Colocation vs. Cloud Mining: What’s the Difference?

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Cryptocurrencies might be facing a hard time but miners are still flourishing. Even in today’s bear market, mining cryptocurrency remains a lucrative venture. As you might already know, mining is the process of verifying the transaction on the blockchain. As a reward of validating the previous blockchain transactions, a Bitcoin is granted to the miner.

In the early days, it was easy to set up a GPU rig and begin mining from home. But with the rising competition and volatile market conditions, mining has become hyper-competitive. And today it is not possible to make a profit without investing in highly efficient mining hardware. As a result, these days, miners are looking for better alternatives. The most popular options available for miners include pool mining, colocation, and cloud mining.

For miners who want to earn maximum profit, colocation or cloud mining are the most attractive options. However, these two are easily confused terms and most miners find it difficult to choose the best method. So, here we’ll find out the difference between the two and understand which is the better option to boost ROI on your mining investment.


Cloud Mining

Cloud Mining is a method of mining Bitcoin and other cryptocurrencies where miners rent time or become a mining pool member. In this method, you receive a portion of funds based on your mining performance. You don’t need to buy mining hardware to get a reward. The companies offering cloud mining services invest in mining hardware and users are charged for using that equipment to mine. This means that users have little control over how the equipment is used and how effectively it runs. If you choose this method, you might need to sign a long term, costly contract also. This mining method appears straightforward, however, cloud mining is the most frequent victim of scams and frauds. So, before going for cloud mining, make sure the cloud service provider abides by the applicable industry standards and digital security.

Colocation Mining

Mining colocation differs from cloud mining in the same way as renting an apartment is different than owning it. When you choose cloud mining, you only pay for the time and have little say in how operations work. But when you opt for colocation, you own the mining equipment. You have your own mining rigs and they are placed in a secure facility and monitored 24/7. Colocation allows you to be in charge of the mining hardware without worrying about problems like service disruption, theft, high heat, and soaring energy bills. Your mining units are monitored around the clock and an expert IT team operates them as you like.

Cloud mining is vulnerable to hacks and scams. However, colocation data centers ensure top-notch security of your equipment and mining operations. As compared to a fly by night cloud mining service, a colocation data center invests in security personnel to keep your ASIC miners safe. Moreover, you don’t need to share your profits. You only need to pay for the services and the profit your rigs generate are completely yours. In cloud mining, you get a small portion of the profit that your cloud mining team makes.

Everything you need to run your mining equipment, such as rack space, power, cooling, and internet are provided by the data center. You remain the owner of the equipment and your mining rig is monitored by the expert round the clock to ensure maximum capacity.

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