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Thinking about earning money on cryptocurrency mining? The good news is you don’t need to invest in heavy-duty mining gear to make a buck. A much cheaper option is to leverage the potential of cloud mining platforms. Mining cryptocurrencies with a cloud-based service provider rather than purchasing your own mining rig is far more convenient and far less demanding in terms of operational costs and technical know-how. Still, earning crypto through a cloud mining platform can bring in handsome rewards, depending on contract arrangements and current market situation. No wonder, crypto users increasingly turn to buying hash power instead of setting up their own rigs.
But what is crypto mining anyway?
What is cryptocurrency mining?
Crypto mining is an essential process in most blockchains. It involves the use of powerful computers to solve complex mathematical problems that confirm and verify transactions on a decentralized network. When a miner succeeds in solving a computational problem, a new block containing a record of these transactions is created. This block is added to the blockchain, and miners are rewarded with newly created coins. In short terms, crypto mining enables introducing new coins into circulation and processing transactions, while remunerating miners.
The mining process is primarily associated with the Proof of Work (PoW) consensus mechanism, and it’s inherent to PoW-based networks. Your first thought may be Bitcoin mining, but the method is also used by many other PoW cryptocurrencies, including Dogecoin, Litecoin, BitcoinCash, Monero, Ethereum Classic, Zcash, Namecoin, and more.
The concept of mining has shifted with with the emergence of Proof of Stake (PoS) and other consensus mechanisms like Delegated Proof of Stake (DPoS) or Proof of Authority (PoA). Instead of miners competing to solve complex mathematical problems, these mechanisms rely on different principles such as validators or block producers, who are chosen to create new blocks based on their stake in the network or their reputation. Since its transition to PoS in 2022, it’s no longer possible to mine Ethereum, although you can start mining Ethereum Classic (a PoW cryptocurrency) instead.
What is cloud mining?
Initially, Bitcoin mining was possible with regular CPUs (central processing units) in personal computers. When the network grew, miners moved to more efficient GPUs (graphics processing units). Nowadays, to mine cryptocurrencies you need significantly more computing power. Specialized hardware, such as ASICs (application-specific integrated circuits) for Bitcoin mining, has become a standard, while GPUs (Graphics Processing Units) are typically used for other cryptocurrencies.
Mining can be done individually, as so-called solo mining, or as part of a pool. Mining pools involve a group of miners who combine their computational resources to enhance their chances of solving complex algorithms and sharing rewards. Solo mining, while more autonomous, requires significantly more time and resources to compete for rewards. Both options require hardware investments, technical knowledge, and setting up proprietary mining rigs.
Cloud mining providers have emerged as a far more approachable and a “user-friendly” alternative. Cloud mining platforms allow users to rent resources, such as hash power, from a provider's hardware. Essentially, users pay for mining capabilities without owning or managing the physical mining hardware. It doesn't involve the joint effort seen in pool mining, while offering access to remote mining facilities through a subscription model.
Both pool and cloud mining models involve collective effort and shared resources. The difference is that the former relies on individual miners collectively contributing their own hardware and sharing the rewards, whereas cloud mining service involves users renting mining power from a remote facility that handles the hardware and operations.
What are the types of cloud mining?
There are three distinct types of cloud mining, which can be ranked according to their entry threshold (high to low). In this article, we focus on the latter, which is also the most popular and most approachable for less experienced crypto users, simultaneously carrying relatively less risks.
Hosted mining
Hosted mining, aka custodial mining, involves users leasing or buying a mining rig from a service provider. The hardware is placed in a mining farm or data center owned by the service provider. The equipment is remotely accessible, and users don't need to set up the hardware at their own location. The service provider is responsible for the maintenance and upkeep of the mining rig, including fixing technical issues, ensuring continuous power supply, and keeping the machinery cool. This approach is popular among those who want to mine cryptocurrency without the hassle of managing the hardware. However, it takes thorough research and a bit of tech know-how to find a reputable service provider and avoid scams. Some hands-on oversight is also required.
Virtual hosted mining
Virtual hosted mining is a crossover between hosted mining and leasing hash power. Instead of renting mining hardware, customers rent a virtual environment and install their own mining software to perform their operations. With virtual machines, users typically have greater flexibility in terms of computational power and resources they can allocate to their mining process. The virtual hosted approach eliminates the need to buy and maintain physical mining hardware, allowing users to pay just for the usage of virtual resources, which can be more cost-effective and less risky.
