You may have seen ads promising all sorts of things when it comes to Cloud Mining, but to no ones surprise this is often just the tip of the ice burg, with a bunch of sharks hiding underneath the water. So today we’re going to go through exactly what crypto mining in the cloud is, what it isn’t and why you shouldn’t go anywhere near it if you have half a brain.
Contents
What Is Cloud Mining?
Cloud Mining is where users rent hash power from cloud mining providers in order to mine Bitcoin. Just like you might use a cloud service provider to rent storage space to store your files, cloud mining allows you to mine bitcoin without having to buy expensive mining hardware, power and maintain it as well set it up.
This approach has a number of pros and cons when compared to buying the mining equipment and operating it directly yourself.
How Does Cloud Mining Work?
Rather than purchasing and operating a bitcoin miner, you instead find and sign up to a bitcoin cloud mining platform. This company will then provide you a simple user interface for configuration and charge you a certain amount that depends on how much hash power you want to control.
While you don’t own any physical mining hardware, you also don’t have to purchase it, power it, listen or configure it either. You can start contributing to the Bitcoin networks decentralization and get fresh bitcoin straight away rather than having to wait for the hardware and wrangle with configuration.
Most bitcoin cloud mining platforms have packages with set computing power amounts and come with tech support to help beginners or those that are having general troubles. Unfortunately most also insist that you either pay them or be paid in some random altcoin, likely one they own and can print infinitely. They also encourage day trading and many other extremely questionable things.
Cloud Mining Vs Traditional Mining
When Bitcoin Was Created years ago you could mine blocks on your 2009 laptop all day long. As the network grew, so did the difficulty adjustment thus requiring more compute to mine blocks. GPU’s started being used and eventually application-specific integrated circuits or ASICs were built to get as much performance per watt as possible.
This traditional way of mining involves owning your own physical hardware and doing what’s now called “solo” mining. You and you alone would attempt to solve the Proof-of-Work problem, claiming the entire Block Reward for yourself if you succeeded.
Mining Pools
Eventually even one powerful ASIC mining bitcoin wasn’t enough and mining pools were required to have any chance in finding a block and profiting. This involves an individual committing their Hash Power to a mining pool service. This service would pool the hash power of hundreds or thousands of people in order to have a greater chance of finding a block.
If someone in the pool finds a block, the reward would then be divided up and paid out to everyone as a percentage of how much hash power they were contributing. This is the main way most individuals mine today.
Lottery Mining
Bitcoin Lottery Mining (also called desktop mining) is another way for everyday people to mine Bitcoin that involves solo miners competing to find a valid block in the Bitcoin network.
Mining a solo block in today’s world is hard. Like, really, really, really hard. To mine a single bitcoin block yourself, once a year on average, you would currently need 13,500 Terahash. To wield this amount of raw hashing power you’d need 58 Bitmain S21 Pro’s, each with a price tag of $6,318 USD.
This would cost you a total of $366,444 up front, then you’d also have to somehow supply the enormous 204 kW of continuous power they suck up. Then you’d also need somewhere to put them, as they’re incredibly loud, and cool them as well.
Obviously this isn’t practical for everyday people, which is why most people that have relatively powerful Bitcoin miners like the S21 join a mining pool. Bitcoin lottery mining is for those who wish to operate even lower power consumption miners. As these are usually less than about 1 TH/s in power, they’re not worth even joining these pooled bitcoin mining efforts.
As a result, people solo mine with them, essentially gambling on the odds of hitting a block and being able to claim the full block reward like you would a jackpot in Powerball. These tiny solo miners usually only use 15 Watts or less and although the odds of them mining a block can be as high as 1 in 4.6 million, the pay out is huge at 3.25+ BTC or around $200,000.
Differences
These various forms of traditional mining all require you to buy, setup, config, power and maintain your own Bitcoin mining hardware. For those starting out this can be either too expensive, not practical or just too technically difficult.
Cloud mining services try and fill this void, allowing anyone to participate in mining without annoying issues like how to power something that draws 3,000+ watts continuously and that sounds like a banshee screeching 24/7 in their home.
It means you don’t have to purchase all the equipment up front and can operate it from a far, in proper data centers that have cooling, power and security already setup. Powering 3,000+ watts requires a 240 volt, 20 amp dedicated circuit. For many, especially in America where most outlets are 120V, this is a hard thing to setup.
Even if you can easily (and cheaply) power them, they require significant cooling and make a ton of noise. While there are less powerful and quieter options which are easier to manage, if you want a large amount of hashing power cloud mining might be your only practical option short of buying your own warehouse.
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