Main Takeaways
Cryptocurrency miners compete to solve complex cryptographic puzzles using specialized computers in order to earn newly minted tokens.
Mining operations are akin to huge data centers. Miners ‘pool’ their computing power so they can collectively earn more and share greater rewards.
Cloud mining describes the outsourcing of computational power from someone else’s mining farm. You pay for hash rate and electricity, then earn rewards.
November 2022 saw the launch of Binance Cloud Mining, which lets users earn rewards from Binance’s mining pool without having to buy equipment.
What is cryptocurrency mining? How do miners make money? What’s a mining pool? We explain all this before looking at the pros and cons of cloud mining, and how to get started with Binance.
November 2022 saw the launch of Binance Cloud Mining —a new product that enables users to earn mining rewards from Binance’s cryptocurrency mining pool without having to purchase, set up, or run mining equipment. Simply pay for mining power (hash rate) and electricity via Binance Cloud Mining’s products, and the mining rewards you earn will be sent to you daily.
Before you think about signing up for a cloud mining service, however, it’s important you understand what you’re buying. This article will give an overview of cryptocurrency mining, how miners make money from it, and what mining pools are. We’ll also look at how cloud mining works, its benefits, and how you can try cloud mining with Binance.
What is Cryptocurrency Mining?
Mining is the process in which cryptocurrency transactions among users are verified and added to the public blockchain ledger. Mining is also responsible for introducing new coins into the existing circulating supply.
Note that there is no single method for mining tokens — the equipment and process changes as new hardware and consensus algorithms emerge. Typically, however, miners use specialized computers to solve complex cryptographic equations.
For the purposes of this article, we’ll talk about mining on the Bitcoin network (although what follows is similar for coins that adopt the same mechanism). It’s a complicated process deserving of its own article, and any deep dive into mining will require you to wrap your head around things like hashing transactions, merkle trees, block headers, and hash rate.
One of the key things to understand, however, is that miners compete with one another to solve complex cryptographic puzzles with specialized computers (mining hardware). The first miner to find a valid solution can then broadcast their block of transactions to the blockchain and receive the block reward.
You can think of this as payment of newly minted currency awarded to the successful miner (plus transaction fees). These payments are what encourage miners to maintain the blockchain, and do the work of collecting and validating transactions.
How Do Miners Make Money?
For Bitcoin, the block reward is currently 6.25 BTC, plus whatever transaction fees were included in the block. Blocks in the Bitcoin network are created, on average, every ten minutes. This basically means that every ten minutes, one miner in the network is earning themselves 6.25 BTC, plus transaction fees.
From a business perspective, miners have to invest in mining hardware and spend money on electricity to run these machines. The goal is to make more from the block rewards than they spend on running their operation. But there are no guarantees — some miners may lose money from spending more on machines and operational costs than they make from rewards.
In simple terms, the more often a miner’s computers solve the cryptographic puzzles first, the more money they make. And the more machines and mining power you have, the more likely you are to be the one earning the block reward. This has led to the creation of mining pools.
What Are Mining Pools?
Mining pools are all about hash rate. In cryptocurrency mining, the term ‘hash rate’ refers to the speed at which mining computers are able to perform their computations. Hash rate is directly proportional to profitability: a higher hash rate means a greater probability of mining a block, which means the miner has a better chance of receiving that all-important block reward.
Mining operations are now essentially akin to huge data centers. The more machines a miner has, the greater their hash rate and, as such, the more block rewards they’re likely to receive. As a result, miners will ‘pool’ their resources, joining forces to combine their hash rate into a single ‘mining pool’. The probability of finding new blocks rises due to their increased collective power, so they can collectively earn more and share greater rewards.
Binance Pool, for example, has averaged around 11% of the Bitcoin network’s total hash rate over the last year, and mined 11.37% of blocks (2,980) over the last six months (as of November 2022). Setting aside transaction fees, that’s 18,625 BTC to Binance Pool in six months.
Rewards are shared amongst miners in the pool based on the hash rate they provide. For example, if a single mining operation contributed 10% of Binance Pool’s entire hash rate, they would be awarded 10% of the pool’s earnings. A small mining operation is unlikely to be first to the block reward but by contributing their hash rate to the group, they can earn a percentage share of the larger pool’s more regular income.
Cloud Mining: The Benefits and Dangers
Cloud mining is a way for people to try cryptocurrency mining without having to go through the hassle or expense of buying mining machines, finding a physical location to run them, or all the other capital expenditure involved in running a mining operation. With cloud mining, you outsource computational power from someone else’s mining farm. In short, this usually consists of paying someone else to mine on your behalf.
As cloud mining doesn't require users to have specialized hardware to mine cryptocurrency, they can get involved in the mining process more easily. In addition, because you are essentially renting computing power from someone else, there are no electrical systems to set up or storage issues to consider.
In the most basic of terms, cloud mining allows you to rent hash rate, thereby contributing to the functioning and existence of the decentralized blockchain. At the same time, you will hopefully earn money from the share of mining rewards distributed to you.
You should still exercise caution, of course. Because you aren’t buying a physical machine and are unlikely to ever see the mining farm, you must beware of scams, where bad actors will take money for cloud mining without actually providing any such physical service. Additionally, even with reputable and trusted parties, there is a chance you can lose money.
This is because cloud mining usually requires you to commit to a fixed contract where you pay for hash rate and electricity over a set period of time. Projected earnings for the duration of the contract may point to profit but if the price of the token you’re mining falls during that time, you could end up making a loss instead. There are no guaranteed profits with cloud mining.
How To Start Cloud Mining With Binance
If you want to start cloud mining, Binance is a safe option. With Binance Cloud Mining, you don’t have to worry about hardware, site-sourcing, or mining farms. We handle all the operations and maintenance while you enjoy the benefit of being part of a proven cryptocurrency mining pool and earning your share of rewards.
Ready to buy hash rate with a view to generating income? Simply login to your Binance account and click [Earn] — [Binance Pool], then go to [Cloud Mining]. You’ll see all the Cloud Mining products under [Market]. Choose a product and click [Buy Now].
Adjust the amount of hash rate you want to purchase and choose your payment currency. Currently, we support USDT and BUSD. You’ll see the total payment amount, the estimated start time, and the duration.
Note that you have to pay for your hash rate and electricity upfront. Read and agree to the service agreement and click [Confirm]. Once the order is confirmed, Binance will deduct the agreed amount from your Spot Wallet.
Please note that once the order is confirmed, you cannot edit or cancel it. Subscriptions open every Tuesday from 04:00 (UTC) to Thursday, 14:00 (UTC). Your daily mining income will be settled between 02:00 and 10:00 (UTC). After the settlement is complete, your mining income will be distributed to your Binance Funding Wallet.
Read the following articles to learn more about mining pools and how to use Binance Cloud Mining:
How to Use Binance Cloud Mining
Mining Pools Explained
Binance Cloud Mining Terms of Use
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