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With cryptocurrency cloud mining, you can earn passive income without the need for an expensive hardware setup!
In this guide, we’ll break down everything you need to know about cryptocurrency cloud mining — including how you can get started and how you can choose the right platform.
What is cloud mining?
Typically, mining Bitcoin and other cryptocurrencies is an intensive process that involves significant costs — including expensive hardware and the cost of electricity.
With cloud mining, there’s no need to set up your own Bitcoin mining rig. Instead, you can rent mining power from other Bitcoin miners and earn a portion of associated rewards.
How does cloud mining work?
To better understand how cloud mining works, let’s take a moment to understand Bitcoin/cryptocurrency mining.
What is Bitcoin mining?
Bitcoin mining is a process that helps maintain the security of the blockchain. Bitcoin miners help to verify new blocks of transactions posted on the blockchain and in return, receive cryptocurrency.
Bitcoin mining requires an expensive hardware set up, cheap electricity, and regular maintenance.
How cloud mining works
Cloud mining allows users to rent mining power and earn associated rewards. Cloud mining allows you to enter a contract with a Bitcoin miner to earn rewards!
In a cloud mining contract, the customer does not own any part of the mining operation. Instead, the customer simply has a contract with the provider to earn payouts.
Is cloud mining a scam?
Unfortunately, cloud mining scams are relatively common.
Many cloud mining companies promise unrealistic returns to customers to entice them to sign contracts. In some cases, these companies make it impossible for customers to withdraw their rewards.
To avoid situations like these, it’s important to do research on your cloud mining provider and choose an established platform with a good reputation.
What are the different types of cloud mining?
Most popular cloud mining providers offer host mining or hash power leasing.
Host mining: Host mining involves renting or leasing mining equipment from a provider. If you choose this route, it’s your responsibility to setup and manage the mining operation yourself.
Hash power leasing: Hash power leasing involves renting a certain amount of hash power from a provider. If you choose this route, you are not involved with the setup or maintenance of Bitcoin mining equipment.
Hash power leasing is more popular because it is considered to be a more convenient option.
Can I get started cloud mining for free?
Some cloud mining sites like ECOS allow customers to get started with a free demo! However, you’ll need to pay if you wish to enter a contract with regular payouts.
What are the advantages of Cloud Mining?
- No need for mining hardware: With cloud mining, there’s no need to buy your own expensive mining hardware.
- No technical knowledge required: While setting up a mining operation on your own can be difficult, getting started with cloud mining requires no technical knowledge!
- No need to operate: Mining hardware can be noisy and come with significant electricity costs!
What are the disadvantages of Cloud Mining?
- No ownership: With cloud mining, you have no ownership over the mining operation.
- Limited profits: Because you are sharing your profits with the cloud mining provider, your potential rewards are limited.
- Lack of control over mining process: You have no control over the mining process with cloud mining — which may lead to issues if the price of your cryptocurrency goes through a large price swing.
Useful metrics for cloud mining
Let’s walk through a few different helpful metrics for cloud mining.
Hash rate: Hash rate is a measure of how many computations a cryptocurrency miner can perform per second. The higher hash rate a miner has, the better chance they have of receiving cryptocurrency rewards.
Electricity fee: Many platforms will charge an ongoing electricity fee for cloud mining.
Mining difficulty: Mining rewards are determined by mining difficulty — which changes based on how many miners are earning rewards on the blockchain. The higher the mining difficulty, the higher hash rate you’ll need to earn rewards.
Typically, hash rate is measured in units like gigahash (GH/s) and terahash (TH/s).
How to choose a cloud mining provider
Here are a few factors you should consider before choosing a cloud mining provider.
Third-party reviews: Before you choose a cloud mining provider, it’s important to look at how other customers rate the platform on third-party review sites like Trustpilot. This will give you a better understanding of the strengths of each platform — and help you avoid potential scams.
Customer support: Platforms with robust customer support can help you with potential issues that may arise when cloud mining. You should research if your cloud mining platform offers different support options such as live chat, email, and phone support.
Transparency: Before you get started with a cloud mining provider, look to see if they are transparent about how their business operatesions. This should include publicly available information on the executive team and details on where the company’s mining operation is located.
Security: Be sure to understand the security measures your cloud mining provider takes to protect your cryptocurrency. This may include two-factor authentication and SSL encryption.
The best Cloud Mining Sites
Here is a list of popular cloud mining providers. Because of the amount of scams on the market, it’s important to do your own research before getting started!
Ecos
Ecos is a cloud mining company that serves customers all over the world! The company has an agreement with Hrazdan Thermal Power Plant — which gives Ecos cheap electricity for Bitcoin mining. Currently, Ecos is rated 3.8 stars on Trustpilot — however, some users have complained about excess fees upon withdrawal.
Binance Cloud Mining
Binance, the world’s biggest cryptocurrency exchange, announced support for Cloud Mining in 2023. The platform allows users to buy different cloud mining products based on its electricity/historical output ratio. The higher the ratio, the higher the reward when the price of cryptocurrency goes up (and the higher the risk during price crashes). Unfortunately, Binance cloud mining is not available for customers based in the US.
BeMine
BeMine is a cloud mining provider that allows users to buy shares of ASIC-miners with low service fees! The platform is also known for its generous referral program. Currently, BeMne is rated 4.2 stars on Trustpilot with more than 100 reviews.
StormGain
StormGain is a United Kingdom-based cryptocurrency exchange that offers cloud mining to users! The platform allows users to receive rewards up to 0.03 BTC per day. Unfortunately, StormGain and its associated cloud mining services are not available for customers based in the US.
How is cloud mining taxed?
Typically, cryptocurrency mining rewards are taxed as ordinary income upon receipt. For more information, check out our complete guide to cryptocurrency mining taxes.
If you’re looking for an easy way to report your cryptocurrency taxes, try CoinLedger. The platform connects with your wallets and exchanges to help you generate a comprehensive tax report in minutes!
Frequently asked questions
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