Cloud Mining vs Mining Pools: A Shariah Perspective

As interest in cryptocurrency mining continues to grow, especially among Muslim investors and tech-savvy users, two common terms often come up: cloud mining and mining pools. While both are connected to the process of earning crypto through mining, they operate very differently, and their Shariah implications also diverge significantly. This article explores both models, explains their functional differences, and presents how each one may or may not fit within Islamic principles.

What is Mining?

Before diving into the two models, it is important to understand what mining actually is. In cryptocurrencies like Bitcoin, mining refers to the process of solving mathematical problems to validate transactions and secure the network. Successful miners are rewarded with new coins. This process requires powerful machines that use a lot of electricity to perform millions or billions of calculations per second. The more computing power (hashrate) a miner contributes, the higher their chance of earning a reward.

What Is a Mining Pool?

A mining pool is a service that allows individual miners to join forces and combine their computing power. Rather than trying to mine alone, which has a low chance of success, miners can link their machines to a pool, work together on solving blocks, and share the rewards based on how much power each miner contributed.

Importantly, the miner still owns and operates their own machine. The mining pool is simply a coordinator. It receives the work from all participants, distributes it, monitors performance, and splits the crypto rewards according to each person’s share of work.

For example, if a pool mines one Bitcoin block worth 3.125 BTC, and your machine contributed one percent of the total power at that time, you receive one percent of the reward minus a small fee charged by the pool. You can track your real-time performance, hashrate, and earnings using the pool's dashboard.

This model gives transparency, control, and measurable effort for each participant. Popular mining pools include F2Pool, ViaBTC, Luxor, and Slushpool.

What Is Cloud Mining?

Cloud mining is a different model entirely. In this setup, a company owns mining machines in a data centre and offers you the ability to rent their computing power. You do not own or operate any hardware. Instead, you purchase a contract that says, for example, you will receive 100 TH/s of power for 30 days, in return for a fixed payment.

Once you pay, the company claims it will allocate a portion of its computing power to you, use it to mine crypto, and send you daily payouts. You do not control the machine, the settings, or the pool it is connected to. You only see your hashrate and earnings through their private dashboard.

The problem is that in many cloud mining services, there is no way to verify whether the machines exist, whether your hashrate is real, or whether the rewards are truly coming from mining. In some cases, platforms simply simulate mining results and send fixed daily payouts to users, regardless of what is happening behind the scenes. This makes many cloud mining platforms vulnerable to fraud or Ponzi-like structures.

Shariah Perspective: Mining Pools

From a Shariah perspective, mining pools are generally acceptable. The miner owns their machine, contributes computing power, and receives a reward based on actual effort. The pool takes a service fee for coordination. This arrangement does not involve any riba (interest), gharar (excessive uncertainty), or maysir (gambling).

However, it is also important to consider the nature of the mining pool and the blockchain network it supports. If the platform is used primarily to validate permissible transactions, such as a basic value-transfer network like Bitcoin, then mining through it is more justifiable. But if the platform validates haram activity (such as interest-based DeFi or gambling apps), then even indirect participation in that process can raise Shariah concerns.

Shariah Perspective: Cloud Mining

Cloud mining is more complex. Its permissibility depends entirely on how it is structured.

If the platform owns real machines, allocates actual computing power to you (e.g. 100 TH/s), allows you to monitor performance transparently, and provides variable mining output based on actual performance, then the arrangement can be viewed as an ijarah (leasing) contract. This is the most accurate classification for legitimate cloud mining services. In such cases, you are leasing the manfa’ah (usage benefit) of computational power — not the physical hardware, and not acquiring a haqq (right) to guaranteed output. It is analogous to leasing electricity or hiring a server to perform functions on your behalf. You lease the service for a set period and receive output proportionate to its performance.

This is also the opinion of Dr Ghada Ali Amrousy, who states: “the user selects a plan that provides a fixed amount of computing power for a known time, and benefits from the processing performed by the machine. The legal structure here is closer to ijarah than to partnership (sharikah).”

Based on this, the concept of cloud mining is acceptable, as long as the return is not guaranteed, and the asset (power) is real and deliverable.

However, if the platform guarantees daily profits, does not let you verify any real machines or power, and pays fixed returns regardless of mining success, then the model may involve gharar, and possibly even maysir or riba if returns are disconnected from work and performance. In that case, it would not be permissible under Islamic jurisprudence. Many mobile-based and low-cost cloud mining platforms unfortunately fall into this second category.

Earning Crypto: Justified Through jua’lah (a reward-based contract for completing a task)

Although users do not perform mining manually, their rented machines participate in solving blockchain puzzles. The computational activity (measured in hashes per second) constitutes real effort, even if automated. The crypto received is therefore:

A reward under jua’lah since the blockchain network offers a reward for whoever solves the block.

Just like a gold miner rents a drill and keeps the gold he extracts, the crypto reward here is tied to the machine’s contribution and not riba.

A Deeper Problem: Supporting Non-Halal Transactions

However, an issue arises from how mining rewards are earned. Mining validates all transactions in a block. These blocks may include haram transactions such as riba-based DeFi, gambling, or adult content. If a miner’s power contributes to validating these blocks, even indirectly, then a Shariah concern arises: you are facilitating non-permissible activity.

Even if the platform is neutral (like Ethereum), the content of what is validated can be impermissible. The same critique applies to blockchain platforms more broadly. If the blockchain facilitates haram activities by design, such as adult NFTs or lending apps,  and if the validator profits from processing such transactions, then the reward may be tainted, and participation needs careful review.

Bitcoin and Haram Transactions

Bitcoin itself does not support smart contracts or dapps natively. It is primarily a value-transfer network. However, some haram usage may still occur on Bitcoin, including use for illegal or immoral payments (such as gambling or adult services), metadata embedding via OP_RETURN, and Wrapped BTC being used on haram dapps through other blockchains like Ethereum. Still, mining Bitcoin is generally seen as less problematic than participating in consensus on chains like Ethereum or Solana, where the rewards are often linked to validating impermissible activities.

Conclusion

In theory, cloud mining can be structured as an ijarah of defined computational power. But in practice, many platforms fail due to gharar (undefined or unverifiable hashrate), fraud (overselling power or operating scams), and ethical risks (processing haram transactions through mining). For a platform to be acceptable, it must provide clear and verifiable access to computational effort, avoid guaranteeing fixed profits, and ensure that the blockchain activity being validated does not involve impermissible use-cases.

Mining pools offer a clearer and more transparent contractual model, since rewards are distributed according to actual contribution and the pool operator charges a coordination fee. However, they too face a major challenge: on most existing blockchains, participation means validating transactions that include riba-based finance, gambling, or other non-compliant activity.

At this stage, neither cloud mining nor mining pools can be considered fully Shariah compliant. Mining pools are structurally closer to permissibility, but remain ethically compromised in practice, while cloud mining is theoretically possible but in reality rarely compliant.