Mining as a Service (MaaS)

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What is Mining as a Service (MaaS)?

Mining as a service (MaaS) is a crypto model that describes the outsourcing of mining hardware and software from dedicated service providers.

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Also known as cloud mining, the practice allows individuals to rent the computing resources required to mine their preferred cryptocurrencies instead of purchasing them outright.

Hence, mining as a service serves as an entryway for anyone to mine cryptocurrencies, such as:

Instead, users get an approximate amount of the crypto asset generated from verifying transactions on the blockchain network.

Once these newly minted cryptocurrencies are generated, investors can choose to convert them to other crypto assets or fiat currencies based on preference.

Techopedia Explains

While crypto mining can be rewarding, it can be expensive to run. An investor may face significant expenses for equipment, energy, ventilation, and facility hosting.

With MaaS, most cost elements can be passed on to a third party.

Cloud mining service operators typically offer mining as a service to users. These service providers offer several options, but the most popular involve:

  • The purchase of mining contracts, where the user leases mining gear necessary to solve hashing algorithms.
  • The acquisition of mining hardware, which the provider maintains.

Mining as a service has become increasingly popular in the last couple of years due to the rapid popularity of blockchain-based protocols.

This form of mining reduces the barrier to entry to crypto mining, which makes it ideal for rookie or hobbyist miners to mine their preferred digital assets for rewards.

MaaS also runs a pay-as-you-go model, which brings flexibility to investors, as they can choose to terminate their contracts without any hassle.

How Does Mining as a Service Work?

To mine a new digital asset, miners are tasked with solving complex mathematical puzzles to add transactions to a block and get the accompanying reward.

The first miner to do so often gets the block reward and a part of the network fee as a commission. Successfully verifying transactions has become more difficult in the last couple of years due to the mining difficulty, which often increases as more miners join the network.

With the mining difficulty skyrocketing, miners have to spend more on resources to maintain consensus across the network.

Service providers offering mining as a service cut through this bottleneck, allowing users to lease computing power, network bandwidth, and storage to mine crypto assets remotely.

Below, we consider the steps on how the entire mining as a service operation works:

5 Key Steps in Mining as a Service Operation

1. Choose a Service Provider

The first to-do list is to select a vetted and trusted service provider to work with. To select a MaaS provider, crypto miners have to consider several factors:

  • Long-standing reputation in the industry
  • Fees
  • Supported crypto assets
  • Mining contracts and pricing
  • Earmarked rewards
  • Mining rigs (optional if they state on their website)
  • Security Protocols
  • Mining pools

Putting these factors on top of mind will help investors separate the bad options from the good ones. In addition, investors can also conduct research on third-party review platforms and social media platforms to learn what past customers have to say about the service provider. This will significantly protect users from engaging fraudulent MaaS providers.

2. Create a Crypto Wallet

A crypto wallet is a blockchain-based digital storage for crypto assets. Since crypto assets are virtual, they cannot be physically handled and rely on these sophisticated storage mechanisms for safekeeping.

There are several types of crypto wallets, but the most popular ones are software and hardware wallets.

The hardware crypto wallet comes in a physical form, like a regular USB stick. As a result, the private keys of cryptos stored in a hardware wallet are disconnected from the internet by design.

Software wallets require internet access to safely store and access digital currencies, but they are susceptible to online attacks. These wallets are often free to use.

Creating a software crypto wallet is easy and can be done within a few minutes. However, saving the mnemonic phrase (between 12 and 24 random words) during the setup process is important to ensure full access and recovery.

In addition, investors should only connect a crypto wallet for the same asset they plan to mine. Creating an Ethereum wallet for Bitcoin rewards could lead to loss of funds if transferred. This applies to all supported assets in the company’s portfolio.

3. Choose a Mining Contract

The next step is to select a mining contract. Mining contract costs are largely tied to the hash power (computing resource) expended in verifying transactions and the crypto asset.

Hence, the higher the hash power, the more expensive the mining contract and vice-versa. Furthermore, the profits generated will be shared based on how much hash power a user purchases.

Other key factors to consider are contract duration, maintenance fees, and the ability to select multiple crypto assets to mine.

Compare the pricing across each contract and ensure it aligns with the stated budget and mining preferences. Then, select one and proceed to the next stage.

4. Deposit Funds

The next step is to select a payment option. The most popular option is to transfer crypto assets to the company’s wallet address. However, some providers offer a fiat payment gateway. Select the most preferred option to initiate payment for the contract.

5. Get Block Rewards

Once the payment is confirmed, the mining process automatically begins. If a block reward is generated, the company will credit the investor’s crypto wallet with the agreed percentage of profits.

Merits of Mining as a Service

Mining as a service comes with several unique benefits for retail miners.

Below, we consider a few:

Advantages Description
Passive Income Stream Purchasing a mining contract and remotely mining cryptocurrencies can serve as a viable income stream for users. This is because the block rewards will be distributed to each user connected to the mining pool of a service provider. Investors can also reinvest their earnings to purchase more hash power and grow their income further. 
Zero Expertise Required Solo crypto mining requires a level of technical know-how to set up and maintain the hardware. Mining as a service takes away this requirement, as the tools and technical details are borne by the service provider. Investors must only pay for a mining contract and watch from the sidelines as their earnings grow. 
Zero Upfront Investment Crypto mining is a capital-intensive project as miners have to spend a lot on hardware, power, space for storage, and an ample ventilation system.

All these liquidity guzzlers are eliminated when using a mining as a service company as they have all the tools set up. Users only have to make a low investment in the mining contract to begin mining crypto assets.

Demerits of Mining as a Service

Using mining as a service to verify transactions has some disadvantages. Below, we shed light on a few:

Disadvantages Description
Unstable Income Cloud mining is not a stable endeavor, as the promised income often fluctuates. This is due to the volatility in the crypto market and the constant changes in the mining difficulty – a constantly changing parameter that determines the difficulty experienced in mining a digital asset. This can significantly impact how much profit investors earn at the end of a month or even a year.
Poor Infrastructure Mining demands advanced mining equipment, which needs to be upgraded regularly as hardware manufacturers constantly look for ways to enhance the productivity and efficiency of their machines. However, some MaaS providers may not be quick enough to update their inventory when new products are introduced. This can decrease productivity and earnings potential.
Loss Potential Cloud mining businesses have been known to shut down unexpectedly, leaving several of their customers stranded. Given that the service is provided remotely, users can see their funds disappear suddenly with no means of recovering them. As a result, investors should factor in the duration and reputation of a MaaS provider before subscribing to a mining contract.

The Bottom Line

Mining as a service serves as a viable avenue to broaden crypto adoption and awareness and secure the network in a larger scope.

The zero need for technical expertise, low upfront investment, and potential to serve as a viable passive income stream make it a great means for both retail and hobby miners to own digital assets.

However, mining as a service is still in its infancy, and users should do extensive research to avoid fraudulent projects. Before choosing to mine a crypto asset, investors should consider its potential, popularity, and mass appeal.

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Jimmy Aki
Crypto & Blockchain Writer
Jimmy Aki
Crypto & Blockchain Writer

A graduate of the University of Virginia, Jimmy previously worked for BeInCrypto, Bitcoin Magazine, Decrypt, Cryptonews and other major publications. Alongside writing for Techopedia, Jimmy is also a trained economist, accountant and blockchain instructor with hands-on work experience in the financial sector.