Cryptocurrency mining basically involves two functions. The first function is adding transactions to the blockchain by verifying them while the second one is releasing new bitcoins. The mining process involves the compilation of recent transactions on the blockchain into blocks and solving complex computation puzzles. The miner who solves the puzzle is given the opportunity to place the next block on the blockchain and collect the incentive.
For mining to take place, a computer is needed to help the miner solve the complex mathematical puzzles. However, mining makes use of expensive computer resources. Regularly, miners try to solve a block that has a transaction data by making use of cryptographic hash functions.
The hash value is a numeric value that identifies data and each hash value is unique. With the help of their computers, miners zero in on a hash value less than the target. The first miner to solve it is considered as the miner of the block and will get a reward for that.
However, mining has become a very difficult and technical task and not everyone knows how it is done. The high cost of mining equipment means not all prospective miners can mine cryptocurrencies.
As discussed,cloud mining is an alternative to regular mining. It is particularly important for those who don’t have the technical ability to mine or those who can’t afford it. We will now look at what is cloud mining.
What is cloud mining?
Cloud mining is a mechanism by which an individual can mine cryptocurrencies without having to install all the hardware or go through the stress that traditional crypto miners go through. Crypto mining has been made easy by companies who offer cloud mining. The companies allow people to create an account with them and take part in the cloud mining process. However, the individual will have to pay the company a basic cost. Cloud mining has ultimately made the crypto mining industryopen to everyone.
Cloud mining enables miner becomes a participant in the mining pool. The miner purchases a certain amount of hash power and each user will, in the end, have a share of the profit that is allotted to the purchased hash power. Maintenance and energy costs aren’t an issue with cloud mining considering the fact that the mining is done via the cloud.
Best Suited For
Cloud mining is best suited for people who aren’t technically gifted since mining is a technical activity. It is also very useful for those who don’t have the funds to purchase their own mining software and hardware.
For those that live in cities and countries with high electricity rates, then outsourcing your mining activity to companies or regions where the electricity cost is low is a very good idea. Mining in countries such as Germany is difficultdue to high cost of activities, but cloud mining companies in countries like the United States of America will get the job done due to lower electricity charges.
Top Cloud Mining Companies
There are several cloud mining companies in the world. We will take a look at the top ones currently in the market.
- Hashflare
This is a cloud mining service provided by the parent company HashCoins. The company has been playing a role in the blockchain world since the creation of bitcoin, and offers one of the best cloud mining services.
Hashflareas a cloud mining service that makes the act of mining accessible to anyone interested. Users on this mining service can start with a small scale contract in order to know if the system is working. Hashflare allows its users to choose between the several mining pools available.
- Genesis Mining
Genesis cloud miningwas launched in 2013 and is known for its transparent nature of mining. The company is registered with Security Exchange Commission (SEC) and is regarded by most as the largest and most popular cloud mining company.
According to their website, Genesis makes cloud mining very easy and safe for people to purchase hash power without the need to deal with the complex software and hardware issues that regular miners deal with. They are always working on building efficient and reliable mining rigs that are rented to their clients. They also have multiple plans available, depending on what the users want.
- Hashnest
This is a cloud mining service offered by Bitmain technologies. Hashnest has been offering cloud mining service for four years now, with the cloud mining rigs provided by Bitmain.
The hashpower purchased by clients can be traded and transferred to other people using the Bitmain network, thus ensuring that a customer can sell his or her hashpower. To know the results of a cloud mining activity, a user can track it using the Bitmain wallet. All in all, Hashnest aims to make mining cheap and available to everyone.
Cloud Mining Advantages
- There are no hardware or software costs
- No electricity cost
- You don’t have to deal with excess heat the way regular miners do.
Cloud Mining Disadvantages
- Profit is lower than actual mining.
- Lack of control and flexibility.
Types of Cloud Mining
There are generally three main types of cloud mining. They are
- Hosted mining
- Virtual hosted mining, and
- Leased hashing power
Is Cloud Mining Profitable?
Cloud mining profitability depends on the company you decide to go for and the coin you mine, the amount of hashpower you purchase and the maintenance fees charged by the service provider.At the moment, when you do the math properly,mining Bitcoin on most of the cloud mining services is no longer profitable. Other cryptocurrencies such as Dash, Litecoin, ZCash and others are still profitable.
The profitability of your cloud mining also depends on the cloud mining provider you decide to go with. You will have to conduct an extensive research on some of their costs such as their maintenance fees and how much you are to get as an annualized ROI from them.
Conclusion
Cloud mining has become the go-to mining avenue for those who don’t have the technical knowledge to handle mining materials, those who don’t have the funds to purchase mining tools and those who live in places where the electricity rate is very high.
Bitcoin cloud mining isn’t profitable at the moment. However, mining other altcoins such as Litecoin, Monero, Dash, ZCash,and others are profitable. Since you won’t be paying for electricity and mining tools, your profitability will depend on how much the company charges as maintenance fees and how much they offer as ROI.
