Guarda Wallet team often gets asked about various notions in the cryptocurrency space. Often, the questions are not even related to wallets. This is why we are starting Guarda Education – a series of articles on blockchain-related topics. We have already published an article on cryptocurrency wallets. Today, we will bread down hosted mining and cloud mining.
Cryptocurrency mining basics
Mining PoW crypto requires completing very complex algorithms. Completing these actions and getting some cryptocurrency as a reward takes lots of computing power. Popular blockchains never stop growing as so do their hash rates, making mining even more resource intensive to partake. For an individual, getting profit from Bitcoin mining in these conditions is virtually impossible.
On the other hand, Bitcoin hosted mining allows users to get the needed mining equipment from a provider. This strategy has multiple playing scenarios but on the usual basis, a customer buys the mining equipment from a hosted mining service. Then you will need to pay for electricity and storage – this allows mining a cryptocurrency of choice without the usual maintenance, energy and space concerns. Bitcoin mining hosting is quite a popular business now. Users like using hosting services because of the relative freedom they provide – you can monitor the process through remote access. Surely, there is still the third-party involvement in the deal, but actually buying (not leasing) the equipment secures miners from their cryptocurrency being touched by the provider. The main drawback of Bitcoin hosted mining (it also applies to any other cryptocurrency) is a high price you need to pay for the services. Besides purchasing the expensive equipment, the further costs include repairing mining gear as time passes by.
Cloud mining services allow their clients to pool processing powers and start mining en masse. This way is cheaper than traditional mining are requires less effort from the users. Also, contrary to the hosted mining, there is no need to purchase the mining equipment. Of course, the best point for cloud mining is that it is relatively cheap to start using the services. The customers need to pay for electricity consumption and fees, plus a percentage for using the service.
However, there is a price for this ease of use. Anyone who is into cloud mining must ensure the security of a service they are using. The market demand for mining services is high, so there are many fraud schemes and confusing advertisements around – be cautious! Trustworthiness of a cloud mining service is also essential from the point that these enterprises first collect the cryptocurrencies and then distribute them to the users.
Hosted mining vs. Cloud mining
If you are about to start mining with a hosted or cloud mining service, do your research prior to joining the process. You need to understand not only the basics of mining but the foundation and security of a service you are about to use. A good mining solution needs to be safe, trustworthy and transparent with their payments.