What is Cloud Mining?

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What is Cloud Mining?

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Cloud mining is an online version of regular cryptocurrency mining that uses cloud computing. It allows everyone, regardless of their technical background or available funds, to be able to benefit from the crypto mining industry without the hassle of maintaining physical hardware and maintenance.

In this article, you will learn about the basics of cryptocurrency mining and how cloud computing technology is taking this industry to the next level.

What Is Cryptocurrency Mining?

Cryptocurrency mining refers to the process of creating new digital coins by using specific hardware. While creating new cryptocurrency coins, miners verify the transactions between network members and secure the system in the process.

In other words, crypto miners such as Bitcoin miners verify and gather transactions in batches, called blocks, and link them to previous blocks using complicated cryptography techniques to ensure that they are tamper-proof.

In this way, the members of a blockchain will be able to run the system in a distributed setup using a shared and verified copy of all transactions ever executed on the network. A consensus mechanism is used in this process which defines the way members would reach an agreement on the state of a transaction: valid or invalid?

A cryptocurrency needs mining when using the Proof-of-Work (PoW) consensus mechanism. PoW was popularized by Satoshi Nakamoto, the anonymous creator(s) of Bitcoin when it was mentioned as the crypto’s consensus mechanism in its whitepaper back in 2008.

To make sure that every member of the system will act honestly, the system requires them to put some skin in the game; something they will lose if they act dishonestly. PoW has set this stake as expensive hardware and maintenance fees such as electricity and cooling.

Miners will also be encouraged to behave honestly as they will be rewarded with newly mined coins whenever they successfully verify a block of transactions.

For an open blockchain, like Bitcoin, anyone can participate in maintaining the network by running a blockchain node. We have various types of blockchain nodes that may take on different roles. Based on these roles, the node operator would need different software and hardware requirements.

You can read our “Blockchain Nodes Explained” article to learn more about various types of blockchain nodes and how they help the network to stay up and running.

To become a miner, you would need to operate a mining node that requires special hardware and infrastructure based on the selected cryptocurrency coin. Bitcoin mining, for instance, is a highly competitive industry with big names investing millions of dollars in Bitcoin mining farms.

This makes small self-mining almost impossible, meaning as a Bitcoin enthusiast you would not be able to participate in the mining process the regular way; that is to keep some hardware running the Bitcoin software in your house while using the normal electricity you have available at home.

However, you are not out of options.

You can share your existing hardware and its computing power with others and split the rewards whenever you successfully mine a block. Or, you can buy or lease mining equipment or their computing power.

How Does Cloud Mining Work?

Cloud mining refers to the use of cloud computing to mine PoW cryptocurrencies such as Bitcoin.

Cloud computing allows everyone to be able to buy or rent computing resources over the internet without getting involved in the maintenance of the equipment. This computing power can be used for anything: running a server or mining Bitcoin.

There are two main ways that you can use cloud mining: using a hosting service or leasing hash power from an existing mining site.


In this model, you can buy some cryptocurrency mining hardware from a crypto mining farm. The maintenance is operated by the company, however, you would need to pay for the fees including the electricity bills.

The main benefit of this model is that you won’t have to worry about the technical side of things and you would be able to enjoy better electricity options as these mining farms are located in areas with cheap electricity and maintenance costs.

This model is mainly suitable for institutional investors as the costs may go up to thousands of dollars each month.


By leasing, you will directly lease the hashing power from an existing crypto mining farm.

This model is more suitable for retail users as you won’t need to pay any maintenance or electricity costs. All you have to do is buy an existing plan which specifies the hashing power you will get and an estimate of the revenue you can make.