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A Beginner’s Guide to Bitcoin Cloud Mining
Bitcoin Cloud mining operation is an alternative to traditional cryptocurrency
mining. Cloud mining
is usually seen as a cheaper way to generate digital coins for people who are
not technically savvy, as well as those who don't want to operate and maintain
their own hardware and associated software.
It's a method that definitely offers advantages for miners, but it's
also an area ripe for scams. In this article, we will take a closer look at
what cloud mining is and how it works, as well as its pros and cons.
Cloud mining is a process for generating cryptocurrencies using rented
computing power from a third party (cloud mining service provider). Each miner
actually participates in a "mining farm" (remote data center for
crypto mining) by buying a certain amount of "hash power" from the
service provider. In return, the provider grants them access to rewards
proportional to the amount of hashing power purchased by the miners.
Because the mining operations are conducted via the cloud, miners do not
have to worry about computer equipment maintenance, noise, heat, or energy
bills. After finding a reliable bitcoin cloud mining service provider, miners
only need to select the type of contract to sign and the desired duration. They
have to make an upfront payment, either in fiat currencies or digital
currencies, after which the provider supplies them with everything they need to
operate.
In general, miners can choose between contracts for 500 and 1,000
gigahashes per second with a term of up to one year. (One GH/s = 1 billion
hashes per second.) However, some providers may offer short term cloud mining
contracts, 6 month or even 24 month contracts.
Bitcoin mining is tedious and requires expensive mining equipment for
the small rewards. The Bitcoin cloud mining services are an alternative for
everyone to start bitcoin mining without requiring expensive equipment or
technical knowledge. As with any cloud mining, the concept is simple and
involves only the remote data center with a shared processing power - hashing
power.
While the return of investment (ROI) from bitcoin cloud mining is
arguably rewarding. But it all depends on the upfront cost and the valuation of
the Bitcoin price at that point. Since you are technically leasing the
processing power from a Bitcoin cloud mining service provider, the price per
gh/s or th/s and the service fees could be a major factor in deciding your
actual ROI.
Compared to owning a GPU mining machine that costs $2,000-$8,000 for a
high-end device, Bitcoin cloud mining could actually save you a lot of hassle
from the high electric bills, noise, and heat. All you need to sit back and
watch the rewards roll in is buy your desired hash power and decide on a
desired investment period. But cloud mining is like any other form of investment;
it is always associated with uncertainties and risks. Always do your due
diligence before investing.
The miners compete with each other in the search for new blocks. Every
time someone successfully creates a hash, they currently receive 6.25 bitcoins.
The blockchain gets an update through the hash and everyone knows about it.
With this incentive system, the mining that keeps the transaction processing
going is rewarded.
The problem is that it's very easy to hash a collection of data. So the
bitcoin network has to make it harder, otherwise everyone would hash hundreds
of blocks a second and all the bitcoins would be mined in a few hours. The
Bitcoin protocol intentionally makes it more difficult for the miners by
introducing a so-called proof of work - the mining difficulty increases over
time.
The Bitcoin network would not simply accept any old hash. Rather, the
block hash must have a specific appearance, such as a specific number of zeros
at the beginning. There is no way of knowing what a hash will look like until
it has been produced, as it completely changes its appearance with each piece
of data set that is added.
Miners should not interfere with the transactions in the block. However,
they must alter the data they use to create a new hash. They do this by using
another piece of data again. This record is also called a nonce. It is used
along with the transaction to create a hash. If the hash doesn't find the
desired format, the nonce is changed and the whole hash changes again.
Many attempts are usually necessary to find the right nonce. Therefore,
the miners mostly work on the same network at the same time. If the nonce is
found, the bitcoins are divided among all miners according to their
performance. This is how miners ultimately earn bitcoins.
There are two types of Bitcoin cloud mining models:
Host mining: Miners buy or lease mining rigs on mining farms and
pay to set them up and maintain them. This model reduces the costs associated with
access to electricity. Also, since miners have more control over rigs, they can
redirect the generated hashing power into mining pools. In addition, miners
have complete control over the rewards generated.
Lease Hash Power: Miners lease a portion of the hash power that a
mining farm generates. You are essentially subscribing to a plan offered by the
Bitcoin cloud mining company to get a share of the mining farm's profits.
Miners do not have to pay any setup or maintenance fees, and mining rewards are
distributed based on the share of hashing power that each miner controls.
All participants in a mining pool share their computing resources to
increase the likelihood of generating a block on a cryptocurrency blockchain
– which requires solving complex cryptographic puzzles. If participants are
successful, they receive a reward, usually in the form of the cryptocurrency
they mined. The amount they get depends on the percentage of their computing
power or work in relation to the total pool.
All mining pools have their own difficulty level, which is usually
between 1 and the difficulty level of the cryptocurrency being mined. If a
miner generates a block with a difficulty between the mining pool difficulty
and the cryptocurrency
difficulty, that block is considered a "share". The majority of
mining pools usually distribute mining rewards among participants based on the
pay-per-share (PPS) model.
There are also pools that may impose limits on rates paid per share.
These pools use models such as Equalized Shared Maximum Pay per Share and
Shared Maximum Pay per Share.
Enthusiasm for cryptocurrency mining remains strong despite increasing
mining difficulties. There may be miners who prefer hosted mining equipment
rather than owning it. Still, there are many reasons that lead to the idea of
cloud mining.
