Cloud mining has momentarily become one of the hottest topics that people never stop discussing in the crypto universe. This mining article is here to broaden your knowledge about what Cloud Mining is. Aside from cloud mining, please note that this post will also help you learn more about crypto mining in general.
Above all, we will use this tutorial to take a deep dive into cloud mining and bring exposure to its advantages and disadvantages. Alongside this, we would know if cloud mining is safe and worth investing in.
To highlight more, cloud mining is considered to be one of the more convenient methods for generating digital coins. This mining method is more friendly to people who are not technically proficient. It’s also a good mining option for those who do not wish to run and maintain hardware and related software.
Cloud mining is of great benefit to miners. However, it is also becoming a field ripe with scams. This is why before everything else, please be vigilant, mindful, and always secure your digital assets before doing anything.
Table of contents
- What Is Cloud Mining?
- Is Cloud Mining Profitable?
- How Cloud Mining Platforms Work
- Step 1: Choose a Cloud Mining Site
- Step 2: Create an Account and Deposit Funds
- Step 3: Choose a Cryptocurrency to Mine
- Step 4: Collect Your Share Until Contract Matures
- Choosing Which Cryptocurrency to Mine
- How to Choose a Cloud Mining Site
- Risk of Using Cloud Mining Sites
- What is Cloud Mining: Pros and Cons
Cloud mining leases computing power from a third-party cloud mining service provider. Every miner participates in a mining farm, which is a remote data center dedicated to crypto mining, by buying a certain amount of “hash power” from the service provider.
In exchange, the provider will grant them access to rewards equal to the amount of hashing power that the miners have purchased. In addition, since the mining operation is carried out via the cloud, miners do not need to worry about computer maintenance, noise, heat, and energy bills.
After finding a reliable cloud mining service provider, miners only need to choose the type of contract to sign and the desired duration. Then, they will have to make an upfront payment, either in fiat currencies or digital currencies, after which the provider will set them up with everything they need for the operation.
Generally, miners can select contracts of between 500 or 1,000 gigahashes per second, with a term of up to one year. Many providers may also offer different terms such as short-term cloud mining leases that may take up to 6-months or even 24-month contracts.
With the growth of mining pools, cloud mining means you are leasing a data center’s hash power. Cutting out the initial expense for a mining rig makes it profitable in some ways. However, it’s always a case-to-case basis when it comes to investing. Please do your own research into your service provider before diving into cloud mining.
Likewise, one could free up the time needed for driving by the technical hurdles of mining. Cloud mining eliminates that too. Notably, those who live in countries with costly electricity can finally partake in crypto mining with a simple cloud account.
Before entering the cloud mining platform for the first time, you need to know how the process typically works. As such, we would advise reviewing the following step-by-step guidelines.
Your first move is to choose a cloud mining site that meets your individual needs. In addition, the best way for you to do this is to perform enhanced research on the platform. This includes how long the site is operational and what reviews are like in the public domain.
Once you choose which cloud mining platform you’d like to use, you must create an account. In most cases, you’ll need to give an email address and choose a username and password.
After choosing a cloud mining platform you want to use, and then invest in it. Moreover, cloud mining sites usually give you the choice of mining various cryptos. But, each mining platform has its own pros and cons.
In the broad bulk of cases, you will be required to invest for a minimum period. Also, it is known as the “Contract Period.” This dictates the length of time you will need to have your initial investment locked up.
Likewise, this operates on fixed-rate bonds so that you will receive your interest payments throughout the term—besides your original deposit amount on the contract maturity date.
Now that you know how cloud mining platforms typically work, you need to think about the specific cryptocurrency that you wish to mine. Unfortunately, this is not easy, as there is no one-size-fits-all answer to the best coin to mine. Instead, there are lots of variables that you need to admit.
First of all, you need to look at how the cryptocurrency performs in the open marketplace. For example, if the coin has been on an upward trajectory for several weeks or months. Then, its strength may be worth jumping on.
You will be receiving your cloud mining profits daily, which will be paid with the cryptocurrency you are mining. But, the real-world value of the coin will have a direct impact on your ROI, especially if you are planning to sell your coin as soon as they are paid.
If you are more interested in your investment’s long-term viability, it might be best to choose a cryptocurrency that you think stands a good chance of increasing in value in the future. In doing so, you’ll be keeping hold of your cloud mining profits with the plan of selling the coins several years down the line.
Ultimately, if you’re sure of the potential of your preferred crypto, you stand the chance of obtaining coins at a discounted price through cloud mining.
During the first few years of Bitcoin, it was possible to gain mining rewards with a basic CPU device. This was because there was virtually no competition between miners, meaning that everyone stood a good chance of winning that all-important block reward.
However, Bitcoin is now a multi-billion asset class. A select number of well-resourced rigs dominate the mining space.
As such, it might be worth taking crypto that operates in a less competitive mining field. In effect, the less valuable respective coin is, the more chance your cloud mining operation will have inconsistently winning the block rewards.
