What is cloud mining
With the growing popularity of cryptocurrencies, the number of people – miners who want to mine it, is growing. Most cryptocurrencies provide for the complication of hashing algorithms with the growth of capacities that are involved in their extraction. All this leads to the fact that over time it becomes more difficult to mine any cryptocurrency, especially if the cryptocurrency itself is growing in popularity and the number of miners mining it increases.
Almost any new cryptocurrency that appears on the market provides a protection mechanism against ASICs – special devices that are designed to decrypt hashing. ASIC’s sole purpose is to decrypt the hash. Therefore, ASICs are most effective in cryptocurrency mining. They allow you to mine cryptocurrency at a lower cost than using cards or computer processors for home use.
For this reason, as soon as specialized ASICs appear that allow you to mine one or another cryptocurrency, private mining becomes not profitable for miners due to the constantly complicated hashing algorithm.
Because of this, private miners leave the mining of a particular cryptocurrency and mining passes into the hands of corporations that use special and efficient equipment, and often they themselves are manufacturers of such equipment. To reduce energy costs, corporations build mining farms near power plants and establish production facilities there. For this reason, private miners with their home farms and expensive electricity are simply not able to compete in the extraction of popular cryptocurrencies.
The more popular cryptocurrency, the more attention is focused on it by industrial giants.
But it is not all that bad. Some industrial enterprises provide their mining facilities for rent. People who have purchased capacity contracts do not need to buy and install equipment on their own, install software and pay for electricity. The corporation, which leases their equipment, already has equipment and capacities. She also serves all of her equipment.
A leasing company usually also charges for the maintenance of capacities and for electricity. This amount is withdrawn from the income from the extracted cryptocurrency. Each company provides different conditions of the contract, as well as different rental periods.
Types of Cloud Mining
Cloud mining is a rental of industrial mining facilities. Using industrial facilities and specialized equipment, mining is becoming more efficient. The location of mining farms and the price of electricity also increase efficiency. So mining in Germany or South Korea, for example, is not beneficial by definition, since no matter what equipment the miner uses for cryptocurrency mining, the high price of electricity makes all his efforts pointless. Therefore, the residents of such countries have the only way – to use cloud mining, that is, rent capacities and equipment that are located in other countries, where the conditions for mining are more suitable.
The following types of cloud mining are different depending on the subject and content of the cloud mining lease agreement itself.
- Mining hosting rental
- Virtual Private Server Rental
- Computing power rental
Rental hosting for mining
In the case of renting a hosting for mining, the user rents equipment installed by the service provider on his hosting. The term of the lease is determined by the supplier. Also, usually the provider independently determines which cryptocurrency it will mine. Indeed, on an industrial scale, ASIC equipment is highly specialized and is suitable only for the production of a limited number of cryptocurrencies using a specific hashing algorithm. Typically, suppliers, if they use different equipment for the extraction of various cryptocurrencies, offer several options for contracts and the buyer of services, depending on the amount he is willing to spend and other conditions, chooses the most suitable option for himself.
Rent a virtual private server
In this case, the user selects a private virtual server and determines its parameters. In accordance with these parameters, he independently installs mining software, determining which cryptocurrencies he will mine. In this case, the user needs to have not only technical data in order to correctly select the server parameters for installing specialized mining software. It is also necessary to have financial knowledge, to be well versed in different mining algorithms for various cryptocurrencies, to know the market. Here, the user independently chooses what he needs and what he wants and, depending on his needs and money, selects the most suitable conditions for the contract.
As in the case of renting a hosting, and in the case of renting a private virtual server, the user is required to take some actions, select either the equipment used or install special programs, that is, the user must have special knowledge, understand the market, cryptocurrencies and understand What he wants.
Therefore, ready-made rental solutions have gained the greatest popularity. Namely, the lease of computing power. This is the most universal solution that suits a wide category of users, even if they do not have special knowledge and skills. That is why this type of rental has become the most popular and widespread.
Rent a certain amount of power without access to equipment, server or shared hosting. The user rents power for a certain time (there are also life-long contracts) for the extraction of certain cryptocurrencies.
