitalization, as a point of example here.
Within the Bitcoin blockchain network, each miner utilizes the Proof-of-Work (PoW) consensus mechanism.
This is a decentralized consensus mechanism that requires members of a network to essentially expand their overall efforts when it comes to solving an arbitrary mathematical puzzle, which serves the role of preventing anyone from gaining control over the system.
It is used for the process of cryptocurrency mining and for the validation of transactions as well as for mining new cryptocurrencies.
Due to this Proof-of-Work (PoW) consensus mechanism, Bitcoin, as well as other cryptocurrency transactions, are given the opportunity to get processed by Peer-to-Peer (P2P) technology in a secure way without the involvement of a third party at all. However, the fact here is that this isn't the most eco-friendly option out there due to the fact that it requires huge amounts of energy at scale, which increases as more miners join the network.
Due to this, Cloud Mining Sites and services were created as a means of overcoming some of the challenges found by people who have to manually set things up for themselves.
Cloud mining is essentially a mechanism that users can utilize in order to mine cryptocurrencies such as the aforementioned Bitcoin (BTC) cryptocurrency, through the usage of rented cloud computing power, without needing to manually install and directly run the hardware as well the related software.
These cloud mining farms essentially let people open an account where they can remotely participate in the process of cryptocurrency mining for a specific cost, which makes the process a lot more accessible to users who would otherwise not be able to participate. Everything is done through the cloud, and as such, this reduces issues such as the maintenance of equipment or high energy costs.
With that in mind, there are a plethora of different cloud mining sites available which are available for you to pick from and invest in.
As such, this piece is intended to give you an introduction to some of the technicalities found within cloud mining sites. Once we go over everything here, you will be able to make a well-educated decision when it comes to picking the one service that’s best for you as quickly and as reliably as possible.
With all of this in mind, hopefully, by the end of this, you will be able to have a clear level of understanding when it comes to understanding everything you need to know about the best cloud mining sites, and you can know what to look for in each option which will be available to you.
What are Cloud Mining Sites?
Cloud mining is the process of mining cryptocurrencies through the process of leasing or purchasing mining equipment from a third party which fills the role of a cloud provider. This cloud provider is essentially responsible for the process of managing and maintaining the equipment used for the mining process. However, popular models for cloud mining include hosted mining as well as leased has to power.
There are numerous advantages found within cloud mining sites, and these are the fact that they reduce the overall costs involved with mining and even allow everyday investors, who might otherwise lack the sufficient technical know-how, to mine the cryptocurrencies in question.
To summarize all of this efficiently, cloud mining sites are websites that enable service to users where they can essentially pay a monthly fee to get access to mining gear located at another geographical location.
WIthin the cost, they are also paying for the management and maintenance of the hardware used, as well as for its storage and cooling, for example.
All they have to do is pay the monthly fee and get any of the mined cryptocurrencies from the hardware that they are essentially renting for that specific use case.
How do Cloud Mining Sites Function?
In order to see how cloud mining sites function, we will first need to go over how cloud mining functions begin with.
Cloud mining essentially utilizes cloud computing as a means of producing cryptocurrencies that utilize the Proof-of-Work (PoW) consensus mechanism.
In other words, Cloud computing is one of the fastest-growing trends within the world of technology due to the fact that it provides users with access to processing power, server capacity, database service,s software, and even file storage options, all of which can be accessed through the cloud and through the usage of an internet connection.
These are companies that will charge users in order to get access to specific services, such as the raw hardware required to mine cryptocurrencies.
Mining is also the backbone of the cryptocurrency model, and it is a process where transactions get verified and then get added to the public ledger known as the blockchain network.
This is the main way through which coins get transferred from one user to another.
However, in order for a person to set up their own mining farm, this would require a space to be rented out, our bought, proper cooling, and an entire set of mining hardware, all of which can lead to costs that add up over time. For anyone that is interested in essentially getting all of the benefits of mining their own cryptocurrencies without committing the time and effort of setting up their own cryptocurrency farm, the best way through which they can access a similar level of functionality is to engage with cloud mining websites.
The Different Cloud Mining Models
There are numerous types of cloud mining models that can be utilized. Hosted mining, for example, is by far one of the most popular types of cloud mining there is, and this is the case for a good reason.
Specifically, within this model, the customer only has to purchase or lease the mining hardware, which is geographically located within a miner's facility. Then the miner is fully responsible for the process of maintaining the equipment and ensures that it functions as performed.
Through this model, customers essentially gain direct control over their cryptocurrency, and the economies of scale of a mining farm can also lead to ensure that the expensive costs associated with mining typically, which includes the electricity, and the storage, can become a lot more manageable.
However, this model is far from perfect and has the downside of having an expensive upfront cost associated with it.
