A lot of computing power, also known as hashing power (Gigahash/seconds or GH/s), is spent on securing the Bitcoin network and validating transactions. It is up to miners to supply this power with their hardware and software. In return, they collect block rewards or fees.

While traditionally miners buy the computer hardware required, the cloud provides an option to mine without the hassle of setting up your own hardware resources. At a fee, you get access to mining capabilities remotely as a service.

This makes it possible to avoid the huge electricity, support and repair costs. It also makes it possible for those with little technical skills to participate.

Types of Cloud Mining

How this power is accessed and used determines what category it falls under.

1. Leased hashing– It is by far the most popular and easiest way to participate in mining. You simply buy hashing power from a vendor and share in the bitcoin rewards generated by it.

Because it has a price, you can sell and buy it back again at the marketplace at your discretion. Overall mining difficulty levels, supply, and demand are factors that affect its price behavior.

2. Hosted mining– Works a lot similar to owning the actual hardware. In this case, you rent a physical server from a provider. It will have your desired specifications and can be accessible remotely for tweaks and preferences. Rental payments are made periodically as per pre-agreed contract periods.

3. Virtual hosted mining-closely resembles the two above. The power capabilities are available for purchase and hiring per unit time. You rent one of these servers and install mining software to run on them. Amazon’s EC2 standard cloud service is one example that became popular with cryptocurrencies that have low power requirements.

In considering what to go for, you need to compare the returns you expect and the total investment.