What is the difference between conventional and cloud mining, and which one is the best?
Since the end of 2020 and until now, the digital currency Bitcoin is still witnessing its best period since its launch in 2009, as its price exceeded the $ 38,000 barrier, violating many previous expectations about its performance during this period, and some other currencies have witnessed a lot of improvement as well as the total market value exceeds the barrier. Trillion dollars for the first time as well, and as a result, the option of mining digital currencies is more attractive for many today.
Since the beginning of the era of digital currencies, the known methods of mining have been through computers that work all the time to process transfer transactions and obtain rewards for that, but with the rise in currency prices and the emergence of many of them, the mining market has changed dramatically from what was the case previously, so we will help you in this The article focuses on understanding the mechanism of mining, the difference between the traditional method and cloud mining, and what is the best option, so follow us to learn more.
What is cryptocurrency mining?
The term crypto mining refers to the method by which new coins are obtained from the coin’s blockchain platform in exchange for contributing to improving network security and processing conversion transactions, by allocating the computational power of users’ devices (miners) to solve complex mathematical equations. To process every block within the blockchain and to ensure that the network operates normally and efficiently.
For many digital currencies, mining is the only way to obtain new currencies, as the currencies that miners obtain come as an incentive for them in exchange for their participation in the network, which will stop working completely or partially if they refrain from mining continuously.
Mining conditions vary greatly according to each digital currency and the conditions for its platform to do so, as there are many factors that may make mining a currency profitable or not, such as electrical energy costs, the type of equipment used, the price of the currency and the difficulty of mining as well, as some blockchain platforms You may increase the level of mining difficulty if the number of participants and their computing power increases during a period.
Traditional mining versus cloud mining
Since 2015, cloud mining began to spread widely, although it was available almost since the beginning of the currency in bitcoin. Traditional mining has become more difficult than before with the emergence of mining farms that use professional equipment for that, and even today it is still The choice between these two methods is a subject of controversy within the cryptocurrency community, and below we will explain each method separately, explaining the advantages and disadvantages of each of them:
Traditional mining is the primary method by which cryptocurrency is mined, as it relies on the presence of relatively high computational power to process conversion factors and the complex mathematical equations needed to achieve this. As for Bitcoin, computer mining has become almost impossible due to the presence of many companies controlling this field in a way that greatly reduces the chance of getting rewards for individual miners.
There are still some users who resort to mining Bitcoin currency through what is known as the Mining Pool, which depends on a group of users sharing the computer power of their devices and collecting it to do mining and improve the chances of obtaining a new block to process it and get rewards in return, but there is Some other digital currencies that can still be mined from the computer, but will not provide the same profits due to their low price compared to popular currencies.
Traditional mining is distinguished by the fact that it may not require high initial costs in the event of choosing easy-to-mining digital currencies, and the user will have complete freedom with his equipment that he uses for mining with the ability to upgrade in the future in case the process is profitable, and in the event that it is losing or not profitable enough, then it can be Selling these equipment and recovering part of the initial investment that was earmarked for it.
Of course, traditional mining comes with many drawbacks, as the amount of profits varies according to the costs of the necessary equipment in addition to the cost of electrical energy, which may be high or low depending on each country, in addition to the fact that it needs sufficient knowledge in this field to prepare the equipment and install the necessary software for mining, which varies. Also, between each currency.
Cloud mining comes in a completely different way from the traditional one, as the process here is done remotely by allocating specific servers and data centers to do the mining on behalf of the user, and there are several companies that provide this service in exchange for a specific subscription that is agreed upon in advance, so the user will not have to do Anything but paying money and receiving digital currencies that he will get from that process.
There is another method for cloud mining, but it needs some experience, as it is for the user to rent a virtual server remotely and choose the computing power that he wants to obtain from it, and then he must install the necessary software so that the server becomes able to mine the required digital currency, although it is not considered. An easy way for many, it is sometimes necessary given that some currencies may not be supported by cloud mining companies.
In order to start the cloud mining process, the user must choose the company that provides these services first, and then he must buy a mining contract with a duration of about two years on average, and the agreed amount is determined according to the computer power that the user wants to obtain to mine his chosen currency. Some companies also charge additional fees for the costs of electrical energy and equipment maintenance and a commission on currency exchange as well.