Then there's leased hashing power, which is another model that users might opt in towards using as an alternative. Through the leased hashing power model, the hash power, or in other words, the computing power which is typically associated with cryptocurrency mining, gets leased directly from the mining farm.
What this results in is the fact that customers can essentially get a share of the farm's overall profits from the process of mining cryptocurrencies.
This is yet another popular form of mining cryptocurrencies. However, its usage can be seen in altcoins, which are essentially any other cryptocurrency than Bitcoin (BTC).
This requires a person to essentially open an account with a cloud mining company through their website, after which they can configure and select specific things, such as the contract period as well as the hashing power.
While there are indeed advantages when it comes to cloud mining, such as less investment in hardware initially, as well as recurring costs, the process can also have numerous disadvantages. There have been cases of industry scams due to the rapid increase in popularity surrounding cryptocurrencies. As such, it is important to know what the best cloud mining sites are and how they work so you can make a well-educated decision at the point in time when you decide to utilize them.
However, cloud mining also promotes the centralization of cryptocurrencies, which would otherwise, and by default, be a decentralized ecosystem.
The enthusiasm to mine cryptocurrencies remains extremely high, even despite the increased level of difficulty when it comes to entering this sphere of the crypto world. There might be miners that prefer hosted mining equipment rather than heaving their own. However, there are still a plethora of reasons why the idea of cloud mining evolved.
The difficulty of cryptocurrency algorithms has seen a tremendous level of growth throughout the past few years. Mining operation owners realized that more computing power was required in order for them to remain competitive.
There is also only a predetermined number of coins within a cryptocurrency that can be mined.
For example, in the case of Bitcoin, only 21 million coins can exist. This, coupled with the prospects of its exchange rate increasing, led to a series of innovations within the crypto mining space, out of which cloud mining was created, as an evolution of mining pools.
Another reason why we saw the increase in cloud mining is due to the fact that people started seeing opportunities due to the attractive rewards involved with participation in a mining process. Cloud mining companies typically offer solid payouts in order to get new clients and investors on board with the proposal and serve as a whole.
Let us go over the history and evolution of mining rigs used today so you can have a higher level of understanding as to how they work exactly.
The Evolution of Mining Rigs Used Today
Throughout the early days of cryptocurrency mining, the procedure itself was a process that could be conducted by an average PC typically found in the homes of the users. However, over time, miners began establishing what is known as mining "rigs" through the combination of graphics processing units (GPUs) which ended up being a lot more efficient at resolving complicated mathematical equations, such as Bitcoin's Secure Hash Algorithm, than normal CPUs.
What essentially happened here is that GPUs bolstered the hashing power of the Bitcoin network but made the SHA-256 algorithm a lot more difficult to solve as well. However, later on, there were developments in the form of application-specific integrated circuit (ASIC) mining rigs, which ended up getting introduced within the crypto market. These are high-powered, purpose-built chips that came at a cost that the average miner would simply not be able to afford.
The hashing power of the Bitcoin network ended up increasing even further as a direct result of this.
This means that it became almost impossible for users to begin mining on a regular CPU, and the cost of electricity usage also increased due to this.
The ASIC rigs turned the crypto mining sector into a place where only the major players could prevail.
This is where we were introduced to mining pools, which were specifically created to allow anyone to participate in the mining operation to the best of their abilities in exchange for regular rewards.
These rewards were typically proportional to the denoted hash power across every participant within the pool.
Datacenter operations ended up catching the interest in this and saw that a lot of people didn't really participate within these mining pools due to the fact that they did not own any mining rig.
As such, they began renting out hashing power within the pool, which created the concept of cloud mining.
Cryptocurrency Mining Explained
We will now be going over how cryptocurrency mining works, so you can have an even higher level of understanding when it comes to how cloud mining sites can aid you in this regard.
Mining of cryptocurrency, such as the aforementioned Bitcoin (BTC) cryptocurrency, can be conducted locally or through the cloud.
However, this is actually a process that generates new cryptocurrency tokens that are awarded to miners, where the mining operation also serves a crucial role when it comes to the maintenance as well as the security of a distributed ledger such as a blockchain network.
Bitcoin mining is essentially performed by high-end computers that solve complex computational math issues, and these problems are so complicated that even the strongest computers out there might have a hard time doing so.
However, whenever miners do indeed end up adding a block of transactions to the blockchain network, they are verifying that those transactions are indeed accurate. Specifically, Bitcoin miners can ensure that BTC is not being duplicated, which is a unique aspect of some cryptocurrencies known as "double-spending."
With printed currencies, for example, there will always be an issue when it comes to counterfeiting. However, with digital currencies, the miners use the computational power here as a means of solving a cryptographic puzzle that prevents double-spending from occurring in a decentralized way.
