What is Cloud Mining and How Does it Work?

What is Cloud Mining and How Does it Work?

Crypto cloud mining allows people to mine cryptocurrency without the need for expensive hardware or a physical setup. Learn more about what is cloud...

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If you’re wondering “What is cloud mining and what are the advantages of cloud mining?”, you’ve landed at the right spot. Cloud mining is a new and innovative way for individuals and companies to mine for cryptocurrencies without the need to invest in expensive equipment or maintain a physical mining setup. Instead, cloud mining services allow users to rent the computational power of specialized mining devices hosted in remote warehouses, which can be located anywhere in the world. This lets users take advantage of these machines to mine for coins like Bitcoin, Litecoin, and Dogecoin with a much higher chance of success. In this article, we will explain what cloud mining is, how it works, and its advantages and disadvantages. We will also discuss the different types of cloud mining services available.

What is Cloud Mining? 

As cryptocurrencies gain traction, many people are interested in the various ways that cryptocurrencies can be used to make money. Crypto cloud mining is one such method to earn cryptos and profit from them. If you’re wondering what is cloud mining and how cloud mining works, you’re in the right place.

First, let’s answer the question, “what is cloud mining”.

For the uninitiated, crypto cloud mining refers to the process of mining cryptocurrencies via a remote data center’s shared computing power. Essentially, cloud mining is a substitute for the existing crypto mining infrastructure. Users can mine bitcoins or other cryptocurrencies using this type of mining without worrying about the equipment.

In the past, software companies had basements stacked with computers that ran computations all day and night. With the advent of cloud computing, everything has changed.

Instead of investing in costly machines to mine these coins on your own, you can now hire the processing power of a skilled miner from a cloud mining company anywhere around the globe. By shifting to the cloud, this type of mining eliminates problems like equipment upkeep and direct energy expenses.

When users buy a particular amount of “hash power,” they join a mining pool and start participating as “cloud miners.” Once the hashing power has been rented, users receive a pro-rata part of the revenues.

What is Cloud Mining
Source: Bitpanda | What is Bitcoin Mining – An illustration

To better understand how cloud mining works, let’s take a look at conventional crypto mining first.

How Cryptocurrency Mining Works

How Cryptocurrency Mining Works
Source: BITCOINZ | Graphical representation of how mining works

Crypto mining is the method of adding cryptocurrency transactions to a distributed ledger and validating them on a blockchain network. Cryptocurrency mining, in a more technical sense, is a transactional process that uses computers and cryptographic techniques to solve challenging puzzles and store data on a blockchain. 

When a member spends cryptocurrency, the digital ledger must be updated by debiting one account and crediting the other, just like when physical money is used. A digital currency faces difficulties, though, due to the ease with which digital platforms can be circumvented. As a result, the distributed ledger used by cryptocurrencies like Bitcoin only permits updates from verified miners. This helps to avoid double spending on the network. As miners contribute to network security, new coins are created to compensate them.

Cryptocurrency mining is indeed a great alternative to conventional centralized systems; however, it requires extensive computer and electricity resources, making it unfeasible for most people.

Different Types of Cloud Mining

Now that we have an idea of what is crypto mining, let us look at the different types of cloud mining.

1. Host Mining

Host mining is a type of cloud mining where miners are required to purchase or lease mining rigs and cover the cost of installation and upkeep. With this type of cryptocurrency cloud mining, miners have more control over the rig, allowing them to redirect generated hashing power to mining pools while also lowering overhead costs.

2. Hash Power Leasing 

In this type of crypto cloud mining, a mining farm is rented to provide the hash power needed to mine a given coin. Customers then receive a portion of the mining farm’s overall earnings.

Advantages and Disadvantages of Cryptocurrency Cloud Mining

Advantages of Cloud Mining

The lowering of overall mining expenses and the accessibility of cryptocurrency mining to regular investors who might not have the required financial resources or technological know-how are two major advantages of cloud mining. Another advantage of cloud mining is that users can mine multiple cryptocurrencies utilizing the same service. This allows them to avoid or mitigate the risks related to cryptocurrencies.

Disadvantages of Cloud Mining

The biggest disadvantage of crypto cloud mining is that you rely on someone else to mine cryptocurrencies without verifying that they have the hardware required to mine the cryptocurrency of your choice. Beware of cryptocurrency cloud mining firms that claim to be mining money for you but actually only take your money. The process also centralizes mining to farms, and revenues are based on demand, which is another disadvantage.

How to Spot Potential Fraud in Cloud Mining

One of the biggest warning signs to watch out for in crypto cloud mining is advertisements that seem to promise outrageous rewards in a short span of time. Due to late payments, hidden costs, and “flexible” conditions that alter over time, even projects that initially appear to be legitimate can deceive their clients. Other red flags include short project history, comment bots, insufficient options to replenish the account, too little company information, etc. 

A Guide to Free Cloud Mining

Free cryptocurrency cloud mining enables individuals to enter the cryptocurrency mining market without paying any initial expenses. Here is how you can mine Bitcoin for free on Stormgain – a comprehensive cloud mining platform. 

How to Mine Bitcoin for Free on Stormgain 

  1. To begin mining BTC, first register at Stormgain.com.
  2. Once you have registered, navigate to the Bitcoin Miner page on the platform.
  3. Then, click the green “Activate” button to receive your first mining reward.
  4. Repeat the operation and increase your mining speed by trading or exchanging crypto on the platform. 

