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What Is Cloud Mining? Definition & How It Works

Updated 2023-08-17 12:30:23

As cryptocurrency usage grows, so does the demand for mining these digital assets. Traditional cryptocurrency mining, on the other hand, frequently necessitates considerable investments in gear, electricity, and technical expertise. As a result, cloud mining has emerged as an alternate strategy that allows individuals to engage in mining without the burden of expensive equipment and sophisticated setups.


In this article, we'll look at cloud mining, how it works, and the benefits it provides. In addition, we will compare cloud mining to traditional hardware mining, analyze major cloud mining service providers, and highlight the various forms of cloud mining. By the conclusion, you'll have a thorough grasp of cloud mining and its significance in the fast-changing cryptocurrency world.


What is cloud mining?

Cloud mining enables people to mine crypto without owning physical equipment


Cloud mining enables people to participate in mining activities without owning or running their own hosted mining equipment. Users can instead hire or lease computing power from cloud mining service providers who own and operate large-scale mining operations. On the other hand, cryptocurrency mining is confirming and adding transactions to a blockchain, thereby safeguarding and maintaining the network. This used to entail employing specialized hardware, such as ASIC mining (Specific Integrated Circuit), to solve complicated mathematical problems and gain rewards in newly produced coins.


The mining hardware and infrastructure are hosted and controlled by the service provider in cloud mining. At the same time, users access and control the mining operation remotely via a web interface or software. This means that individuals can mine without the logistical constraints of purchasing, setting up, and maintaining costly mining equipment.


Cloud mining providers often offer a variety of mining plans with varying degrees of hashing power, contract periods, and cryptocurrencies supported. Users can select a method according to their budget, mining ambitions, and favorite coin. They pay the price for the hired mining capacity, either upfront or as a subscription, and in exchange, they receive a share of the mining returns earned by the provider's mining operation.


How does cloud mining work?

How does cloud mining work?


Cloud mining entails several important stages and processes that allow users to mine cryptocurrency remotely using the computational resources offered by cloud mining service providers. Let's look at how cloud mining works in more detail:


Choosing a Reliable Cloud Mining Provider

The first step in cloud mining is to select a reliable service provider. Researching and analyzing several suppliers is critical based on aspects such as track record, reputation, transparency, contract terms, costs, and customer service. Choosing a trustworthy and dependable service ensures a smooth and secure cloud mining experience.


Choosing a Mining Plan

After selecting a provider, users can often choose from various mining plans the service gives. These plans include hashing power, contract duration, and cryptocurrency support. When selecting a mining strategy, users should evaluate their mining goals, budget, and the potential profitability of various cryptocurrencies.


Contract Signing

After selecting a mining plan, consumers contract with the cloud mining service. The contract details the mining agreement's terms and conditions, including the contract's duration, hashing power allocation, hashing power maintenance fees, and others.


Cloud mining services usually offer various contracts to sign


Payment and Activation

Users pay for the rented computing power via an upfront payment or monthly subscription fees. When the payment is confirmed, the cloud mining service activates the user's mining capacity and configures it to mine the cryptocurrency of choice.


Mining Operations

When the mining capacity is enabled, the cloud mining provider uses their mining hardware and infrastructure to mine the selected cryptocurrency on the user's behalf. The mining facility of the provider handles the complex computations required to validate transactions and add them to the blockchain.


Mining Rewards and Payouts

As the mining operation produces rewards, the cloud mining service distributes the cryptocurrencies gained among the users depending on their shares of the total mining output. Users get paid in their chosen cryptocurrency wallets or accounts regularly, reflecting their share of the mining rewards.


Monitoring and Control

Typically, users may monitor and control their mining operations or mining farm via a web interface or software provided by the cloud mining provider. They can monitor the performance of their mining activities by tracking mining output, earnings, and other relevant statistics.


Cloud mining vs Hardware mining

Cloud mining vs Hardware mining


The two techniques of crypto mining are cloud mining and hardware mining. Let's examine these two approaches to better grasp their differences and benefits:



In hardware mining, individuals or businesses purchase and own physical mining hardware, such as ASIC (Application-Specific Integrated Circuit) miners or GPUs (Graphics Processing Units). They must have technical skills to set up and maintain mining equipment. On the other hand, cloud mining involves renting computing power from various cloud mining services provided by remote data centers. Miners do not own the mining rigs but pay for cloud mining contracts to use the cloud mining provider's computer power.


Setup and Maintenance

Hardware mining necessitates extensive setup as well as continual maintenance. Miners must install and set up mining software, manage cooling systems to avoid overheating, handle hardware repairs or replacements, and ensure a consistent mining power supply. Technical knowledge and skills are required. Cloud mining reduces the need for hardware setup and maintenance because the provider handles these duties, making it more accessible to those without substantial technical knowledge.