Most cloud mining platforms will give you a breakdown of the proposed payout on your chosen crypto. This is sometimes shown as a dollar value for every KW/s or Mh/s. However, this makes it hard to know exactly how much you’re likely to get. So, we prefer sites that give projected yields in interest terms.
Take note, and there is never any guarantee that you will realize the projected yield published by the cloud mining site as market conditions change on almost a daily basis.
Choosing a platform to use in your journey to profit from cloud mining is the usual challenging part of the process. Moreover, this industry operates in an unregulated manner. So, your money is not 100% safe.
Nevertheless, here are some factors you need to see before entering a new cloud mining site.
Notably, cloud mining platforms are not regulated, but plenty of data is available in the public domain. So, firstly, check the launch of the cloud mining site. The longer it’s been operational, the better.
Then, it would help if you check websites like Reddit to assess public opinion of the cloud mining provider. If there are constant complaints from past investors about the site, you should probably avoid it.
You also need to consider the type of cryptocurrency you wish to fund your cloud mining account with. If the platform does not support a coin that you currently hold, you will need to go and buy it.
Therefore, this is possible to increase the cost of your investment when you factor in the exchange fee. So, evaluate what coins are available before opening an account.
You can consistently win block rewards on a cloud mining platform, owning a fully-fledged mining rig setup. If it doesn’t, you won’t stand a chance of earning any money. At the fore of this is the hardware devices that the platform owns.
As we noted earlier, miners are often required when the blockchain difficulty level increases. As such, verify the cloud mining site setup crucially, if what hardware it owns.
The location of the cloud mining platform plays a vital role in your decision-making process. For example, you want to choose a mining operation based in a country with cheap energy prices. This is to ensure your yield is not eaten by ever-growing electricity consumption.
Similarly, you’ll want to take a cloud mining platform that is based in a crypto-friendly location. If it’s not, there is always a chance that the local authorities will close the operation.
As is the case with any investment product, you need to understand the underlying risks. After all, cryptocurrencies operate in a highly risky industry. So, there is always the risk that you could lose money.
Although cloud mining is still a good new aspect, many scam websites have run away with client funds. At the same time, the platform might have initially operated legitimately. We have seen cases where the cloud mining site shut down overnight, with investors losing everything.
Ultimately, there is no assurance that this won’t happen to you, not least because of crypto’s unregulated and borderless nature.
You will be mining cryptos so that you will pay your profit in crypto. As such, to realize your gains in pounds and pence. First, you need to sell your coins on the open marketplace.
However, if the cryptocurrency market goes through a period of bearishness, you might need to offload your coins at a discounted price. Also, this could result in a loss. Subsequently, making the cloud mining investment redundant. Furthermore, if the particular crypto project drops outright, your cloud mining profits could be useless in more severe cases.
Although cloud mining sites might have had prior success in particular mining crypto. There is no promise that this will always be the case. For example, a major mining operation develops a new hardware device that can generate more hashing power than anything else in the market. As a result, the cloud mining site might be no longer able to complete.
Notably, this would be highly problematic if you are locked into a cloud mining contract that you cannot exit.
Like most crypto mining, there are some pros and cons that every user needs to know. Therefore, this review gathers the pros and cons of cloud mining that you need to know before considering cloud mining.
- Mine cryptocurrencies without needing any hardware.
- No requirements to consume electricity.
- Invest a small amount or as much as you wish.
- You can see a return on your investment from the start.
- You can select the cryptocurrency that you wish to cloud mine.
- Receive a share of the mining earnings proportionate to your investment.
- Lots of shady cloud mining sites.
- Potential gains are super-low.
Many experts conclude that cloud mining, with its powers and opportunities, is the future of crypto mining. However, it remains a challenging sector with the flow of frauds and scams for the time being. That means miners need to do extensive research before investing in a particular company.
In the modern situation, to earn money, we have to take the risk connected with it. So, Cloud mining is the home for those investors who are willing to invest and are suitable for taking risks related to it. It’s like only that much that you are capable of overcoming in case of loss.
It is hard to say whether it is profitable or not as it depends on its goals. However, as it involves many risks, people need to be cautious in making a purchase.
While many cloud mining platforms might claim to offer their services on a fee-free basis, it’s unlikely to be a legitimate operation.
Cloud mining sites usually distribute profits daily. This is commonly in the same coin that you are mining. For instance, if you’re mining Ethereum (ETH), you’ll earn your daily gains in ETH.
Cloud mining sites will promote cryptos depending on the hardware they possess. Cryptos will often have their hashing algorithm, so platforms need to invest in specialized devices. However, other options include Bitcoin, Ethereum, Bitcoin Cash, Litecoin, and more.
The minimum agreement term given by cloud mining platforms will differ from site to site. While some offer a minimum six months term, others are longer.
Disclaimer: The views and opinions expressed in this article are solely the author’s and do not necessarily reflect the views of CoinQuora. No information in this article should be interpreted as investment advice. CoinQuora encourages all users to do their own research before investing in cryptocurrencies.