Cloud Mining vs Hardware Mining: Which is Better for Bitcoin?
What is Cloud Mining?
Cloud Mining is when cryptocurrencies are mined using a remote datacenter with shared processing power.
A company sets up mining rigs and maintains the facility by themselves, while users have to register and deposit the fees for the mining contracts. Once the fees are deposited and your contract initiates, the mining company will assign it’s mining hardware to your account along with the rewards generated by that mining rig. The mining company will subtract some fees before sending your rewards to your account.
Depending on the terms of your subscription you may be required to pay additional fees for electricity and/or maintenance often on a daily basis which will be subtracted from your mined coins or to pay for that upfront. There are contracts that cover different periods, a year, two, or more. There are even services that advertise Lifetime contracts for Bitcoin mining, but this means that it will mine until it makes profits.
What is Hardware Mining?
Hardware mining is when the users buy and manage all the mining hardware, and supports all the necessary operating costs, liabilities, and setup fees.
Mining is a very energy consuming process which leads to high electricity bills. Moreover, the hardware and the cooling fans needed to maintain its temperature constant can be rather noisy depending on their brand and type.
Hardware mining is definitely a more expensive process, as it requires the users to make all the initial investments, which can add up to a hefty sum, by himself. Also, the delivery times for the hardware can take weeks. In order to set up mining rigs, users also have to own some degree of technical knowledge.
Costs of IT Cloud Mining
When compared to hardware mining, costs for IT cloud mining can be calculated in a much simpler manner. Most platforms feature a monthly subscription model which is determined by the cryptocurrency you want to mine, hash rate speeds and other hardware specifications.
Costs of Bitcoin Mining Hardware
Bitcoin mining hardware usually requires a substantial initial investment on the part of miners. The cost of a mining rig depends on various factors, such as the cryptocurrency which you intend to mine and how extensive and powerful your mining operation needs to be.
For BTC mining, you’ll most likely have to purchase an ASIC mining rig. These usually come with a higher price tag when compared to GPU and CPU mining rigs. Despite having a higher computing ability and faster hash rates, ASIC mining rigs are disadvantageous because they cannot be repurposed once the network’s mining difficulty increases.
This means that, if a cryptocurrency’s blockchain makes modifications to their hash algorithms, ASIC miners will have to purchase new hardware. This can generate additional significant costs that can easily cancel out the profits made and even lead to a general investment loss.
Of course, other aspects such as electricity costs have to also be taken into consideration. The price of a kW/s varies by geographic area, making it difficult to accurately estimate how much money is required for keeping hardware rigs operational.
ROI for Cloud Mining Vs Hardware Mining Bitcoin
Even though there is no way of determining how long it will take to break even on investments in hardware mining rigs or cloud mining, it’s still important to make assessments on estimated time frames.
Most miners revealed that it’s problematic to expect to make a profit within 3 to 6 months. 10-15 months is more feasible, according to most miners. Factors that influence profit generation are crypto prices, electric costs, and the type of mining hardware which is used. There are many profitability calculators that let you enter your details and estimate how much you can make with your specific hardware and conditions.
According to information provided by Reddit forums, reviews, and ROI calculators, it seems that cloud mining is neither popular or profitable. For instance, starting with May 30, 2018, HashFlare Scrypt and SHA-256 currently take 3,828 and 3,983 days (or a little over 10 years) to reach ROI on BTC according to calculations made by Coinstaker.
The issue with a cloud mining subscription is that it can be difficult to maintain the frequency of paying monthly during harsh markets conditions. In comparison to using Bitcoin mining hardware, this makes the latter process more advantageous.
That’s because most costs are upfront and not recurrent even during market crashes. There are some additional costs such as electric bills to consider with hardware mining, but in several locations, the electricity is cheaper and it can be profitable to mine BTC.
Advantages of Cloud mining
- Much cheaper than hardware mining.
- Less maintenance.
- No long shipping wait times.
- Constant hash rate.
- Doesn’t occupy physical space.
- Doesn’t require a cooling system, hence no noise.
- Efficient and automatic mining pool management.
- Daily payouts (automatic or manual).
Advantages of Hardware Mining
- Better ROI.
- No monthly subscription.
- You can customize your rig.
Cloud Mining vs Hardware Mining Conclusion
Both hardware mining and cloud mining come with their own advantages and disadvantages. It’s hard to determine which one is the best type of mining. Reason dictates that the best type would be the one that brings the most profit, which according to user experiences, this would be hardware mining. So if you have more technical expertise, then opt for hardware mining but if you don’t, cloud mining is a better alternative, although it will bring you less profit.