Bitcoin has shown that it’s here to stay, and as a result, more people are trying to get started mining than ever before – even those who once scoffed at the idea are beginning to recognize the validity of the lucrative mining industry. As a result, the scene is changing, and two competing business models have emerged to serve the retail cryptocurrency miners of 2022. We’re here to explain the differences between cloud mining vs. colocation mining for beginners so that you can make an informed decision about the best way to start mining Bitcoin.
You may know a friend, or a friend of a friend, who made money mining Bitcoin at home on their laptop. We hate to break it to you, but those days are gone. Now that the value of Bitcoin has gone up and a greater number of players are competing for a piece of the pie, you’ll need dedicated mining hardware in order to make a significant profit with your investment. That means getting an ASIC (Application Specific Integrated Circuit) miner (to learn more about these machines and how much profit they can generate, check out our list of the best ASIC miners in 2022).
For someone looking to get started in the mining industry, this can all seem a little overwhelming. Luckily, there are a couple modes of mining available today that allow entry-level miners to get started quickly and easily – namely, cloud mining and colocation mining.
Which one is right for you? Read on to find out which is the right choice when it comes to cloud mining vs. colocation 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.
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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.
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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.
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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