Capital Investment

Hardware mining necessitates a significant upfront investment in mining equipment, which can be pricey. There are also continuing costs like power, cooling, and maintenance. Cloud mining often has cheaper beginning costs because miners simply pay for the mining contract or service, eliminating the need for major capital investment.


Control and Flexibility

Miners completely control their mining activity while using hardware mining. They can select which cryptocurrencies to mine, modify mining algorithms, and change other variables to suit their needs. This level of management provides additional leeway in optimizing mining tactics. Cloud mining often provides less control and flexibility because the provider's terms and conditions constrain miners. They may be restricted to specific mining algorithms or to altering settings.


Mining profitability

Mining profitability is determined by several factors, including the cost of power, the efficiency of mining hardware, the mining difficulty of the chosen coin, and market circumstances. Mining gear allows miners to benefit directly from any advances in hardware efficiency or changes in mining technique. Cloud mining profitability is determined by contract parameters such as mining fees, contract duration, and the price of the cryptocurrency throughout the contract period.



Hardware mining contains hazards connected with mining equipment degradation. If the mining difficulty rises dramatically or the price of cryptocurrency falls, the profitability of hardware mining may fall, perhaps resulting in a financial loss. Cloud mining has its own set of dangers, such as the possibility that the provider's operations would be disrupted or cease to exist. To prevent these dangers, it is critical to select a reliable cloud mining provider.


Overall, although hardware mining necessitates technical knowledge, substantial cash commitment, and continuous maintenance, many cloud mining services are more accessible options with lower initial expenses. It enables users to participate in crypto mining without requiring substantial technical knowledge or the management of their own hardware.


Best Cloud Mining Service providers

When contemplating cloud mining, it is critical to select a trustworthy service provider with dependable infrastructure, competitive pricing, and excellent customer support. The following are five well-known service providers in cloud mining space:


1) NiceHash

NiceHash - Best Cloud Mining Service providers


NiceHash is a popular crypto mining site where users may purchase and sell hashing power. NiceHash caters to both novice and professional miners with a user-friendly interface and support for a variety of cryptocurrencies. The platform has competitive pricing and is transparent about mining methods and profitability.


2) BeMine

BeMine - Best Cloud Mining Service providers


BeMine is a crypto mining service provider that provides flexible cloud mining contracts, clear pricing, and a variety of cryptocurrencies supported. The platform offers thorough information as well as real-time monitoring of mining operations, allowing customers to precisely track their mining performance.


3) Bitdeer

Bitdeer - Best Cloud Mining Service providers


Bitdeer is a cloud mining company that focuses on Bitcoin mining and other major cryptocurrencies. The platform provides cheap pricing, dependable mining infrastructure, and flexible mining programs to meet the needs of diverse users. Bitdeer also offers advanced features like strategic mining and multi-algorithm switching to help customers increase mining revenue.


4) Stormgain

Stormgain - Best Cloud Mining Service providers


Stormgain is mostly a cryptocurrency trading website, but it also provides cloud mining services to users in order for them to mine Bitcoin and other cryptocurrencies. Stormgain offers a handy option to engage in cloud mining alongside trading operations, with a user-friendly interface, cheap costs, and an easy-to-manage mobile app.


5) Hashshiny

Hashshiny - Best Cloud Mining Service providers


Hashshiny is a cloud mining platform that supports the Bitcoin network, Ethereum network, and Litecoin network, among other cryptocurrencies. The platform provides adaptable mining plans, real-time mining statistics, and an easy-to-use interface. Hashshiny also offers a demo mode in which users can explore and learn about the platform before committing to a mining contract.


2 Major Types of Cloud Mining

There are two major types of cloud mining. Based on the mining model and approach employed by the service providers, cloud mining may be divided into two basic types. Let's take a look at each one:


Hosted Mining

Hosted Mining - Major Types of Cloud Mining


Hosted mining is the classic type of cloud mining in which customers rent mining hardware from the service provider. Users in this approach rent physical mining machines and equipment from the provider's data centers or remote data centers. The provider handles hardware setup, maintenance, and management, assuring optimal mining performance.


As opposed to other types of cloud mining, consumers have more control and visibility over the mining process with hosted mining. They can select mining hardware, establish mining parameters, and choose which cryptocurrencies to mine. Hosted mining allows for greater flexibility and customization, making it ideal for those who want more control over their mining operations.


