If you want to invest in bitcoin mining without the hassle of managing your own hardware, there is an alternative.

What is Bitcoin mining?

You can use the cloud to earn your coins. Put very simply, cloud mining means using generally shared processing power run from remote data centres. One only needs a home computer for communications, optional local bitcoin wallets and so on.

However, there are certain risks associated with cloud mining that investors need to understand prior to purchase.

Bitcoin Mining Hardware Comparison

Pros Here’s why you might want to consider cloud mining: A quiet, cooler home — no constantly humming fans No added electricity costs No equipment to sell when mining ceases to be profitable No ventilation problems with hot equipment Reduced chance of being let down by mining equipment suppliers.

Cons Here’s why you might not want to consider cloud mining: Risk of fraud Less fun if you’re a geek who likes system building! Lower profits — the operators have to cover their costs after all Contractual warnings that mining operations may cease depending on the price of bitcoin Lack of control and flexibility.

Types of cloud mining In general, there are three forms of remote mining available at the moment: Hosted mining Lease a mining machine that is hosted by the provider. Virtual hosted mining Create a general purpose virtual private server and install your own mining software. Leased hashing power Lease an amount of hashing power, without having a dedicated physical or virtual computer. This is, by far, the most popular method of cloud mining.

Bitcoin is Secure

How to determine profitability We have previously covered ways to calculate mining profitability. However, the web services offered are designed to work with your hardware parameters, not cloud-mining parameters. Miners are paid any transaction fees as well as a “subsidy” of newly created coins. This both serves the purpose of disseminating new coins in a decentralized manner as well as motivating people to provide security for the system.

Mining for answers

Bitcoin mining is so called because it resembles the mining of other commodities: What is Proof of Work? A proof of work is a piece of data which was difficult costly, time-consuming to produce so as to satisfy certain requirements.

It must be trivial to check whether data satisfies said requirements. Producing a proof of work can be a random process with low probability, so that a lot of trial and error is required on average before a valid proof of work is generated.