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Cloud Mining vs Colocation Mining: Compare Cost, Control & Profit Potential

By Adan Kohnhorst

Cloud Mining vs Colocation Mining: Compare Cost, Control & Profit Potential

Cryptocurrency Cloud Mining vs Colocation Mining

Bitcoin mining has matured into a professional, capital-driven industry. As adoption has grown and the network has become more competitive, new miners can no longer rely on consumer hardware or casual at-home setups. Profitability today requires dedicated ASIC machines and access to reliable, cost-efficient infrastructure.

For individuals and small investors, this shift has created two primary entry paths: cloud mining and colocation mining. Both options allow you to participate in Bitcoin mining without building your own facility, but they differ significantly in ownership, control, cost structure, and long-term returns.

Before choosing a direction, it’s important to understand what each model actually offers and what you’re giving up. This guide breaks down cloud mining vs. colocation mining in simple terms so you can determine which approach aligns with your goals and what you hope to earn from mining in 2025.

What is Cloud Mining?

Cloud mining is a form of mining where people rent cloud computing power in exchange for a corresponding share of mining profits. Unlike other methods, cloud mining allows you to participate without owning any mining hardware or software. 

Simply pay for a share of “hash power,” and the rest takes care of itself. While this may be the easiest way to get involved in Bitcoin mining, be careful – it’s also going to put a dent in your profits over the long-term.

Pros:

  • No hardware necessary
  • Easy to get involved with
  • No prior knowledge or experience necessary

Cons:

  • Since you don’t own the hardware, those who do will eat into your profits over time
  • There are many scams and frauds in the cloud mining industry, making it not as beginner-friendly as it seems
  • Mining hardware retains value for years, so it can be more profitable to actually own the machine(s) yourself
  • Not scalable

What is Colocation Mining?

In Bitcoin colocation mining (also called hosted mining), miners rent rack space, electricity, and other resources in a shared datacenter operated by a 3rd party, the hosting provider. You must purchase mining hardware yourself, but its operation is managed and maintained by on-site experts. Colocation mining also allows you to tap into the expertise of trained professionals, but as the owner of the hardware, you keep  more of the profits.

Colocation mining gives you more control, and constitutes a real, scalable mining operation where you own the equipment and enjoy the results.

Pros:

  • Trained experts will manage your mining rigs and ensure they run efficiently
  • Convenient, offsite management away from your home or office so you don’t have to deal with the heat and noise that miners produce
  • Access to competitive electricity prices through your mining hosting provider which are likely much cheaper than you could get on your own
  • More scalable as you can choose how many mining rigs to purchase and host
  • Gives you the option to sell the ASIC hardware for a profit if there’s a bull market 

Cons:

  • Unlike cloud mining, you will need to purchase your own hardware which requires a larger up-front investment
  • Requires a bit more mining knowledge and expertise than cloud mining, although still suitable for beginners

Cloud Mining vs. Colocation Mining

So when it comes to the question of cloud mining vs. colocation mining, which one is right for you?

It’s true that cloud mining offers an easy way to get started on your Bitcoin mining journey, and it’s tempting to consider a service where other miners will take care of all the major responsibilities. Plus, you don’t even need to buy mining equipment!

Think carefully, though. With that easy on-ramp comes a downside, and choosing cloud mining means limiting your profits in the long-term.

Besides that, the vast majority of cloud mining platforms are outright scams, but can appear legit to beginners. That’s why most people would ultimately be better off just investing in cryptocurrency directly rather than purchasing cloud mining contracts. 

That said, if Bitcoin mining is really attractive to you, our advice would be to cut to the chase and get started with colocation mining where you own the actual mining hardware and have a relationship with the miner hosting provider. You’ll be involved in a scalable, high-yield mining operation that grows over time and generates real, sustainable revenue.

For example, here is a 2-year mining profitability calculation for a single Antminer S19 Pro Bitcoin machine with an initial investment of $10k. The mining machine produces over $11k in Bitcoin profits (assuming you don’t sell the BTC you mine right away) and it’s retained a lot of its resale value thanks to the 5-6 year lifespans of modern mining rigs.

Cloud Mining vs Colocation Mining: What’s the Difference, and How Much Will You Make?

Getting Bitcoin Mining Exposure

On the issue of cloud mining vs colocation mining, there are pros and cons on both sides. However, we recommend colocation mining as the ideal route for miners interested in making a serious profit.

If you’re not sure where to start, consider our Managed Mining program for white-glove mining colocation services. We can help you purchase Bitcoin mining machines and we employ industry experts to watch over your mining operation, so you can achieve maximum results with less effort. 

The mining space is vast and fast-moving, but with an open mind and the right approach, anyone can get involved and find real success.

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