List of Websites for Cloud Mining

Let us now look at some of the top crypto-cloud mining platforms. 

1. NiceHash

NiceHash, a global cryptocurrency exchange and hash power broker founded in 2014, operates an open marketplace where it connects buyers and sellers of hashing power utilizing a sharing economy model. With more than 1 million daily active employees, NiceHash is the industry leader in cryptocurrency cloud mining.

2. Genesis Mining 

Genesis Mining, one of the top hashpower suppliers globally since its launch in 2013, offers crypto cloud mining services across the board. Pulling on the latest technology, this cloud mining platform offers cloud mining services for several coins and algorithms without charging any pool fees. 

3. GMiners

Gminers is a London-based mobile cryptocurrency cloud mining platform that enables anyone to mine Bitcoin and earn money from the convenience of their own home. Users can make profits up to 600 USD per month by signing up for the platform’s 5,000 USD annual contract.

4. Shamining

Shamining is a cryptocurrency cloud mining platform that was established in 2018. More than 70 thousand registered users from various countries currently use the company’s services. Shamining is a great option for novice investors since the platform provides a 37 percent extra bonus on mined cryptocurrency rewards for new users.

5. IQMining 

IQMining is a crypto cloud mining platform established at the end of 2016 by a group of IT professionals and blockchain programming specialists. The platform allows users to multiply potential income by integrating cryptocurrency cloud mining with daily payments, Forex margin trading, options, and cryptocurrencies.

Is Cloud Mining Profitable?

Cloud mining has the potential to be profitable, but it comes with costs such as rent and mining pool fees. The amount of profit you can make varies depending on factors such as the type of mining pool, the power of the miners, and the state of the market. Newer mining equipment and models tend to generate more profit than older ones. Additionally, the market state plays a role, as a bear market can decrease profits while a bull market can increase them. The profitability of cloud mining also depends on the reward, which varies for different cryptocurrencies. To maximize gains, it is recommended to focus on the most profitable coins.

Is Cloud Mining Risky?

Cloud mining is a convenient way to mine cryptocurrencies, but it also comes with a certain level of risk. One of the main risks of cloud mining is that you do not own the equipment and therefore, have no control over its use. This means that you are relying on someone else’s gear to do the actual mining for you, and if something goes wrong, you may not be able to recoup your losses.

Another risk associated with cloud mining is the trust factor. There might be scammers out there pretending to mine on your behalf, and you might fall prey to such schemes. It’d be wise to look for a certain level of transparency before believing a cloud mining service provider to be authentic.

Pool Mining vs. Cloud Mining: What is the Difference?

Cryptocurrency mining pools are groups of miners who collaborate to increase the likelihood of finding a block collectively as opposed to individually. On the other hand, as we saw above, crypto cloud mining is a method of mining that frees up miners from the need to set up and maintain mining hardware. Although pool mining and cryptocurrency cloud mining both involve cooperation, they do differ from one another. 

Cloud miners merely need to download an app and make a provider payment, as opposed to pool miners who must pool their computing capabilities over a network to boost their chances of earning cryptocurrency. Simply put, mining pools are for those who own mining hardware to split profits, whereas crypto cloud mining is where you pay a service provider to mine for you, and you get the benefits.


Clearly, with cryptocurrencies gaining substantial traction in recent times, the space has opened up several avenues for individuals to earn huge profits and enjoy financial freedom. Crypto cloud mining is one such endeavor that helps individuals to mine cryptocurrencies easily as opposed to conventional crypto mining, which necessitates excessive computational power, skills, and resources. However, it’s always advisable to do your own research before spending money on such ventures. Due to the high level of volatility associated with cryptocurrencies, users should only invest money they can afford to lose.

Frequently Asked Questions (FAQs)

1. What Contributes to the Idea of Cloud Mining? 

Cloud mining was developed as a solution to various challenges faced by the industry such as shortage of available coins for mining, increasing value of cryptocurrencies, growing demand for network hashing power, and the need to stay competitive. As the algorithm for many cryptocurrencies became more complex and the rewards for mining became less, it was necessary for mining operations to have access to additional computing power. Cloud mining businesses offer an attractive option for customers and investors as they often provide huge returns.

2. What are the Main Characteristics of Cloud Mining?

Cloud mining involves renting computing power from a third-party provider, eliminating nuisances such as dealing with power outages, hosting issues, or maintenance. Additionally, the miner has direct control over their coins and can access their equipment remotely through an internet control panel from any location in the world.

3. What Differentiates Cloud Mining and Traditional Hardware Mining?

Cloud mining allows individuals to invest in a mining enterprise and receive monetary compensation. This can be done by purchasing or renting a portion of the mining company’s hashing power. In contrast, hardware mining requires the use of personal mining rigs, and the miner can choose to mine independently or join a mining pool to contribute computing power in exchange for a share of the profits. Maintaining and updating the equipment and having a reliable internet connection are crucial for hardware mining.

Disclaimers: Opinions expressed in this publication are those of the author(s). They do not necessarily purport to reflect the opinions or views of Shardeum Foundation.

About the AuthorAnuska is an independent freelance writer freshly exploring web3 and blockchain space. Her articles blend personal exploration with established editorial methods, and she’d love to hear your thoughts in the comments!

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