Cloud mining produces blockchain-based cryptocurrencies by either purchasing or leasing mining equipment from a third-party cloud provider. Today, cloud computing is the most thriving technology practice. Everything from database services, processing, software, server capacity, etc., is accessed through the internet's cloud. Cryptocurrency mining is not too far behind.

What Is Cloud Mining?

Cloud mining is a cryptocurrency mining method, similar to bitcoin, using rented cloud computing power backed by the Proof-of-Work (PoW) consensus algorithm. There is no need to install any hardware directly at a local system. 

Cryptocurrencies are mined by renting or buying mining equipment from a third party that maintains the equipment. Prevalent cloud mining models comprise leased hash power and hosted mining.

What Are The Different Types Of Cloud Mining?

Currently, three types of cloud mining are available in the market. They are:

• Physical farm rental

This procedure involves renting an organised farm or an entire server from one data centre.

• Virtual farm rental

You can rent a portion of the farm for management, in which you set up everything yourself.

• Computing power rent

You can also rent a cloud comprising numerous farms or with various separate parts.

What Are The Merits Of Cloud Mining?

The following are the advantages of cloud mining:

• Using an algorithmic hash is resource-heavy as the CPU continuously runs during the entire process. It heats the motherboard and other internal components. Thus, cloud mining is becoming prevalent to avoid a severe collapse of the hardware. 
• Constant running of the CPU causes large-scale electricity consumption. As a result, it might become tough to afford such a huge cost. Hence, organisations are involved in cloud mining today.
• Since third-party data centres run on high power, you will get more from cloud mining even after building your own firm.
• Using cloud mining allows you to mine various cryptocurrencies.

What Are The Demerits Of Cloud Mining?

Just as there are advantages, there are also a few disadvantages of cloud mining. They are

• There is a chance of decreasing the bitcoin rate. 
• No matter what kind of contract you have signed, each of them has an expiry date and time, after which they will become invalid. 
• You cannot have control or flexibility in cloud mining which you can have at a local system.

Cloud mining is one of the most prevalent topics in the crypto world. If you want to go for cloud mining, it is vital to understand the concept and working principles thoroughly. It will also be helpful to gather some working knowledge of cryptocurrencies.