crypto mining

Cryptocurrencies are mined on the network by creating new coins through mining. This can best be explained by the cryptocurrency Bitcoin. Each network subscriber can, in principle, earn money by mining with the corresponding Bitcoin address. However, various requirements must be met to participate in the mining process.

“Mining” first runs the necessary control functions on the blockchain. No third-party financial service providers or banks verify transactions performed on the system. It is also worth mentioning that cryptocurrencies like Bitcoin cannot be minted twice. Fraud is thus virtually excluded. Mining within the Bitcoin network ensures that all transactions are properly executed and recorded on the blockchain.

All transactions that occur within the network are transmitted to all network participants. So basically every single user can participate in the computation of “blocks” and “blockchains”. Once a transaction is verified and confirmed, users who can solve the relevant math problem will receive a reward in the form of bitcoins. Since Bitcoin’s system requirements are currently very high, it is usually not a single user, but a pool of users or mining pools.

Generally “mining”

In particular, newcomers to the industry often think that “mining” means creating a new cryptocurrency. However, this is only partially true. Above all, mining serves to secure the blockchain. So-called “miners” are responsible for verifying and confirming new transactions to keep the network stable. Each individual network participant can confirm transactions and combine them into new “blocks”. The completed block is then always incorporated into the blockchain as a “blockchain”. The mining process also ensures that the network does not duplicate transactions. Miners also ensure that no one violates the rules of the network protocol.

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Increased difficulty and reduced wages

The fact that mining is increasingly difficult for individuals is because of the system. Over time, you can mine fewer and fewer coins. This slows the growth of money until it eventually comes to a standstill. A total of 21 million Bitcoins could be created. This limit is set by the Bitcoin protocol. It is assumed that the last bitcoins will be mined around 2140. However, experts assume that over 90% of all coins will be created 100 years ago.

The sinking bonus for creating new “blocks” results in mining becoming increasingly unprofitable, especially for individuals. People with limited computing capacity are usually no longer able to actively participate in the mining process.

 

How can individuals benefit from mining?

At the beginning of the cryptocurrency Bitcoin (between 2009 and 2010), the Bitcoin network’s own graphics card allowed it to count blocks as an ordinary computer user. At the time, the creation of new bitcoins was still favoring individuals. Meanwhile, this is practically impossible. This is because the computing power required for mining is too high for ordinary computer users. Nonetheless, you can benefit from participating in Bitcoin Mining as an individual.

• Mining pools: One possibility is to join so-called mining pools. These are networks that use shared hash power to compute the blockchain to get newly created bitcoins. Mining pools differ primarily in size, but also in the type of remuneration for participants.
• Automatic mining: If you have the right mining hardware, you can of course directly participate in the mining process. Miners can use the mining calculator to calculate the computing power needed to calculate the value of their investment.
• Cloud mining: Another alternative is to contract with a cloud mining provider. It has a farm of servers and provides users with the computing power they need to mine a specific cryptocurrency over a period of time.

“Mining” of cryptocurrencies through so-called cloud mining providers is becoming more and more exciting even for individuals. Depending on the provider, anyone interested can choose from a variety of cryptocurrencies and related algorithms.

Cloud mining contracts can vary greatly from provider to provider, so it’s a good idea to accurately compare cloud mining providers. Presentations from some of the most well-known companies in this field can be found in our supplier overview.

General Interim Conclusions for Mining

As the difficulty of the mining process increases, bundled computing resources are particularly promising. In addition to mining with your own computer, you also have the opportunity to join a mining pool or use the services of a cloud mining provider. The latter also partially works with mining pools. Available resources are effectively used to engage in mining.

The subject of cloud mining is discussed further below.

What is cloud mining?

The time when individual users could “mine” cryptocurrencies like Bitcoin is over. In any case, autonomous mining is becoming increasingly difficult due to the high computational power required. Anyone who still wants to dig cryptocurrencies will need a wide range of equipment as well as technical skills. However, in most cases it is no longer worth playing the role of a single miner, so today you can use so-called cloud mining.

Note: Do not confuse cloud mining with mining pools. Here multiple users work together by pooling computing capacity. Cloud mining allows users to rent or purchase computing power or hardware from cloud mining providers. These are settled through contracts. Maintenance costs are often added. However, some cloud mining providers work with other mining pools.

Cloud mining: facts

• In “Cloud Mining”, users purchase or rent the computing power or hardware required for mining from a cloud mining provider.
• The cloud mining company performs the mining process for the contracting parties as part of the contract they have signed.
• Remuneration corresponds to the amount specified in the contract. Also, maintenance costs are automatically deducted from your profit.
• Cloud mining offers attractive gains, but increases the risk of loss as cryptocurrencies are highly volatile currencies.

Various cloud mining providers have already entered the market to make cloud mining attractive to the average user. Various contracts allow users to enter the mining process relatively favorably. Depending on the provider and the currency you choose, there are lifetime contracts and limited contracts (as long as the contract is profitable). A clear advantage of cloud mining is that users do not have to provide their own hardware and computing power. This is completely done by cloud mining providers.

 

How does cloud mining work?

In the first step, stakeholders need to select a cloud mining provider. Here is a value for an overview of cloud mining vendors. Then visit the provider’s website and open a customer account. Cloud mining comparisons are always encouraged. Depending on the provider, offers and conditions can be very different.

Depending on the provider chosen, the user can conclude by choosing a mining contract and corresponding computing power. After purchase, the cloud mining provider’s hardware usually starts immediately with coin generation. However, with some vendors, contracts also sell out quickly, so customers have to wait weeks to months in this case. You can read more in our cloud mining provider review.