Leased Hash Power

Leased Hash Power - Major Types of Cloud Mining


Another sort of cloud mining is leased hash power, also known as hashing power leasing, in which customers rent computing power capacity for a set period of time. Users lease a share of the provider's mining power, which is used to mine cryptocurrency remotely, rather than renting physical mining hardware.


Users do not have direct control over the hardware or mining settings in leased hash power crypto mining. To create mining rewards, they rely on the provider's infrastructure and mining expertise. Because users do not have to bother with hardware setup or maintenance, this sort of cloud mining space is convenient and easy to use. It is especially suited to those who prefer a hands-off approach to mining and do not require thorough hardware control.


Pros of Cloud Mining

3 Pros of Cloud Mining


Cloud mining has various features that make it an appealing alternative for people interested in crypto mining. Let's look at three major advantages of cloud mining:


1) Accessibility

One of the key benefits of cloud mining is its ease of use. Unlike traditional hardware mining, which necessitates large expenditures in mining equipment, it allows users to enter the mining ecosystem at a cheaper initial cost. Users can avoid the requirement for expensive gear expenditures and technical skills by renting mining power from the service providers. This accessibility allows a broader spectrum of people, regardless of technical background or financial capacity, to participate in cryptocurrency mining and perhaps receive rewards.


2) Cost-effectiveness

Cloud mining saves money by eliminating the requirement for customers to purchase and maintain their own mining hardware. Users just rent the computing power they require from the provider, and the associated costs of hardware, electricity, cooling, and maintenance are paid by the service price. This allows customers to save money on both initial and ongoing capital costs, making mining more financially viable. Furthermore, cloud mining companies benefit from economies of scale, as they can operate large-scale mining facilities more efficiently, lowering prices even further.


3) Convenience

Another advantage of cloud mining is its ease of use. Setting up and maintaining mining hardware can be time-consuming and technically difficult. It alleviates these problems by delegating hardware setup, configuration, and maintenance to the service provider. Users can sign up, choose a mining plan, and begin mining immediately without the need for hardware debugging or ongoing monitoring. Individuals can concentrate on mining tasks and perhaps earn rewards while avoiding the hassles and distractions of hardware administration.


Cloud mining is an interesting alternative for anyone seeking an entrance point into cryptocurrency mining because of its accessibility, cost-efficiency, and convenience. It also allows a broader audience to join in this potentially lucrative business by reducing hurdles like high upfront costs, technical competence requirements, and hardware maintenance constraints.


Cons of Cloud Mining

3 Cons of Cloud Mining


While there are various benefits to cloud mining, it is crucial to recognize the potential pitfalls and obstacles involved with this mining method. When it comes to cloud mining, there are three major factors to consider:


1) Limited Control

Cloud mining limits users' ability to control the mining process. Users have little influence over hardware specs, mining algorithms, and software configurations because they do not own the physical mining hardware. Individuals who like fine-tuning their mining operations or those who want to mine specific cryptocurrencies that may not be supported by the cloud mining service provider may find this lack of control to be a drawback. Users rely on the infrastructure and decision-making of the supplier.


2) Reliance on Service Provider

Cloud mining customers rely on the service provider's dependability and integrity. The mining outputs and possible rewards are directly influenced by the provider's performance, uptime, and security practices. Users may incur disruptions in their mining operations or potential financial losses if the service provider encounters technical challenges or fails to produce as promised. To reduce these dangers, it is critical to select a reliable and trustworthy cloud mining service provider.


3) Profitability and ROI

Cloud mining profitability is determined by a variety of factors, including cryptocurrency market circumstances, mining difficulty, and service provider fees. While cloud mining can be a low-cost option in terms of initial investments and ongoing maintenance, it does not ensure profitability or a favorable return on investment (ROI). Changes in cryptocurrency prices or mining difficulty levels can have an impact on mining payouts and overall profitability. Before investing in cloud mining, it is critical to thoroughly evaluate market conditions and do a thorough cost-benefit analysis.


These factors emphasize the significance of completing extensive research, due diligence, and risk assessment before selecting a cloud mining service provider. Understanding the boundaries of control, dependency, and profitability can assist users in making educated decisions and managing expectations when engaging in cloud mining activities.



In conclusion, cloud mining allows a broader spectrum of users to participate in crypto mining. Individuals can increase their possibilities of success in the mining ecosystem by joining mining pools or selecting reputable cloud mining companies. To make informed decisions about cloud mining activities, it is critical to thoroughly weigh the pros and downsides, select a reputable service provider, and analyze market conditions. Cloud mining remains a viable alternative for anyone interested in experiencing the realm of mining without the challenges associated with mining rigs ownership as the cryptocurrency environment evolves. Individuals can take advantage of cloud mining prospects by being educated and adjusting to changing market circumstances.