Ever since Bitcoin was made back in 2009, people used two main ways to acquire it: buying it via a crypto trading system or mining it themselves.
However, bitcoin mining is a constantly changing industry that has already seen a few significant paradigm adjustments. Early Bitcoin miners could produce enough hashing power with a standard laptop. Mining got competitive as the number of Bitcoin miners increased, and specialized technology was eventually required to continue mining economically.
Mining has evolved from a small-scale, domestic hobby to a multi-billion dollar industry dominated by publicly traded companies with specialized computer centers.
Mining has become inaccessible for many due to its transformation into a fiercely competitive business with high capital expenditures and many moving parts. Hosted mining has become a viable alternative to assist overcome these entry obstacles.
What Is Hosted Mining?
Custodial mining, commonly referred to as hosted mining, is a practice in which a third party hosts mining rigs on a client’s behalf. The client typically buys the mining machines directly from the hosting business.
The customer, not the hosting firm, is the only owner of the mining rig, and the client pays the provider a monthly hosting charge that is determined by the mining rig’s power consumption. In addition to electricity and rack space, all other necessary services to maintain smooth operations, like security, customer support, and monitoring, are typically included in one single charge.
Some hosting providers include an anticipated uptime in the contract; this uptime is typically around 95%. This protects customers from unplanned service interruptions because idle time is the time when a machine is not earning bitcoin. Reputable hosting companies will also assist in organizing machine repairs, and the majority have on-site service personnel to return the machine to hashing as soon as possible.
Normally, hosting conditions are set for a certain period of time. Since the mining rig is the client’s property, the client is free to ask for actual delivery of the unit, however doing so early on may result in fees.
Benefits of Hosted Mining
Prospective miners are drawn to hosted mining for a variety of reasons, chief among them being accessibility, comfort, and peace of mind. Additionally, hosting models frequently provide clients with better mining economics.
The hosting company can pass on the advantages of economies of scale to its customers since it buys mining equipment in large quantities and collaborates with enterprise-level colocation facilities. Compared to residential regions, colocation locations have access to electricity at much lower prices.
As a result, hosted miners can mine more profitably than home miners in a low BTC price/high network difficulty environment.
The incentives determine the strength of the client/provider connection, as is the case with any service.
The incentives for a hosting partner to give their clients the best experience are aligned, which benefits a hosting client. The more months of hosting fees can be earned by a hosting company the better the client’s miners are maintained.
Accessible Bitcoin Mining
The majority of potential miners are limited by their geographic location because mining is so reliant on having access to cheap electricity. Mining is frequently completely impractical due to space, heat, and noise constraints in addition to being unprofitable for many due to location. When a physical location prevents mining, hosted mining is the only feasible solution.
Mining With a Low Time Investment
The convenience of mining through a hosting partner is, in the opinion of the majority of hosting clients, the main advantage. It takes subject-matter expertise to address some of the costs and considerations of bitcoin mining because it is a new industry. The main costs associated with mining include equipment, electricity to operate the equipment, and a building to house the equipment.
Any miner, nevertheless, quickly learns that costs that initially seem optional frequently end up being necessary.
A solution to prevent mining equipment from overheating is necessary if there is no natural cooling system. These devices not only produce a lot of heat, but they also produce noise that is too loud for residential areas.
Given all of these additional factors, hosting is often the favored choice for potential miners due to the simplicity it offers to have one service handle every aspect of the mining process.
Investing in Bitcoin Mining
Along with the extra convenience, hosted mining is appealing due to the consumers’ increased security. Clients may rest easy knowing that their machines are safely mining in the hands of a reliable hosting partner without their involvement.
Users are therefore free to concentrate just on the income they are getting rather than the demanding work required to maintain that income. Mining becomes an investment instead of a process.
Owning hosted mining equipment is similar to owning real estate in several ways. Investors take ownership of the tangible asset, in this case, a building, and give over daily management to a property manager in exchange for monthly rent payments.
In order for customers to monitor their performance and observe how their machines are hashing, hosting companies frequently provide a window into the mining process via an app or website.
Drawbacks of Hosted Mining
A strong sense of self-custody permeates the Bitcoin community, as illustrated by the catchphrase “not your keys, not your coins.” Some people use that feeling to argue against all types of custodial mining, including mining. In the end, when hosting, a user is putting their devices’ dependability in the hands of another person.
The dependency on a hosting provider becomes an apparent disadvantage in the event that they stop responding to clients’ requests or do not act in their best interests. Here, it becomes clear how important it is to work with a reliable service.
The opportunity to acquire virgin bitcoin via non-know-your-customer (KYC) processes is frequently a main driver for some people to want to mine bitcoin; however, this is not the case with hosted mining, which discourages those users who value privacy above all else. The majority of hosting companies need KYC during onboarding, making the mined bitcoin KYC-compliant.
Selecting a Hosted Mining Partner
Trust is the most important factor to consider when choosing a hosting partner. The quality of the partner and economics will have a big impact on both the mining returns and experience, even if hosted mining services may initially seem similar.
As a result, the main factors that distinguish different providers are now price and reputation. Many would-be miners find cheaper hardware and hosting choices to be the most alluring. However, if those computers can’t stay online, slight discounts on hardware or electricity don’t really matter.
A hosting partner must be able to be relied upon to protect priceless hardware and act quickly in the event that a facilities issue results in machine downtime. The ability to rely on a hosting partner to stay financially stable through market downturns is likely the most crucial requirement for making sure your machines stay your machines. Reputation plays a big role in choosing a hosting partner because our product is built on peace of mind.