You can then move the coins mined by cloud mining to your own wallet. Distributions are daily and weekly, depending on the provider chosen. Leased computing power is tied to corresponding mining pools by cloud mining providers. In this case, users don’t have to worry about anything after completing the Cloud Mining contract.

These advantages are provided through cloud mining

Especially for beginners, the cloud mining company’s proposal reduces the barrier to entry into mining. This is because it does not require any software knowledge to set up such a high-performance computer, nor does it require appropriate hardware. So, you don’t need to invest a lot of money before you start mining. As in the beginning, people with a small amount of money can participate in mining again.

Another advantage of cloud mining is the flexible use of computing power provided by cloud providers. If the business is profitable for the individual, additional resources or contracts may be added as needed depending on the provider. This also allows us to respond flexibly to each market situation.

Advantages at a glance

• No prior technical knowledge required
• No hardware and software required.
• Therefore, no installation, maintenance or repairs need to be performed.
• The cloud mining provider handles the entire transaction after signing the contract.
• Quick and easy registration on the provider website is time-saving and intuitive.
• Depending on the provider you can mine other cryptocurrencies.
• “Mining” is based on a fixed contract.

This downside is with cloud mining.

Users of cloud mining providers can reduce investment costs and gain flexibility through such contracts. But in general, you have to pay more for more computing power. Also, there are contracts with different durations and maintenance fees, which is what most cloud mining providers do.

Another issue is the risk of cloud mining scams. Users should always inform themselves about the vendors from which they get their computing power. In our cloud mining providers comparison, only reputable companies are listed with their services. Also, for more information about Cloud Mining Company, please refer to their Cloud Mining Experience Report.

Cons at a glance

• Generally, the profit is lower than automated mining of cryptocurrencies.
• The initial investment usually pays off only after a few weeks or months.
• Some vendors incur additional “maintenance fees” beyond those specified in the contract.
• There is a general risk of loss in terms of volatile digital currencies.

A common risk to see each performance is cryptocurrency. This also depends on the success of your mine. Even if the cloud mining provider orchestrates the whole process very well and everything is done to the maximum satisfaction of the customer, all parties involved should always expect the cryptocurrency of their choice to depreciate. Therefore, capital loss is possible at any time. However, each digital currency should be (almost) completely worthless.

How much can you earn with Cloud Mining?

The advantages of cloud mining depend on several factors. Among other things, as already mentioned, the price of each digital currency plays a major role. However, cloud mining costs also play a role. In most cases, this is a fixed amount and is determined through the applicable contract. The cost depends, on the one hand, on the currency chosen, on the other hand, on the duration of the contract and other fees raised by the offeror.

Additionally, fees for the transfer or sale of discarded coins must be considered by the user. For example, when discarded coins are transferred from one’s own wallet to another wallet or stock exchange, transaction fees usually apply. This means that on top of the pure cloud mining costs, there may still be additional costs that reduce revenue. When choosing a cloud mining provider, all costs and fees should be transparently displayed.

The original concept of digital currency

The concept of digital currency dates back to 1998. Wei Dai introduced the basic idea via the cyberpunk mailing list. However, he failed to implement the idea, since there were no technical requirements at that time. In 2008, Satoshi Nakamoto took his idea back and published the concept of a digital currency, Bitcoin (“a peer-to-peer electronic cash system”), in a white paper. The system was supposed to work “person to person” without state or bank involvement. The result is an innovative Bitcoin network (Bitcoin protocol) based on cryptography.

On January 3, 2009, the first Bitcoin was created electronically. It was Nakamoto himself who “scraped” the first 50 bitcoins (until now it is unknown if it was one person or an entire team).

General information about the cryptocurrency Bitcoin

Digital currencies are still young and experimental, and at the same time very expensive. The latter applies above all to Bitcoin, the undisputed market leader. The cryptocurrency has really started a new era of payments, at least when it comes to Bitcoin proponents. Even an innovative and decentralized currency like Bitcoin has had to overcome some hurdles in the past to gain recognition.

To date, Bitcoin has many advocates, but also many critics who speak of it as a threat to the financial system. Reason: Neither states nor banks can interfere with transactions taking place on the Bitcoin network. Although digital currencies were more ridiculed in their early days, they have made a noteworthy upward journey, especially in recent years. It is read regularly in the media. Banks also have no other choice but to consider cryptocurrencies as serious competitors to traditional currencies. This is exactly what Bitcoin is aiming for. Besides creating new coins, Bitcoin should have a permanent place in the financial sector in the future. In these countries, the currency is still not a common means of payment. However, other countries have already created Bitcoin.

Where can I buy Bitcoin?

Bitcoin (and other cryptocurrencies) cannot be “mined” on the network. Investors can also purchase them from relevant markets and stock exchanges on the Internet. Depending on the provider, coins are either acquired by another individual (barter) or purchased directly from the provider at current prices. Prices are always determined by supply and demand.

Note: Since cryptocurrencies are digital currencies, they actually only exist as files. To keep your coins, you need a wallet (digital wallet), which also serves as a kind of account for sending and receiving cryptocurrencies.

Compare cloud mining providers

In the meantime, there are some cloud mining providers on the market offering their services in different terms. For users, it is very important to familiarize yourself with the service provider’s services and related costs in advance. To give you an idea of the providers, we’ve compared various reputable cloud mining providers with their services for our readers. These include HashFlare and Genesis Mining, two famous companies who have been successful in the market for several years. Both providers allow mining for a variety of cryptocurrencies besides Bitcoin. A variety of contracts of different maturity levels are offered. Customers must go here in advance. Once the contract is signed, the selected cloud mining provider will implement and start participating in the mining process.