This type of rental is the most attractive. The company lessor, purchasing new capacities and installing new equipment, offers new contracts. As you know, the amount of installed equipment is limited, as well as limited rental capacity. Therefore, if you work with a popular company that has been well established in the market for many years, you need to be prepared that you cannot buy the most suitable contract for yourself, as the company does not have free capacity. As soon as the capacities for the extraction of the most popular cryptocurrencies appear, they are often disassembled, like cakes, by old-timers. Therefore, newcomers sometimes have to either wait for new capacities to appear, or buy what is, that is, start with less popular cryptocurrencies or contracts, and then, in the course of work with the supplier, gradually wait for new more interesting and profitable contracts for themselves.
Advantages and disadvantages of cloud mining
Benefits of Cloud Mining
- No need to buy your own mining equipment and install specialized programs
- No need to register in a specialized mining pool
- No need to have special knowledge to buy a farm, install it, configure it
- It doesn’t matter in which country you live and what is the cost of electricity (mining is not available for residents of most countries of the world due to the high cost of electricity)
- There are no legal and legislative barriers, since in many countries of the world mining is either directly prohibited by law or not regulated at all, which creates a “suspended” status for the miner and makes it virtually powerless
- No need to look for premises for installation of equipment, no need to maintain, reconfigure, cool, repair
- There is no risk of losing equipment in the event of a technical breakdown or theft
- There is no risk of depreciation of equipment and its obsolescence
- No need to think about how to sell equipment if mining becomes inefficient or the equipment becomes obsolete and becomes unnecessary to the miner
- No need to pay for electricity, for equipment maintenance, its cooling, rental of premises where the equipment is installed, etc.
The disadvantages of cloud mining
- The user is 100% dependent on the choice of a company that provides cloud mining services
- There are a huge number of companies that are inherently hype, and cloud mining is only an integral part of their legend. By selling cloud mining contracts for 5 years, the company may close in a few months. Thus, all users who buy such contracts will be at a loss, as they simply do not have the time to physically recoup their contract
- There are reliable cloud mining companies that have been operating for many years. But the problem of such companies is that their mining capacities are limited, all the existing capacities for them have been leased for a long time, since such companies are consistently paid and very popular. Usually, for beginners, not the most popular directions are available for mining. Such companies regularly purchase new capacities and rent them out, but new capacity contracts are quickly bought up by old-timers. Therefore, the newcomer has no choice but to buy the not the most popular direction for mining and wait patiently when the company starts expanding its capacities and selling new contracts in order to manage to buy a new contract in time, when it appears
- Hackers often crack the wallets of even reliable service providers that have been on the market for many years, as this is a tidbit. The same thing happens with cryptocurrency exchanges. Therefore, even a reliable company that has been operating in the market for many years cannot give a 100% guarantee of success. Profit from the use of leased facilities must be constantly withdrawn
- If in the case of physical mining the user always has equipment that he can sell and get money from the sale of equipment in case of something, then the lease is rarely possible to terminate in advance. Thus, if money is urgently needed, then nothing can be done with a capacity lease agreement.
Work in the cloud or on your equipment. What’s better
Now there are not many cryptocurrencies that can be mined at home on processors and video cards. With almost all cryptocurrencies, hashing complexity grows over time, and with it the requirements for mining equipment. The miner will constantly have to increase his capacity so that mining remains as effective as it was before, or the income from mining begins to fall.
Another way out of the situation is to constantly look for new cryptocurrencies for mining. After all, several cryptocurrencies appear daily and the choice of cryptocurrencies is very large. With new cryptocurrencies, the hashing complexity is very simple, you can mine a lot until the cryptocurrency is not so popular and a large number of miners are connected to its mining. But the problem with all new cryptocurrencies is that if they are cheap to mine, then they physically cannot be expensive, because they are not yet known to anyone, they do not have their own large crypto community, wallets, their support, exchanges and other elements necessary For the successful functioning of cryptocurrency. That is, the miner who chooses mining new cryptocurrencies needs to wait until the new cryptocurrency becomes popular and the demand for it increases. But this can not wait. How many dead cryptocurrencies exist on the network. What do not do with them, they still remain “dead” and no one needs.