Hash power leasing
Hash power leasing is the most-favored option for the majority of users eager to earn bitcoins at limited upfront cost. As mentioned above, it doesn’t require buying or renting any mining equipment, which saves you a lot of hassle and equipment-related hazards. To lease hash power you simply need to create an account at a cloud mining service of your choice and choose a cloud mining plan. The platform takes care of all the technological aspects of the process and provides you with the computational power, so you can start Bitcoin mining right away. Many hash power leasing services offer flexible service options, allowing you to customize a mining contract to some extent, including the duration of the commitment. Hash power leasing services often support multiple cryptocurrencies, allowing you to earn money other than bitcoins and switch between coins based on profitability.
How to make money on cloud mining? Key factors to consider
Cloud mining can be a very convenient way to earn passive income, because it comes with virtually no effort. You simply sign up to a cloud mining service, rent out computing power, let the platform start cloud-mining cryptocurrency for you, and enjoy the mining rewards – the money is sent to your crypto wallet. However, it’s impossible to give a straightforward answer about how much you can earn on cloud mining. The operation’s profitability hinges on several factors.
1. The cryptocurrency selection
One of the most basic factors impacting how much you can earn on cloud mining is the cryptocurrency's market price. Fluctuations in the value of the mined coins directly influence your income. You need to carefully consider what crypto seems the best option for your cloud mining operation. Cryptocurrencies available for mining differ across platforms, although Bitcoin mining is the most common choice.
2. The mining difficulty
It’s another key factor affecting the profitability of cloud mining. As more miners join the network or increase their computational power, the difficulty of mining, a measure of how hard it is to find a new block, also rises. Higher mining difficulty can reduce the rewards per hash and diminish profitability. If your intention is to mine Bitcoin, consider that the top dog of the crypto space has a notably high mining difficulty compared to many other currencies, and it’s constantly growing. Still, the level of difficulty can increase or decrease over time, depending on the number of miners involved in the network. Here’s the all-time Bitcoin mining difficulty chart.
3. The hash rate (computing power)
The hash rate allocated to the mining operation is also crucial. Greater hash power increases the likelihood of solving complex mathematical problems leading to greater mining rewards. Typically, the rewards are distributed among miners based on their contributed hash power. With a higher hash rate, a miner might receive a larger share of the rewards. So, considering hash rate plans is an important step in choosing the cloud mining service.
4. Maintenance fees
Many cloud mining companies charge maintenance fees to cover operational costs, either charging you directly or deducting a percentage from the mining rewards. These fees can erode your profits, and sometimes even outweigh the actual earnings from mining – especially during periods of low cryptocurrency prices or when mining difficulty increases. Make sure you carefully inspect the cloud mining’s contract provisions regarding maintenance fees and how they may impact your return on investment (ROI).
5. The contract’s duration
Cloud mining contracts vary by duration. They can last anything from several months to several years, depending on the provider’s policy, with most of them ranging from 6 to 36 months. The contract’s duration can have a substantial impact on your cloud mining enterprise. Long-term contracts often offer better rates and security in terms of consistent mining operations over an extended period. However, they tie up your investment for that duration and might become less profitable if market conditions, mining difficulty, or coin values fluctuate unfavorably. Short-term contracts might provide more flexibility, enabling miners to adapt to changing market conditions and technology upgrades. On the other hand, they often come with higher fees and can be less profitable due to the frequent need for renewal.
When choosing a cloud mining provider, don’t forget to verify their reputation. A high number of good or bad opinions can give you a better judgment of the platform’s credibility than a superficial examination of mining contracts which can contain catches and caveats. Still, if you’re planning a long-term and hash power-heavy investment, delve into the details of each cloud mining plan or package you’re considering. It’s also essential to stay tuned to the crypto market trends. Keeping an eye on cryptocurrency prices, mining difficulty levels, and other crypto space developments will help you make more expert decisions, increasing the profitability of your cloud mining investment.
What is the best cloud mining service? Top 5 Bitcoin mining cloud platforms
Cloud mining is a relatively new and fast-paced industry. In the crypto world, there are a lot of services of varying reliability and transparency that lure investors with the vision of quick profit. Before you decide to sign a mining contract with a cloud mining provider, check the offer thoroughly. If you have doubts about the profitability of the operation, you can start with a short-term, low-cost plan, and then scale up, if you’re satisfied with the results, or switch to another service. Below, we’ve listed in an alphabetical order five platforms that we think of as a good fit for starters.
Bitdeer
Headquartered in Singapore, Bitdeer is a recognized name in the crypto space. The company has been heavily investing in its infrastructure. In 2023, it launched its new data center in Bhutan, and started the construction of a 175MW immersion cooling data center in Norway scheduled to complete in 2025. Bitdeer’s cloud computing operations in the crypto space include self-mining, hash power sharing, and mining equipment hosting for other miners. The company offers Bitcoin cloud mining plans, allowing customers to choose mining rigs, duration, pools, and more. Apart from that, Bitdeer operates a hash rate market, allowing users to buy directly from the seller, with a convenient access to a wide range of miners worldwide.
