Cloud mining

Cloud Mining is the process of bitcoin mining utilizing a remote datacenter with shared processing power.^[1][2] This type of mining allows users to mine bitcoins or alternative cryptocurrencies without having to manage their own hardware. Since Cloud Mining is provided as a service there is generally some cost and this can result in lower returns for the miner. There have been some scams involving cloud mining.^[3]

Types of Hosting

Users of hosted Mining equipment can either lease a physical mining server or a Virtual private server and install mining software on the machine. Instead of leasing a dedicated server, some services offer hashing power hosted in data centers for sale denominated in Gigahash/seconds (GH/s); Users either select a desired amount of hashing power and a period for the contract or in some cases can trade their hashing power.

A mining farm located in Iceland. The picture shows scrypt miners.

Pros and Cons

There are several advantages over the normal home-mining.

Pros:

• A Quiet and cooler home
• Lower electricity usage
• no need to manage the equipment - no need to repair and no need to configure the hardware

Cons:

• Hazardous - there are several Pyramid scheme which have turned out as fraud
• Management Cost - cost for the maintenance of the equipment
• Lack of control - most providers don't offer the possibility for one to choose his desired mining pool ^[4]

References

1. "Cloud Mining - How to Mine Bitcoin without a Miner". CoinDesk. Retrieved 1 September 2015.
2. David Lee Kuo Chuen (2015). "Handbook of Digital Currency: Bitcoin, Innovation, Financial Instruments, and Big Data". Academic Press.
3. "Bitcoin Cloud Mining Scams". Retrieved 31 January 2016.
4. Philip Dimitrov. "Bitcoin Cloud Mining - The smart alternative of solo (hardware) mining". Retrieved 4 February 2016.