Categories of cloud mining
Hosted Mining: rent a machine provided by a cloud mining provider. You will have physical equipment.
Virtual Hosted Mining: Your own virtual private server with mining software installed.
Leased hashing power: allocate a portion of the company's hashing power without the need for a physical or virtual machine. (This is the most popular method of cloud mining).
To avoid fraud
The cryptocurrency sphere is filled with scammers. Almost every day, headlines highlight the latest ICO scams, where scammers have used ICOS as a front to raise money for a fake company and then run away with all the money. The case is no different for mining, pool mining and cloud mining. If you have to pay money, pay attention to where it goes before you invest. Below are some tips to avoid scams.
Photos of the data center:
It is important to see the machines you are going to work on. You wouldn't buy a car without seeing it first, right? The same applies to cloud mining. If a company runs a legitimate cloud mining business, photos of its data center should be available for viewing. If not, suspicions may arise.
A mining company that doesn't have an address or a signed mined block can be a warning sign up front. As a rule, the company can be checked via their address in the blockchain. In addition, the company must sign the blocks it mines to confirm ownership.
Avoid claims of unlimited computing power:
"As much as you want for one low price." Really? No. Any mining business will be limited by how many hashes it can lease to its customers. If a company claims that its hash power has no limits, or does not provide this information, then the firm should be avoided.
The impossibility of removing the balance:
If you can put money in but can't take it out, then chances are it's a Scam.
Hidden domain contact information:
Normal companies go to great lengths to prove they are trustworthy. Contact information should be readily available and provided without hesitation if required. Private domain registration is an indicator of fraud. Careful!
Looking at the downsides, it's important that you conduct your own expertise when it comes to cloud mining. Don't forget to read the contracts carefully to understand what you are setting yourself up for. If you don't understand something or the legal language is too confusing, there's a good chance that something questionable is trying to hide.
However, this does not mean that every mining company is illegitimate. While the cloud hashing business is full of scammers, there are some reputable companies that can provide you with profits under the right conditions. As for investments and profits, is cloud mining worth the risk?