| Updated: October 30, 2024Conventional mining, which we discussed in the previous article, represents one of the two possible ways of generating Bitcoins. The other method is known as ”cloud mining”. Experts in the field consider cloud mining as a method that usually favors individuals who are not technically proficient, or those who just do not want to run a software or hardware of their own.
What is cloud mining?
Cloud mining is a process, which utilizes a remote data center with shared processing power. You can gain access to such a data center through contracting with a legitimate Bitcoin cloud mining company.
A key moment, if you are willing to employ such a method, is to find a trustworthy provider whom to work with. Once a provider is selected, you will have to choose a type of contract you want to sign and the desired duration. Generally, your choices may include a contract for 500 Giga Hashes per second or a contract for 1 000 Giga Hashes per second. When it comes to duration, in many cases, Bitcoin contracts are signed for a period of up to 1 year. Some providers, however, may offer you contracts with a 6-month or a 24-month term.
If you have made up your mind to engage in cloud mining, you can sign a contract with providers such as Hashflare or Genesis Mining. You will need to make an upfront payment in conventional currency or in Bitcoin, after which the provider will take care of setting you up for the process.
Types of cloud mining
Practice has shown three variations of cloud mining:
1. Hosted mining, where you can lease a mining machine, which is hosted by the provider;
2. Virtual hosted mining, where you can establish a virtual private server and then install a mining software of your own;
3. Leased hashing power, or the most widespread method as of now. In this case, you are not required to have a dedicated virtual or physical computer.
Pros and Cons
If we are to highlight cloud mining’s advantages, we should without doubt consider the following:
1. This method allows you to keep your electricity costs under control. You do not need to worry about ”extra” amounts on your bill;
2. You are able to avoid the constant noise produced by the physical equipment’s fans, especially if you have limited space. Additionally, you do not need to worry about eventual issues with ventilation, in case the physical equipment overheats;
3. There are also no concerns over whether you will be able to sell your physical mining equipment, especially when the mining process stops generating profits.
Of course, some aspects of cloud mining can be considered as disadvantages:
1. With this method you may experience a lack of control and flexibility;
2. You are exposed to risks related with possible acts of fraud by the provider you have selected. There have already been a number of scams in this field. You may wonder why a Bitcoin cloud mining company would share details of its data center, but not actual photos of it. If you request to receive some photos, you may get only unreasonable excuses why there are none. Thus, in this case, it is very likely that you have come face to face with a scam. A legitimate cloud mining company would always provide its clients with details and relevant photos of its data center. Some cloud miners may even provide proof of electric bills or other costs;
3. The profits you generate will be reduced by the fees you pay to your provider during the term of the contract. These fees are usually on top of the initial upfront payment. Make sure that you have read thoroughly the terms and conditions offered by the respective cloud miner;
4. Last but not least, let us not forget the possibility of contractual warnings, which state the mining process may be put to a halt depending on the exchange rate of Bitcoin or some other cryptocurrency mined.
It is likely that some of the circumstances mentioned above urge you to think twice before choosing cloud mining as a method to generate Bitcoins or other cryptocurrency. But, if you believe this is the method which fits your preferences, it is advisable that you do an extensive research of the cloud mining company you intend to contact.