What is Bitcoin mining?

Bitcoin mining, Ethereum, EOS, and other altcoins mining is done by specialized computers. Although the concept of mining coins is very appealing, there’s always a debate on the profitability of hardware mining vs cloud mining.

Cryptocurrency mining

Before carrying out a cryptocurrency transaction, it must be verified on the blockchain network. The process of verifying the transaction on the blockchain network is known as mining and those responsible for validating the transaction are referred to as miners.

As easy as it sounds, it’s a lot of work. In order to mine Bitcoin, you need a software that has the ability to compute cryptographic algorithms, and an enormous amount of computing capacity to complete the mining process. In the beginning, mining was done on personal computers, but now, individual computers are not sufficient enough to make real profits from Bitcoin mining.

And this is one of the drawbacks of hardware mining, as it’s somehow expensive and almost impossible to execute individually. However, cloud mining has fewer risks and doesn’t require the same amount of money or effort to start up.

Hardware mining

Hardware mining requires a lot of money as an initial investment. Some of the factors which affect the cost of mining are:

  • Mining Rigs
  • The hash rate of the Blockchain network
  • The cryptocurrency being mined
  • The cost of electricity
  • The cost of cooling
  • The physical space

The list goes on and on. Also, depending on how powerful you want your mining operation to be, and how much profit you’re aiming to earn, the cost can go up significantly.

In addition to this, most people start mining with multiple rigs to justify the revenue they generate. They also need to consider the cost of electricity where they stay and how much it will cost to cool their equipment to work properly.

Advantages of hardware mining over cloud mining

  • Requires significant initial cost but eliminates the monthly rental fees for the equipment.
  • It is believed to be more profitable if you have the appropriate equipment.
  • You’re not limited to the cryptocurrency mining plans offered by cloud mining companies, you have the option to mine any mineable cryptocurrency of your choice.

Disadvantages of hardware mining over cloud mining

  • Hardware mining has a higher initial cost compared to cloud mining. However, this gap keeps decreasing until your profits reach the break-even point.
  • Hardware mining isn’t that easy. It’s a process that requires a solid technical background and a certain amount of skills to get the job done the right way, even people who have a good understanding of how blockchain works might find themselves overwhelmed with all the information and technicalities they have to deal with.

Cloud mining

In comparison to the complications of hardware mining, cloud mining seems to be simpler to compute. Some of the most popular cloud mining companies like Genesis Mining and HashFlare offer monthly subscription models for users to purchase. These models are computed based on the cryptocurrency you intend mining and the hash rate of the network.

Cloud mining gained popularity simply because of the significant cost and the obvious limitations of hardware mining, and its easiness to start it up.

It allows individuals to invest and purchase a part of a company’s mining power. so the cryptocurrency you intend mining is being mined without the issue of electricity bill, cooling equipment, or storage space.

Advantages of cloud mining over hardware mining

  • You can start mining Bitcoin or any other cryptocurrency with very little knowledge about the Blockchain technology.
  • It is possible to start mining immediately, as there’s no delay associated with purchasing the hardware or shipping cost.
  • There’s no decrease in hash rate by time, and this also means that efficiency is not declined by other factors.
  • The pool management system is running automatically and doesn’t take up your time.
  • You can get a daily automatic payout if you want to get paid on a daily basis.
  • It’s way easier to upgrade and expand your mining operation by increasing your subscription model, unlike hardware mining where you are required to upgrade physical equipment or even discard your old equipment and purchase new ones.

Disadvantages of cloud mining over hardware mining

  • Cloud mining is usually limited to the most popular cryptocurrencies. This is a good thing because you are going to mine only well-established and reliable cryptocurrencies. However, on the other hand, you can often make more profits with hardware mining by extracting new coins when the difficulty and spread are minimal.
  • Unlike Cloud mining, Hardware mining requires more research and thus results in miners being more educated about cryptocurrencies they mine and the blockchain technologies in general.

Conclusion

Hardware mining vs cloud mining is one of the most talked-about topics. This is a topic where experts take different sides, arguing about the cloud mining vs hardware mining profitability. Whichever technology you decide to use, you’ll need to do your own due diligence and dedicate significant time and effort to carry out more research.

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