What is Cloud Mining?
In the cryptocurrency ecosystem, mining refers to the process of verifying cryptocurrency transfers and generating cryptocurrency. This process involves solving mathematical problems to validate the transactions in the block that forms the ring of the blockchain via computing power of processors. Many different methods can be used to mine cryptocurrency. One of these methods is cloud mining.
If you’re wondering what cloud mining is, then you will find the answer in this article.
What is cloud mining?
Especially in mining types that require high processing power, such as Bitcoin mining, it is necessary to purchase hardware, to have the electrical power and infrastructure to run these hardware, and to have a suitable area to store the devices. At the same time, during the calculation process that requires high processing power, a cooling- evacuation system is also needed to cool the heated devices and the environment, and to evacuate the hot air. In addition, there is a need for technical knowledge and time to operate and manage mining devices. Cloud mining is a mining service offered to users by companies that undertake all these difficulties and manage all phases of cryptocurrency mining such as purchasing, positioning, cooling and device maintenance.
How to do cloud mining?
Cloud mining is a method of mining where users rent processing power. Users who want to do this form of mining, register and make a contract with organizations that provide cloud mining services. A prepayment is made as cryptocurrencies or fiat money and the time interval of the mining is selected. Users rent processing power in proportion to the amount paid. They earn mining income at the rate of the share corresponding to this processor power.
How do cloud mining systems work?
In cloud mining, devices with special equipments are used, as in other mining methods. New blocks are added to the blockchain by using the processor power of the devices. This process is carried out by organizations that provide mining services.
What is the difference between cloud mining and hardware mining?
In cloud mining, as in other mining methods, complex mathematical problems are solved and a new block added to the blockchain. In hardware mining, users manage the devices themselves. In cloud mining, devices are managed by the organizations that will perform the mining process. Bitcoin and other cryptocurrencies are not issued by the users, instead, the process is managed by institutions. Users rent processor power from organizations that offer mining services and earn mining income in proportion to this processor power. Cloud mining companies, on the other hand, charge for hardware purchases, electricity, cooling, management, and other costs.
Is cloud mining safe?
Before deciding to do cloud mining, it is necessary to research cloud mining companies well, to learn the terms and the extra costs included in the contracts. It should be taken into account that cloud mining companies reflect various expenses such as hardware, software, electricity, cooling, and management with the contracts they offer to their users. However, the market value of the cryptocurrency that is planned to be mined, the loss of revenue from possible price fluctuations, and possible increases in the difficulty level of production should also be taken into account.
Cloud mining pros and cons
In cloud mining, there is no need to purchase any equipment as in hardware mining. All equipment is provided by the mining companies. In this way, users can mine without technical knowledge.
A large part of the income generated in cloud mining is received by mining institutions. This results in low income for users. Because there is no control over cloud mining, fraudulent activities may occur. Institutions claiming to perform cloud mining can steal the investments made by users.
