How does cloud mining Bitcoin Work?

We know about Bitcoin mining … and how you can earn reward of 12.5 Bitcoins for every mathematical algorithm solved. The more number of miners join the network, the faster the puzzles get solved, the tougher the algorithms become. Though there is a large potential in Cryptocurrency to earn money, there is also a lot of uncertainty and speculation.

Mining Bitcoins at home is highly difficult and impractical thing to do, because of the highly expensive hardware and high electricity bills. One more risk factor is the graphic cards you use should be constantly updated so as to meet the rising hash powers. In this situation, cloud mining looks like a perfect solution.

Cloud Mining or Cloud hashing enables miners to purchase or rent the Hardware from a data center. There are many private companies in the market like Genesis Mining, Nice hash, Hash flare, Hashing24, Miner Gate, Perfect Mine etc., which lend you their hardware for a price (share) to mine the cryptocurrency.

You can take the cloud mining hardware on a contract for 12, 18, 24, 36 months. Along with the cloud mining contract charges, these companies also charge maintenance fee, which is usually a fixed sum to run the mining hardware, storing and cooling it. Usually the mining contract fee is collected as a share of bitcoins mined and the maintenance is collected in fiat currency.

It has become a big business to acquire high end processors and hire them to the miners. Now let us look at the advantages and disadvantages of cloud mining.


  • No capital investment, no excess heat and no souring electricity bills and noise.

  • Need not take the pain of constantly upgrading the systems.


  • Bitcoin mining is very difficult to speculate. There are so many factors involved -- how the rate of Bitcoins vary, how many new miners join the network, the variance in the difficulty rate to solve the puzzles etc., Long term mining contracts may be risky.

  • It is very hard to speculate the number of miners going to be added, and the increase in the level of difficulty of algorithms. If the level of difficulty increases, the processor speed provided may not be sufficient. You cannot upgrade the hardware as per your requirement as it is not your own.

  • As these cloud mining units are mostly handled by private individuals, they are unpredictable. They can collapse any time. If the bitcoin price goes down, the service providers will incur losses. In that case they can close down the company without any notice, and will not refund the amount collected.

  • Hackers may take away your share of bitcoins. Through cloud mining there is always a risk of losing money and information.

In the highly volatile scenario of cryptocurrency mining, cloud mining has their own advantages and disadvantages. It is up to a particular individual’s luck and speculation to earn or lose money by selecting an appropriate cloud mining facility. It is always better to do lot of research before pulling out your wallet.

Updated on: 30-Jul-2019


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