In general, to mine yourself, you need to understand not only technical issues, but also economic ones. Constantly monitor new cryptocurrencies and keep abreast of all the latest events and news in order to choose the right cryptocurrency for mining. In many countries, mining is not profitable due to the high price of electricity and adverse climatic conditions. In many countries, mining is either directly prohibited by law or not regulated in any way. Miners remain “outside the legal field” and are not legally protected in any way.
Thanks to cloud technology, it is possible to rent existing mining facilities. Cloud mining deprives miners of many of the problems that they associate with private physical mining.
But since this area is very popular, there are a lot of scammers in the field of cloud mining. Many of the projects that offer cloud mining services are actually high-tech. Cloud mining in such projects is just a good and popular legend.
On the other hand, we should not forget that popular projects that live for years, providing cloud mining services, have limited capacities. All existing facilities have already been leased. Only less popular destinations remained. Yes, such companies often raise the price of capacity rental, but even taking into account the price increase, new released capacities are immediately leased. First of all, old-timers take on lease new capacities, because the funds invested by them long ago have paid off and now they want to expand.
If you do not have special technical knowledge, you do not know where to buy a farm, how to install and maintain it, it is better to rent ready-made facilities. At the same time, one should not forget that if the project is reliable and time-tested, then the beginner, most likely, will not be offered the best conditions. We’ll have to take those contracts that are. Closely monitor the development, the emergence of new capacities and eventually “snatch” more profitable contracts for yourself.
If you are offered “well, very favorable conditions” right from the start, it is most likely not a cloud mining, but a hype with a legend disguised as cloud mining. There are a lot of such hyps. Some of them are very successful. But the result of any hype is always the same – over time, hype will become a scam.
Cloud mining without investments
Many cloud mining services, in order to promote themselves and attract the right number of investors, provide a certain amount of capacity for free.
This is usually a very small amount of capacity. At best, you will be able to withdraw a few cents a day. The list of such services is constantly changing. New services appear daily. All the most relevant information needs to be tracked on Bitcointalk in the mining section of alternative cryptocurrencies.
At the same time, one should not forget that rarely which company gives out money and capacities for a long time. Usually, as popularity grows, free distribution stops or the service closes and stops paying. Therefore, if you want to receive free money for a long time from cloud mining without investments, you need to constantly monitor new services and update your pool of cloud mining projects without investments.
Cloud mining risks
The risks of cloud mining are comparable to the risks in hypes. Any cloud mining may close over time. This can happen due to the fall in cryptocurrency rates. This can also happen due to the complexity of hashing algorithms. New technologies or new equipment may appear that will make cryptocurrency mining at old ASIC capacities unprofitable. The cloud service will either have to buy new equipment, which is expensive, or close.
Cloud mining can be hacked by hackers. Hacking occurs even with the most reliable services. As well as in cryptocurrency exchanges, huge amounts of money are spinning in the services of cloud mining, hackers are especially interested in them and constantly check them for strength and for vulnerabilities.
The operation of cloud mining services is extremely not transparent. No one checks the cloud mining services for the real availability of the capacities that they rent out.
Even the most “reliable” and “time-tested” cloud mining services can rent non-existent capacities, thereby turning into a banal pyramid that will collapse over time.
The future of cloud mining in the future
Cryptocurrencies are designed in such a way that over time, as their popularity grows and the number of miners increases, the complexity of hashing will increase.
Cloud mining services are owned by many manufacturers of ASIC equipment. Thus, mining costs are reduced. With the growth of technology and the complexity of hashing algorithms, it is becoming more and more difficult for miners to mine currency on their own.
Cloud mining services that lease out power are becoming a good alternative.
With the tightening of cryptocurrency legislation, the regulation of cloud mining services will become more severe. Only the most reliable services will remain on the market. This will protect the rights of users buying power.
On the other hand, toughening regulation will lead to the fact that user revenues from rental capacities will decrease, contracts will pay off longer. The stratification between HYIPs with the legend of providing cloud mining and real services that have the capacity and actually provide such rental services will become even more pronounced.
The reality is that cryptocurrency is becoming more stable, and it is becoming more and more difficult to mine it. The time for super-profits in this area has passed.