Mining Pools Explained
All participants that are a part of a mining pool will need to essentially share their computational resources in order to increase the profitability associated with the process of generating a block within a cryptocurrency's blockchain network. This requires them to solve complex cryptographic puzzles.
Whenever the participants end up succeeding in this task, they receive a reward, typically in the form of the native cryptocurrency token in question. The amount that they receive is dependent on the proportion of their processing power or even work which is relative to the entire pool.
All of the mining pools will typically have their own level of difficulty, which falls between 1 and the level of the difficulty of the cryptocurrency which is mined. If a miner ends up generating a block with a high level of difficulty between the mining pool's difficulty and the cryptocurrency's difficulty, this block will be considered a "share" within the network. The majority of the mining pools will typically distribute the rewards across all of the participants within that specific pool through the Pay-per-Share (PPS) model.
There are even pools that could impose restrictions on specific paid rates per share, and these pools will also employ models such as the Equalized Shared Maximum Pay per Share and Shared Maximum Pay per Share.
Cloud Mining vs. Hardware Mining: Explained
Through cloud mining, miners are actually the investors within a mining operation, and the only thing that they ensure is the money flow.
However, the cloud mining company here is responsible for the process of operating a mining farm that consists of mining rigs and one that allows the miners to buy or rent a share of the farm's overall hashing power.
Most of the time, the provider has invested in high-end equipment and has built the mining farm at a location where the electricity is cheaper and at a location where the climate is cooler as a whole. This way, the overall costs associated with running the farm in question are kept in check, and miners do not need to take care of anything in the entire process; all they will essentially do is just take a cut of the farm's overall profit.
Then, when we take a look at hardware mining instead, in this process, miners will typically own a mining rig of their own and will need to decide if they want to mine solo or join a mining pool, where they can contribute to its computing power in exchange for a share of the proceeds.
They also need to take care of all of the costs related to the maintenance and upgradability of the hardware and will need to ensure that there is a reliable internet connection at any point in time.
Why Cloud Mining Sites Have Grown in Popularity
There are numerous reasons why cloud computing websites have seen an exponential level of growth in terms of their popularity, and this is split into three main factors which have ultimately contributed to this growth. These include the cost efficiency, the technological support, and the lack of maintenance requirements.
Cloud mining is typically a lot more cost-efficient for miners due to the fact that they are not required to pay for mining equipment on their own and constantly need to upgrade it. Furthermore, there are no installation or setup costs involved either. The only hardware that they require will typically be a laptop, a tablet, or even a smartphone, through which they can just check the rewards from the operation in question. What this results in is the elimination of any worries in regards to if they will be able to sell any of their physical equipment at the point in time when mining is no longer profitable with that specific equipment. Furthermore, miners do not need to be concerned about the electricity bill, noise, and the heat which is generated by the mining rig.
Cloud mining does not require any specific knowledge when it comes to protocols, cryptocurrencies, or even knowledge in regard to mining rigs. Miners only need to essentially open an account with a service provider, after which all they have to do is pay the fee, which is dependent on the amount of the hashing power that they are interested in buying.
All of the rewards can then get transferred directly to the account in question here.
No Overall Maintenance
Another main benefit when it comes to cloud mining is the fact that investors and miners as a whole do not need to worry about the maintenance of equipment due to the fact that the cloud mining company will be responsible for taking care of all of that.
Companies will typically employ specialized equipment in order to ensure the good operation of the mining farm and avoid the meltdown of any of the hardware.
However, miners might get charged an equipment maintenance fee from the cloud mining service provider.
Investing in Cloud Mining Sites
There are numerous ways through which someone can engage and begin their overall procedure of investing in cloud mining sites.
Typically, each provider will have its own packages as well as offerings, where the miners will have to essentially lookout for any of the rewards promised, the amount which needs to be paid upfront, and the recurring payments down the line.
It is recommended here that each customer goes over all of the terms and conditions and analyzes all of the data and promises made by each package in order to ensure that they actually get what they are paying for.
Risks of Cloud Mining
There are, however, also risks that are associated with cloud mining. Miners do not own any of the computer equipment which is used and, as such, have no control over it. What this means is that they cannot really sell it.
Furthermore, the probability associated with cloud mining contracts can generally vary greatly and is not guaranteed.
Even if miners locate a trustworthy provider, sign a contract with the company, and do everything by the book, that does not mean that the company will provide the exact services and hash rates which have been agreed upon throughout the creation of the contract.
This means that they do not guarantee that profits will be generated for miners. Furthermore, any profits that get earned can be trimmed by the fees which miners will need to pay in order to get some of the advantages within the service, aside from the upfront amount.
The cloud mining space has also been filled with fraudulent behavior, where miners might pay a provider upfront and receive no rewards in return, or the promised rewards might not exactly be as they initially thought they would be.