ECOS
Founded in 2017, ECOS has soon evolved to become one of the most trusted cloud mining brands. The company located its operations in the free economic zone (FEZ), in Hrazdan, established by the government of Armenia and geared towards supporting blockchain innovations. ECOS has made its name as on of the easiest cloud mining solutions for beginners, earning tons of positive reviews and ratings. The company boasts over 500 thousand clients, 6K+ mined bitcoins and 60 Mbt farm capacity. For beginners, ECOS offers an Easy Earn plan, allowing newcomers to earn up to 14% of annual percentage rate (APR) in passive income.
FancyCrypto
FancyCrypto is one of the earliest companies in the cloud mining business with over 360 thousand customers worldwide. The platform claims to offer 2–10% of the world's cloud mining hash rate. FancyCrypto provides customized packages for both newcomers and large-scale investors, with contract prices ranging from 10 to 15,000 dollars. The platform also incentivizes users with a referral program promising up to 3% lifetime commission on funds invested using your referral code. With a convenient toolkit, intuitive dashboard, and simple withdrawals, FancyCrypto is one of the recommended cloud mining companies for rookies.
NiceHash
NiceHash is the world’s largest hash power marketplace. The company started out in 2014 as a small-scale enterprise established by two Slovenian university students and steadily built its way up to the top of the industry ladder. NiceHash connects buyers and sellers of hashing power for cryptocurrency mining, allowing users to rent or sell their computing power for mining purposes. In return, the platform charges a fee from both groups. Buyers on NiceHash can purchase mining power to mine crypto without the need to invest in their own mining hardware. On the other hand, sellers contribute their CPU/GPU or ASIC power to the NiceHash marketplace and earn cryptocurrency (in bitcoins) in return.
StormGain
StormGain ranks among the industry’s giants, serving customers in over 100 countries. Founded in 2019 in the UK, the company has soon become to make waves in the crypto space due to its unique offering of a free Bitcoin mining service. Currently, the platform offers a range of products and features, including a crypto exchange, multi-currency wallet, trading signals, tokenized assets, and Bitcoin mining. StormGain offers a wide range of order types and tools for traders, customized signals and some of the lowest fees on the market. It combines a user-friendly interface with advanced features for more knowledgeable users and ensures 24/7 customer support. It also boasts a great number of positive ratings on Trustpilot.
What are the advantages of cloud mining?
Cloud mining has significant advantages over mining cryptocurrency with proprietary mining equipment. They include the following:
It’s easy to start
You can start mining crypto gold in a blockchain network in a matter of minutes, leveraging user-friendly platforms and remote data centers. Everything’s at hand and at a low entry threshold: no need for high-level tech-savviness.
Low costs
Setting up a mining rig requires technical expertise and financial means. No need for that in the case of cloud mining. You just pay for a share of the mining power without the incurring high upfront costs and enjoy your earnings.
Usability
Most cloud mining platforms offer user-friendly interfaces, making it easier to earn on crypto mining operations. Not to mention they save you the hassle of handling complex hardware configurations.
Flexibility
Cloud mining services usually come with a variety of mining plans and cryptocurrencies. You can choose or even customize a contract on several levels, to get the best fit for your needs and expectations.
Automatic maintenance
Cloud mining companies take the maintenance burden off your shoulders, taking care of the hard-core tech stuff, troubleshooting, updating, etc. So, if you prefer a hands-off approach, there’s no better way to go about it.
Passive income
Passive income is the holy grail of making money online. Cloud mining requires some activity on your side, including market monitoring, investment adjustments, etc. Basically though, earning cash on cloud-based crypto mining amounts to achieving passive income from remote crypto farms.
What are the risks of cloud mining?
Notwithstanding its advantages, cloud mining comes with several concerns you should consider before starting out on your journey to the desired passive income. Here are several risk factors to keep in mind.
Market risks
The higher the investment, the higher the reward – but also risk involved. Keep in mind, that cloud mining is prone to market risks and cryptocurrency volatility.
Limited control
Relying on external service means limited control over the mining hardware, software, and mining pool decisions – all managed by the cloud mining provider.
Obscure operations
Some cloud mining providers may not disclose detailed information about their operations, making it hard for you to verify the legitimacy of their activities.
Hidden fees
Watch out for “concealed” costs! Cloud mining contracts may contain hidden fees, such as maintenance fees, withdrawal fees, or additional costs that users may not be aware of when entering into a deal.
Scams and fraud
The cloud mining industry is not free from scams and fraudulent schemes. Some providers may promise high returns but disappear with users' investments. Choose wisely, and pick reputable, well-established providers.
Cloud mining can be a good way to increase your chances of achieving passive income but always remember to keep your wits about you and read the fine print!
