Understand “Cloud Mining” in just 3 minutes

There are several methods to generate cryptocurrencies. The main ones remain the purchase of a cryptocurrency or its mining. For this second possibility, many miners set up their own mining installation or go through mining pools to pool equipment and improve profitability.

However, there is another alternative, very fashionable at the moment: cloud mining. But behind this Anglicism, what exactly are we talking about? How does it work? What are the advantages and disadvantages?

What is Cloud Mining?

“Cloud Mining” can be defined as “hosted mining” which covers two quite distinct notions. On the one hand “the cloud”, that is to say the use of external servers and computers, and “mining”, a very popular function in the cryptosphere to generate coins (Ethereum, etc.). It is therefore a mechanism where equipment is rented to a company to participate remotely in the extraction of cryptocurrencies.

It is an alternative to mining solo or via mining pools (pooling the power of miners’ hardware).

How does this work in practice?

There are different methods to exploit Cloud Mining:

  • Or the use of a virtual private server (VPS). In this case, it is a question of renting a server with mining software and the internet bandwidth that goes with it.
  • Either the rental of computing power itself. One contracts with a company for him some of his hashing power. The gains are proportional to the exploitable power and the services subscribed.

The user will be rewarded for their work by getting a share of the reward. Do not forget, however, that service charges may exist.

To note : Cloud Mining works primarily with cryptocurrencies based on Proof of Work (POW) such as Ethereum for example and not with those using Proof of Stake (POS).

Advantages and Disadvantages of Cloud Mining

The main strength of Cloud Mining lies in the low initial cost. This therefore makes mining accessible to the general public. Accessibility is all the more facilitated by the fact that you can follow your mining in real time with your tablet, smartphone, etc.

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With this mechanism, we can free ourselves from the problem linked to equipment that is often very heavy and expensive. Plus, there are no more maintenance issues or energy costs..

Cloud Mining also offers simplicity in use since all you have to do is create an account with a service provider and install the associated software to start mining.

Cloud Mining is not without flaws:

  • Risks of fraud or theft of crypto. Indeed, you have to choose your service provider carefully, because there are many fake mining sites and fraudulent platforms. Some don’t even have mining facilities and are just a Ponzi scheme scam.
  • You usually have to commit to long periods of time (1 year, 2 years…) with Cloud Mining platforms. Not knowing in advance the yield and therefore the gains generated, the return on investment is not guaranteed.
  • The decrease in profits altcoins linked to the reduction of their hashing power.
  • Some platforms impose a minimum amount of earnings generated before they can be withdrawn.

Conclusion: A possibly profitable solution, but beware of scams

This solution is very interesting to answer the problems of the cost of the installations and the electrical consumption. It also has the advantage of its ease of use.

However, even if it is quite possible to be profitable depending on the subscription taken (and therefore the power rented), the Cloud Mining user must remain attentive to several aspects. Many platforms tend to promise “too good to be true” gains and performances.. There is a significant risk of losing the money invested if you do not inform yourself sufficiently beforehand.

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