This gave birth to Ethereum. Ethereum was discovered and developed by Vitalik Buterin to not just match the prowess of Bitcoin, but to better it by expanding its capabilities. Ethereum’s blockchain also gave the world the concept of ‘smart contracts’ as it supported scripting and the creation of decentralized apps through its Ethereum Virtual Machine or commonly known as EVM. Ethereum claim of being better than bitcoin and additional features made many believe that Ethereum was the coin of the future.
Mining the Ethereum
With the belief that Ethereum had the charm to change the world, a lot of miners shifted their focus from Bitcoin to Ethereum. Ethereum’s mining (Proof of Work) was not much different from that of Bitcoin. Any miner that wanted to dig in for getting Ethereum, they had to use computers with superior graphics chips to provide solutions to difficult mathematical puzzles until the block is confirmed and the miner receives his reward in Ethereum.
An Ethereum miner takes nearly 12-15 seconds to mine a block and get his rewards. If the mining rate falls and the miner takes more or less time to solve, the algorithm automatically adjusts its difficulty levels so that miners can bounce back to the 12-15 second solution time.
While things look easy and Ethereum mining a cakewalk, one has to remember the Ethereum may not need mining services forever. Ethereum is soon and slowly moving to Proof of Stake ditching the Proof of Work algorithm to determine the validity of transactions. This would mean that the network would be then secured by token owners and not the miners. Hence purchasing the ASIC or high-end computers might not be a very smart option.
Types of Decentralized Protocol Ethereum Mining
While miners can buy their equipment and run them on their own, crypto mining is still a very difficult and complex procedure.
Apart from high-end equipment, there are a lot of factors that need to be considered and taken care of to make mining profitable. Hence many a time a lot of miners adhere to decentralized protocols which can maximize their profitability. According to these protocols and based on the hardware and hosting positions, Ethereum mining could be classified into two categories – Hosted Mining and Cloud Mining.
In hosted mining, the provider builds and then leases or sells the mining equipment or hardware to the customer directly. This arrangement could be modeled in a variety of ways but generally, it’s the customer who acquires the equipment from a hosted service or sends its directly to a hosted data center or the mining farm. The customer now has to pay the power cost and storage cost allowing someone to mine blocks with purchased or leased hardware. By using hosted services, the miner is hassle-free and does not have to deal with the maintenance, electricity or storage concerns which he may have to encounter while running the hardware on his own.
There are certain advantages that hosted mining brings to the miner which includes more control as they have anytime and anywhere access to exact specifications relating to their mining equipment and can verify the same by having remote access to their mining hardware. The other advantage adds up to the security part of it as the customer/miner is the owner of the mining device and the hosting service provider does not touch the coins at any stage. The only disadvantage here is the upfront cost that miner incur to buy or lease the equipment and repairs if any are also to be borne by the miner.
Unlike hosted mining, cloud mining brings together the customers and their processing powers to a pool where they together mine Ethereum in bulk and at a cheaper rate. With no upfront cost to be borne by the miner for purchasing or leasing the equipment, cloud mining turns out to be relatively cheaper. The cost associated here is that of electricity and fees with respect to mining along with a percentage of the reward earned via mining blocks for the cloud mining services.
As precautions, the miner has to keep a check on the services which they are utilizing gives them a guarantee of the hash rate and other mining capabilities. They also need to associate with reputed names so that their block rewards are secure and are timely distributed by the service provider.
So just to bring in the clear differentiation between the two:
|Hosted Services||Cloud mining|
|The upfront cost of buying or leasing the equipment||No upfront cost involved. There may be a small onboarding fee (if any)|
|More Control as the miner can actually check its equipment’s performance||Less Control as the miner cannot distinguish his bifurcated performance|
|More secure as the hosting service provider does not touch the block rewards||Less secure as the miner has to control the block rewards and has to trust the service provider for being fair in reward distribution|
Ethereum Cloud Mining
With the kind of challenges that an Ethereum miner is facing in terms of price and anticipated move to proof of stake algorithm, investing in Ethereum mining equipment and even going for hosted services is not turning out to be that profitable for miners. Hence a lot of them are shifting to the Cloud mining options as it is relatively cheaper with no upfront commitments.
There are now several remoted farms that have started providing Ethereum cloud mining services. These different service providers charge variable fees based on the capacity and hash power that is being utilized. The cloud mining services also make it hassle-free for the miners as they do not have to take care of the hardware which is maintained by highly skilled professionals who are responsible for the operations of these plants. Also, electricity cost is far lower for these cloud mining service providers as they are usually situated in far of locations. The equivalent electricity cost for a miner running the device out of his home may be significantly higher and full of hassles.
Reasons Miners prefer Ethereum Cloud Mining
While most of the reasons overlap with the advantage of cloud mining, Ethereum miners find cloud mining interesting because –
- It provides a source of passive profit during the day.
- The user data and token rewards are preserved on the cloud and there is very little chance of losing them due to hardware issues.
- Increase in profitability due to Partner Programs.
- Pooling hash rate helps in increasing profitability as well as together everyone achieves more.
- No hassle of managing and maintaining hardware.
- Easy access to mining from anywhere around the globe.
Ethereum Cloud Mining Providers
With the popularity rising for Ethereum cloud mining, there are a lot of companies that have started providing these services. Below is the list of most popular Ethereum cloud mining service providers
Name of the Service Provider
The changes Ethereum is undergoing in terms of its algorithm and the price at which it is hovering, Cloud mining sees to be the best option.
For miners, there is no upfront cost to be incurred to join the hash rates. But yes choosing the right player and right contract is the key as it has a direct impact on the profitability. Hence a bit of research is required.