Additionally, there could also be cases where the provider might put a halt to the overall mining operation when the exchange rate of the cryptocurrency mined reaches a specific level, which miners need to pay close attention to the terms and conditions from a provider in order to figure out, typically seen in the “contractual warnings” section.
Are Cloud Mining Sites Legal in Your Country?
Due to the fact that cryptocurrencies have blown up in terms of their popularity on a global scale, most people might already have some level of understanding when it comes to the legal standing of cryptocurrencies as well as cryptocurrency mining within the location that they are located in.
There are numerous countries on a global scale that have already managed to create strict regulatory standpoints in regard to crypto trading and will typically restrict the activities of exchanges. What this means is that blockchain investments might be restricted within specific countries.
For any cryptocurrency miner that wants to start mining cryptocurrencies, they need to first analyze the legal aspect surrounding this within the country that they are located.
It is due to this that it is typically recommended for each trader, prior to them engaging with a blockchain network, to ensure that trading cryptocurrencies are legal within the geographical location that they reside.
For any of the people that live within countries where mining cryptocurrencies is allowed and legal, they need to verify that the mining procedures employed by cloud mining meet and satisfy the regulatory requirements.
This is mainly the case due to the fact that many nations will typically only set up frameworks for their respective exchange markets and, as such, can be difficult to mine on a global model.
Do Cloud Mining Sites Offer a Solid User Experience?
Typically, most cloud mining websites will feature their own unique website and user-design elements as a means of teaching the user as much as possible in regards to the cryptocurrency mining process that they offer.
Once you visit many of these websites, you will typically be greeted by a lot of animations and a lot of data tables, all of which will allow you to configure and analyze the mining server that you would be renting.
This means that you will have consistent access to data regarding the hashing power and will get an estimate on how much you would be earning on a monthly basis if you decide to go that route, based on the value of the cryptocurrency that is being mined at the point in time when you visit the website.
Keep in mind that cryptocurrencies are volatile, and as such, they might be worth more or less at the end of the month than they would be at the point in time when you make an account and sign the agreement to rent the hardware in order to mine that specific cryptocurrency.
However, it is convenient that users are able to see the potential monthly profits that they can expect at the point in time when they decide to create an account and select one of the payment packages and plans available on the website through a streamlined user experience.
Cloud Mining Sites Offer Advanced Information about Each Package?
When it comes to cloud mining services, typically, each service out there will have its own set of packages. All of these packages will be split based on a different price range or budget, depending on what the person that is trying to run their own remote mining farm needs.
Each website that offers cloud mining services will typically indeed showcase advanced information about each of the packages that are available.
This advanced information will feature an earnings per day category, a monthly earnings category, as well earnings per year category based on your investment. You will also be able to see the hashing power and select a contract.
Typically, the more years you select within the contract, the more of a bonus you will receive in terms of hashing power.
This is tailored this way as a means of enticing people to get contracts for prolonged periods of time. In any case, it is nice to see that there is a lot of advanced information regarding every package on offer.
What about the Security of Cloud Mining Sites?
What you need to be aware of whenever you decide to rent mining machines or lease them through the usage of cloud mining services is that you are essentially buying access to other people’s hardware, and while they can provide you with the highest possible level of security, you are still remotely connecting to them, so there is always some level of risk involved with potential exploits or hacks.
In any case, the most trustworthy cloud mining sites will go out of their way to establish an uptime guarantee.
Do Cloud Mining Sites Have Native Cryptocurrencies?
Cloud mining websites will not have their own native cryptocurrency token due to the fact that they fill the role of being the middleman between you and the mining gear that you are using to mine the native cryptocurrency network of the blockchain network that you are securing through the utilization of rented or leased hardware.
What he means is that the mining sites will be a gateway through which you can access the native cryptocurrency token of the blockchain network on top of which you are mining and contributing to its overall high level of security.
What Users Should Always Check For Prior to Engaging with Cloud Mining
With all of the aforementioned information, you are probably at a point in time where you might want to start experimenting or engage with cloud mining.
If this is the case, there are a few things that are recommended for you to keep in mind in order for you to get the best possible outcome.
First, you need to ensure that the costs have been covered with the mining rewards throughout time, so you can turn a profit out of engaging with this route of cryptocurrency mining.
Second, you need to ensure that the hash rate that is being offered can justify the funds that you are paying for the equipment in question.
Third, you need to stay away from mining platforms that might retain control over your earnings, as a certain level of transparency is a requirement. In any case, it is equally as important that you can ensure the privacy of your cryptocurrency wallet as well.
Miners, in this case, are always advised to perform their due diligence and research prior to engaging with a mining farm that is owned by third parties such as cloud mining sites. Access to information gives you a much higher level of control over your operations and can result in the reduction of the likelihood of being defrauded or scammed out of your earnings.