Cloud mining is a type of passive cryptocurrency mining using someone else's equipment. The user rents computing power for a fee in a remote data center and receives in return part of the mined coins. The final profit depends on a number of services and options, offered by the cloud mining company.

How cloud mining farms work

A company that opens a remote data center for cloud mining, must go through several important stages:

1. Purchase of equipment for mining: video cards, processors, cooling systems, power supplies, etc.

2. Creation of crypto farms. Each farm can consist of several connected units mining equipment, and its operation is controlled by special software. Correct installation can only be carried out by experienced specialists.

3. Launch of digital currency mining. The company may offer different types of mining coins depending on the characteristics of the farm.

4. Creation of a website through which the company offers to rent the capacity of its farms. Typically, clients have several contracts to choose from. Their cost depends on the hashrate - the mining speed.

5. Miners buy a power rental contract. In return, they receive a percentage of the mined coins. The more expensive the tariff, the higher the profitability.

6. The company receives revenue in the form of commissions for renting capacity.Part of the amount is spent on farm maintenance and staff salaries. The remaining money is net profit.

In the end, everyone remains in the black. Miners receive their digital currency, and cloud services - profit from leasing power.

Why cloud mining has become popular

There are several main reasons which explain the increased interest in this method of cryptocurrency mining:

Simplicity. The miner does not need to buy equipment, assemble the farm and monitor its work. This is what the cloud mining service does. All you need to do is select and pay for the contract using fiat or digital currency.

• Efficiency. Cloud farms have high capacity. This increases the speed of solving cryptographic problems and receiving rewards. When solo mining on a home farm, the chances of finding a block are lower.

• Availability. There are many sites on the Internet that offer cloud mining services. The main thing is to find a reliable and trusted company among them.

• Safety. Some companies have official legal status. As a rule, these are remote data centers from Europe. They strictly follow the laws and do not deceive customers.

Advantages and disadvantages of cloud mining

The advantages of cloud mining include the following:

• no need to spend money on your own equipment and assemble the farm yourself;

• equipment maintenance is carried out by a cloud service. This includes everything: replacement of components, repair, cooling installation, etc.;

• the entire mining process is also controlled by cloud service specialists;

• the farm is not installed in the miner’s apartment, so it does not take away living space and does not create discomfort due to high noise levels during operation;

• the remote farm operates 24/7.This process does not depend on the stability of electricity or Internet connections that are available to the miner;

• there is no need to regularly pay bills for the electricity consumed by the farm;

• with a small budget it is easier to rent power than to buy equipment yourself;

• many reliable and secure services for cloud mining have already been launched. Including in those regions where their activities are regulated at the legislative level;

• you can predict the likely profit, since the contract implies a fixed hashrate. But you need to take into account that other factors also influence the final income;

• there are no limits on the use of cloud mining services, one person can enter into contracts with several companies at once;

• Most projects allow you to mine different cryptocurrencies. This allows you to hedge risks associated with falling rates;

• opportunity to participate in referral programs. Anyone can invite new people clients and make a profit for it, even without your own investments;

• you can choose short-term and long-term contracts.

Cloud mining also has its disadvantages, which are also important to consider before investing money:

• in this niche there are a large number of fraudulent projects and financialpyramids that call themselves services for cloud mining;

• most companies do not provide miners with complete reports and statistics. It is impossible to find out the real profitability of someone else's farm;

• unscrupulous companies often mislead customers. For example, They promise high profits - up to 1000% per annum. In fact, earnings are much lower;

• cloud services are constantly exposed to hacker attacks. In such situations, the security of client funds depends on the reliability of the company;

• if the value of the coin collapses, then the contract will not pay off;

• there is a dependence on the increase in mining complexity. Because of this, the company may stop the operation of the farm;

• it is not always possible to switch to mining another currency, you have to wait for the contract to be completed. This problem is also aggravated during periods of falling value of the mined coin;

• often there is no opportunity to immediately pick up accrued coins. Each service has its own minimum withdrawal amount. If a cheap contract is chosen, then the “minimum wage” can be accumulated for up to 1 year or more;

• cheap contracts are ineffective due to the long payback period. Due to coursework fluctuations and increasing difficulty of production, sometimes it is not possible to gain profit at all;

• limited choice of contracts - many services offer 3-4 tariffs.In each case, its own hashrates, mining algorithms and validity periods;

• there are no physical assets, as in the case of your own farm. The user invests money in renting virtual power;

• the rented equipment does not belong to the miner. He can't control it at your own discretion;

• limited selection of coins. Basically, miners are offered to mine popular digital assets: BTC, ETH, ETC, LTC and others.

Considering all these shortcomings, you need to understand that the longer the contract the miner signs, the higher the risks he takes on.

Types of cloud mining

Depending on the type of rental equipment, cloud mining can be divided into three main types:

• Hosting. The miner rents a ready-made farm, which is installed in a remote data center. Collaboration takes place through the cloud service mining - website on the Internet.

• Virtual hosting. The miner only rents a virtual server. At the same time, he himself installs the software that will be used, and then independently monitors the entire process of mining cryptocurrencies.

• Power rental. The user rents the capacity of someone else's farm. He does not have access to the equipment and does not participate in its maintenance.

The third type is the most popular among beginners, as it does not require virtually any knowledge or experience in mining. You just need to buy a ready-made contract and watch how new coins appear on your balance every day.

Another way to participate in cloud mining is to sell own capacities. That is, the miner himself can act as a contractor and rent out his equipment. To do this, you need to have a powerful farm (or remote data center), as well as a website to promote such services.