Mining

Why do data centers rent out mining equipment?

The answer is simple, really. While their business model in one way relies on Bitcoin, they are not building their whole business model on the price of Bitcoin, since the price is highly volatile. They are basically providing shovels and picks in a gold rush. It’s a Pick-And-Shovel Play.

They get their return on investment without relying too much on the price of Bitcoin. If Bitcoin crash to $0, their capital if they mine Bitcoin and kept it themselves, would be worth $0. It’s a more secure way of doing business by renting out the equipment, as of now at least.

However, since the price of Bitcoin keeps rising, its users make more and more profit from their service. So it’s a win-win situation; the user doesn’t need to invest in bitcoin mining hardware and pay for the electricity (the price of a miner can be $3000+, and electricity bills can add up quickly). And the data center does not rely fully on the price of Bitcoin.

What are the advantages of cloud mining

• No stress of upkeep, electricity costs, software installations or expensive hardware
• You don’t need to listen to humming fans running wild all day long
• You can quit at any time if/when Bitcoin mining becomes unprofitable
• No ventilation needed for the hot equipment
• Don’t wait to get start mining bitcoin
• No out-of-stock equipment to wait

The disadvantages of cloud hashing

• Many scams: Many companies that have popped up that exploit newbies, making it hard to find a trustable provider
• Your hands are tied to the decisions of the provider. You cannot upgrade the gear yourself.
• Lower profits long-term
• You rely on a cloud mining provider that can close down anytime in case of too low of a price on Bitcoin

These are some of the pros and cons of the cloud hashing, you can use them to make your mind on which method is the best. Although, for most people that aren’t that tech-savvy or have money to put down on expensive hardware, cloud mining contracts is the best choice.