Colocation Mining vs. Cloud Mining: Which one is better? 1

Colocation Mining vs. Cloud Mining: Which one is better?

With the escalating popularity and growth of Bitcoin and other cryptocurrencies, miners continue to flourish. Cryptocurrency mining enables crypto enthusiasts and businesses to profit from the surge in the value of these digital coins. The crypto market is highly volatile, but crypto mining remains a highly lucrative venture despite the constant fluctuations. However, cryptocurrency mining is a complex process that requires proper knowledge of the decentralized protocols and the correct equipment to succeed.

During the initial years of crypto mining, people could earn mining rewards by quickly setting up a GPU rig to start mining from home. However, with rising demand and increasing competition, the house setup is no longer efficient for earning a profit. Today, to earn mining rewards, miners need to be both fast and cost-effective, and for this reason, the services of cloud and hosted mining solutions seem a more feasible option. Both mining colocation and cloud mining have emerged as legitimate ways to mine Bitcoin with the help of third-party solutions. Both options have pros and cons, and to determine which method is perfect for your mining needs, let’s first understand both ways.

Cloud Mining

Cloud Mining

In cloud mining, customers can rent time and become a member of the mining pool. With this method, you don’t need to purchase mining equipment to get a reward. You will receive a portion of the funds based on your performance and be charged for using the equipment. You ultimately participate in a mining pool and receive a share of the profits based on your allotted hash power. Thus, you need to pay for the electricity consumption and fees associated with mining and a percentage of the block reward for cloud mining services. Since you don’t purchase the equipment, you will have little control over how it is used or how effectively it runs. Though cloud mining allows you to mine Bitcoin or other cryptocurrencies cheaply, this mining option is prone to fraud and scams.

Mining Colocation

Cryptocurrency mining colocation means renting space and utilities for your equipment and operations. Here, in this method, you own mining rigs, which are placed in a secure facility that provides all the resources you need to run that equipment, such as rack space, power, cooling, internet, etc. You can purchase mining equipment from a hosted service or buy equipment on your own and send it directly to a hosted data center or mining farm. Colocation eliminates the stress of mining disruption, theft, high heat, noise, and soaring energy bills. Thus, hosted mining allows customers to mine a blockchain with purchased equipment without dealing with the storage, electricity, and maintenance concerns of running mining hardware independently. The mining colocation service providers have cost-effective power and in-house mining experts to operate rigs at maximum capacity.

Colocation vs. Cloud Mining

Choosing between colocation and cloud mining depends on your mining purpose. If you want to maximize your investment as a miner, mining colocation is the right choice. Though cloud mining seems a cheaper option, in reality, colocation is more cost-effective in the long run. Colocation is also a safer option and gives you more control. You will get experts to handle your operations and don’t have to share in the profits. Cloud mining, on the other hand, encounters frequent scams in the cryptocurrency world.


I am a writer, financial consultant, husband, father, and avid surfer. I am also a long-time entrepreneur, investor, and trader. For almost two decades, I have worked in the financial sector, and now I focus on making money through investing in stock trading.