These are nice stuff to talk about and I will share my view on what I understand about all these. Please stay tuned.
I would love to start from my secondary school knowledge and divert to the cryptocurrency know-how. During my secondary school days, I was taught Mining in Geography. I understood mining as the extraction of materials that are unique, scarce, or valuable. These materials cannot be produced in the laboratory, but can only be found beneath the earth's surface. Examples of these materials are Gold, crude oil, limestone, gemstone, and so on. All these can be found with human effort by digging and breaking rocks
So when I became a crypto enthusiast and heard mining, I looked deep into it and discovered that the word was coined from the mining we learned from geography. Yes! I can explain in my little way of understanding. Crypto mining deals with extracting something valuable (coin) from a pool of valuable entities. This relates to the extraction of materials from the earth. The process of validating transactions in a blockchain system by solving complex mathematical functions is the basics of mining, which relates to the explanation I gave
Let me explain something about mining using the steem blockchain. Every steemian on the steem blockchain mint steem, sbd, and Tron. This can be also seen as mining, but the difference with other mining processes is that steem does its own through content creation, and voting. The coin generated comes from a pool, so also every other mining. The bitcoin and other cryptocurrency mined comes from a pool but the way of mining is different. While the steem blockchain does its mining via votes, some cryptocurrencies do theirs through cloud mining which is by utilizing a remote data-center with a shared processing computerized power to generate new coins by hash rates
As explained, cloud mining deals with the company with a huge capacity to set up a mining farm, and the consumer that pays and registers to tap from the pool via the farm.
i. Proof of work (POW)
II. Proof of stake (POS)
Proof of work has been in existence since 1993 created to prevent service attack and abuse, but bitcoin creator Stoshi Nakamoto came up with a new way of using POW as a consensus algorithm to create new blocks to the blockchain.
The POW is performed to create a trustless transaction on a distributed ledger. When mining via POW, the legitimacy of every transaction is verified and new cryptocurrencies are created to reward miners. The proof of work (POW) works this way
i. Every transactions are in blocks
The proof of stake (POS)
ii. The authentication of the transaction within the blocks are scrutinized and proven to be legit.
iii. The POW problems, which is the mathematical calculation (puzzles) are solved by the miners. They all compete to solve a computational puzzle
iv. The first miner who solves the block problem would be able to broadcast the block to the network and other miners would verify the solution and reward is given to the miner that succeeded in adding a new block to the blockchain.
POW was seen as difficult and not everyone can participate because of the cost involved and also many huge companies started mining operations that took individuals out of the game because their computing power is high and no one can sigle handedly fit into the system. So in 2011, there was a delibration and POS was introduced to solve the problems associated with the proof of work. Nevertheless, both still share the same goal of reaching a consensus of creating new blocks on the blockchain, only that the approach is different. The proof of stake entails users to buy cryptocurrency and lock it which is also known as staking. When a coin is staked, reward is eminent. However, the size of the stake determines the next node to be determined as the validator of the next block
So What is cloud mining
Many people cannot set up a mining factory because of the expenses that would be incurred, that's why cloud mining is there to solve the problem. When bitcoin came into existence, the cost of setting up the hardware and related software was high. Only those that have the resources could set up a mining machine, which was at an exorbitant rate. But the process gives other crypto enthusiasts the opportunity to mine bitcoin without owning hardware. Cloud mining involves cryptographic computational power to solve some puzzles that barricade double-spend. Hash power in cloud mining measures how much power is consumed by the network to make it functional. So cloud mining is the process of making bitcoin and other relevant altcoins using some cloud services which can be done individually. In other to do cloud mining, all you need to do is create an account and fund it, then buy the cryptocurrency you wish to mine minding the hashrate, because the higher the hashrate, the higher the revenue
What are the best cloud mining platforms
There are several mining platforms but some are said to be exceptional while some are fake. Some new platforms priotize themselves as legit but after the've taken your money, the zoom without giving you a dime from your profit. That's why it's good to do a proper homework before investing in cloud mining. From what I've learnt in the past in my crypto journey, I can recommend three cloud mining platforms that are reliable
This platform has been in existence for a while and their cloud mining have a 100% guaranteed uptime. They offer options for bitcoin and bitcoin cash and also, users can locate a simple calculator to calculate their profit based on the hash power rented with respect to the amount locked for mining
It is also a platform that has been around for a while. The platform offers different range of cryptocurrency to mine like Bitcoin, Bitcoin cash, BHA, BSV, ECH and so on. On this platform, buyers create an order and pay for the rented hashpower. The hashpower is provided by the miners and the miners are paid for the service provided. The rented hashpower is sent to the pool and the pool pays out reward to the buyer. It is an effective way of adding block to the blockchain after every transaction is verified. They are also a reliable platform
i. Genesis mining
Some of these platforms can be out of stock when it comes to bitcoin mining contracts, but whenever they are available, they always genuine.
Advantages and disadvantages of cloud mining
The advantages of cloud mining is numerous as far as I'm concerned.
i. You can participate with low investment. The income generated is based on the hashrate, so anyone can lock their fund and generate income no matter how small, except in the case of some platforms that have a minimum amount of input that a user can lock.
ii. You don't need to know about cryptocurrency before you can do cloud mining. A little knowledge of how to create account and lock your fund to generate income is enough, unlike setting up a rig and solving complex puzzles.
iii. No need to purchase hardware and other tools for maintenance. The POW mining needs all these but the cloud mining which is characterized by the POS is an exception.
iv. No huge electricity is required to cloud mine. You are ignorant of anything going on at the back end. No matter the difficulties encountered by the cloud miminig provider, you are not affected because you've done your part by investing in the system as required.
Disadvantages of cloud mining
i. Drop i coin brings about low profit. If a particular coin you are mining drops drastically because of its volatility, the profit will also reduce drastically.
ii. If not careful, you can fall a victim of fraudulent companies. All cryptocurrencies are not regularized. Once payment is made, there is no reversal and this has made many companies arise to dupe people. Some refuses to pay the miners their interest on their investment. This is the more reason we need to research and know the best cloud miner platforms.
Thanks to @besticofinder for taking us through the process of mining as a topic. Thanks for reading