Here are some of the possible reasons:
The difficulty of cryptocurrency algorithms had increased while the
rewards had decreased (e.g. 6.25 bitcoin per mined block today compared to 50
bitcoin per block when it started in 2009). Mine owners realized that more
computing power was needed to stay competitive. This led to the idea of
mining pools, which pool the hashing power of all participants involved in a
mining operation.
Only a predetermined number of coins of a given cryptocurrency will come
to market (in the case of Bitcoin, 21 million coins). Coupled with the prospect
of a rising exchange rate, this has led to a number of innovations in the
crypto mining space. Bitcoin Cloud mining is actually the evolution of mining
pools.
Another reason for the rise of cloud mining is the potential
opportunities for miners to earn attractive rewards by participating in mining
operations. Bitcoin Cloud mining companies tend to offer generous payouts to
entice clients/investors to participate.
You can now buy hash power from Minerland Cloud Mining!
In the early days of crypto mining, the entire process was done on an
average home PC. Later, miners started establishing mining "rigs" by
combining GPU cards, which proved to be much more efficient at solving complex
mathematical equations (like Bitcoin's Secure Hash Algorithm-256) than regular
CPUs. GPUs boosted the hashing power of the Bitcoin network, but also made the
SHA-256 algorithm much more difficult to solve.
A little later, application-specific integrated circuit (ASIC) mining
rigs were introduced to the market, quickly eliminating the need for GPUs.
However, these powerful, purpose-built chips came at a cost that the average
miner could not afford. The hashing power of the Bitcoin network continued to
increase - as did the difficulty of the SHA-256 algorithm. It became almost
impossible for users to mine on a regular CPU while their power bills
skyrocketed.
The ASIC rigs turned the crypto mining sector into a place mostly
destined for big players. And this is where mining pools came in: their purpose
was to allow anyone to participate in the mining operations to the best of
their ability and exchange them for regular rewards. These rewards are usually
proportional to the donated hash power of each participant in the pool.
Soon, data center operators found that a large number of people were not
participating in mining pools because they did not own a mining rig. Hence,
they started renting out hashing power within the pool, which gave rise to the
concept of cloud mining.
In Bitcoin cloud mining, miners are actually investors in a mining
operation and the only thing they ensure is money. The cloud mining company
operates a mining farm consisting of mining rigs and allows miners to either
buy or rent a portion of the farm's hashing power.
In many cases, the provider has invested in top-of-the-line hardware and
built the mining farm in a place with cheaper electricity and a cooler climate.
This keeps the total cost of running the business under control. Miners do not
have to worry about anything in the entire process and only expect a reduction
in the farm's profits.
With hardware mining, miners own their own mining rig and must decide
whether to mine solo or join a mining pool and contribute to its computing
power for a share of the proceeds. You have to take care of all the costs
related to maintaining and upgrading the hardware and have a reliable internet
connection at all times.
Bitcoin Cloud mining is usually very cost-effective for miners. You
don't have to pay for your own mining equipment, keep upgrading it, and there
are no installation or setup costs. The only hardware they need is a tablet or
smartphone to check their rewards from the operation.
This removes the worry of whether they will be able to sell physical
equipment once mining is no longer profitable.
Miners also don't have to worry about electricity bills, noise or heat
generated by mining rigs.
Cloud mining requires no specific knowledge of protocols,
cryptocurrency, or mining rigs. All miners have to do is open an account with a
service provider and pay a fee that depends on the amount of hashing power they
want to buy. All rewards will be paid directly into this account.
Another benefit is that miners don't have to worry about equipment
maintenance (to ensure the best environment for a rig to run) since the cloud
mining company takes care of it. Companies typically deploy cooling towers and
other equipment to keep their mining farms well ventilated to avoid a hardware
meltdown.
However, miners may be charged a maintenance fee for the equipment by
the cloud mining service provider.
First, since miners do not own computer equipment, they have no control
over it. That means they can't sell it.
Second, the profitability of Bitcoin cloud mining contracts varies
widely and is not guaranteed. Even if miners locate a trustworthy provider and
sign a contract with that company, it just means that the latter will provide
exactly the advertised services and hash rates for the agreed duration. It does
not guarantee that it will generate a profit for the miners. Furthermore, any
profits made may be offset by fees that miners may pay the provider during the
contract period - in addition to the upfront payment.
Third, the Bitcoin cloud mining space is full of cases of fraudulent
behavior. Miners can prepay a provider and receive no rewards in return, or the
rewards promised may not be as expected. Also, vendors can disclose details of
their mining farm but no actual photos or other evidence of it, which could
well indicate a scam. Reliable cloud mining companies will always disclose
information and recent photos of their data centers, and in some cases even
provide proof of utility bills.
If a vendor seems to be offering unlimited hashing power for sale, it
could also be a scam — no cloud mining company actually has unlimited computing
power.
Finding a trustworthy provider can be difficult. Miners must always take
care of their own due diligence regarding a particular company before
contacting them.
Finally, there may be circumstances in which a provider may stop mining
- for example, if the exchange rate of the mined cryptocurrency reaches a
certain level. As such, miners must pay close attention to a provider’s terms
and conditions regarding “contractual warnings.”
Many experts believe that cloud mining is the future of crypto mining
with its benefits and opportunities. For now, however, it remains a challenging
sector with the prevalence of scams and scams. This means that miners need to
do extensive research before investing in a particular company's technology.
https://miner-land.com/