Are you wondering what’s the difference between colocation and cloud mining or which one is the better option? It’s not uncommon to get confused between the different methods to mine cryptocurrencies. So, here in this post, we’ll take a look at the two most popular, yet easily confused mining methods and highlight the differences between the two.
Despite recent fluctuations in the cryptocurrency market, Bitcoin remains one of the most popular cryptocurrencies. And with this escalating popularity, the bitcoin market has become even more competitive. As more and more miners are entering the mining landscape, the competition has increased substantially. The rising competition has made solving bitcoin blocks much more difficult and this translates to a need for more power to mine bitcoin. As a result, both, mining colocation and cloud mining have emerged as legitimate ways to mine Bitcoin with the help of third-party solutions.
Cryptocurrency mining has become a lucrative venture for crypto enthusiasts and businesses to generate profit from the surge in the value of the digital coins. However, cryptocurrency mining is a complex process which requires proper knowledge and use of correct equipment to reap profits. Moreover, because of the increased demand and rising competition, the home set up is no longer efficient. So, if you want to earn mining rewards, you should consider either cloud services or hosted mining solutions. But the biggest question is which way is the most profitable?
Both colocation and cloud mining are feasible options and to determine which method is perfect for your mining needs, let’s first understand both methods.
Cryptocurrency mining colocation is a method where you install your servers in a professionally-managed data center. In this method, instead of setting up the server in your own premises, you simply rent the space and utilities for your own equipment and operations. This means you own mining rigs and they are placed in a secure facility and monitored 24/7. The data centers provide all the resources you need to run your mining equipment, such as rack space, power, cooling, internet, etc. Colocation is a popular method because here you don’t have to worry about issues like high energy bills, high heat, noise, and theft. Your mining rig is monitored by the expert round the clock who ensures to operate it at maximum capacity.
Cloud mining is a way of mining crypto coins where miners can rent time and become a member of the mining pool. In this method, the person mining doesn’t require to buy mining hardware to get a reward. There are companies that own and store mining equipment and users are charged for using that equipment to mine. When you opt for cloud mining, you receive a portion of funds based on your performance. This means that you become a member of a mining pool and receive a share of the profits based on your allotted hash power. You will have to pay for using the hardware, as well as electricity and mining service fees. You will have little control over how the equipment is used or how effectively it runs because you’re not the owner of the hardware. Sometimes, there may also be a long term, costly contract.
Colocation vs. Cloud Mining
Here comes the big question- which one is the best method for mining? There are pros and cons of each method of mining and your choice actually depends on your mining purpose. If you want to maximize your investment as a miner, mining colocation is certainly the best option.
As you already know, mining profit largely depends on getting the right power at the lowest cost. Apparently, cloud mining seems to be a cheaper method but colocation is more cost-effective in the long run. Cloud mining appears lucrative because it doesn’t require you to buy any equipment. However, if you consider the monthly rent amount, electricity cost, and other fees, you’ll find that cloud mining does not effectively maximize your long-term gains. In this method, you don’t have any control over the equipment or its operations because you have simply rented it. The lack of control can drastically reduce your contribution and ability to scale. Moreover, despite the initial low-cost of mining of cryptocurrencies, cloud mining is prone to frauds and scams.
Colocation mining, on the other hand, is a safer option and gives you more control. In this method, miners get more power for less cost regularly. Although buying your own mining hardware mean a higher initial expense, still colocation is more profitable in long-run. This is because here you’ll get more power for less cost every month. Your mining equipment will be handled by experts and you’ll have unlimited earning potential because you don’t have to share your profits. Moreover, data centers maintain consistent power supply, steady connections to the Internet, and make sure to prevent criminal activities.