As you know, there is no one way of obtaining cryptocurrency. You can buy, mine, or cloud mine cryptocurrency. If you want to obtain cryptocurrency as fast as possible, the easiest way to do it is by using an exchange like Binance or Kucoin.
What is Hardware Mining?
Hardware mining is when you buy all the necessary equipment to mine cryptocurrency and mine with it. Hardware miner monitors and maintains mining equipment all by himself/herself. They bare all costs associated with mining and mining equipment. This includes cooling, electricity cost, repairs, etc.
The majority of cryptocurrency miners mine for the money. They expect to earn more money than if they had bought cryptocurrency. It is a risky game to play. If everything goes as planned, the miners always obtain more cryptocurrency than the buyer. Check out this article where we compare Bitcoin mining with buying. There is a minority of miners that mine to support the network.
What is Cloud Mining?
Cloud mining is where you utilize a remote data center to mine cryptocurrency. Genesis-Mining and Eobot are some of the well-known players in the cloud mining business. They make it very easy for anyone to cloud mine cryptocurrency. When you buy a cloud mining contract, they assign a mining rig for you. All cryptocurrency mined using this rig is sent to your wallet.
Cloud miners are usually newcomers to the crypto space. They typically lack the knowledge and expertise to set up a mining rig and mine with it. Some of them do it for fun. Some of them opt into cloud mining because it is expensive to build a mining rig. But the goal of every cloud miner is to make money.
Cloud Mining Vs. Hardware Mining
When comparing cloud mining with hardware mining, we assume everyone considers, the one that makes the most money, the winner. In this article, we will compare an ASIC with a 2-year cloud mining contract from Genesis-Mining.
Antminer T17e is an ASIC manufactured by Bitmain. This ASIC is capable of generating a hash rate of 50TH/s. The cost of this ASIC, including the power supply unit, power codes, and shipping, is $1115. Please note that the price of ASICs changes with cryptocurrency price movements. The cost of $1115 is the current cost.
We will use a Bitcoin mining calculator to estimate how much we are going to make with Antminer T17e. This ASIC has a power consumption of 2750 W. Using $0.10 for the cost per KWh, the estimated amount we are going to make in 2 years is approximately $76.78, as shown below:
If we buy a 2-year contract from Genesis-Mining, it will cost us $4186:
The estimated amount we are going to make in 2 years, using this cloud mining contract is approximately $4894.78, as shown below:
Important Note: The mining calculator we used did not take future bitcoin difficulty increase and bitcoin halving into account. The profit can be much lower than the estimated amount for both, cloud mining and hardware mining.
But, if we compare 2 years of cloud mining with 2 years of hardware mining, the winner is, well, its complicated. Look at the table below:
|Current Price of BTC: 7, 433.41||Expenses Associated with Mining (50 TH/s)||Estimated Amount Earned in 2 Years||Profit/Loss|
|Cloud Mining:||Cost of cloud mining contract: $4186||$4894.78||Profit of $708.78|
|Hardware Mining:||The total cost of Antminer T17e including PSU, power codes, and shipping: $1115||$76.78 after deducting electricity fees.||Loss of $1,038.22|
From the table above, it looks as if cloud mining is the clear winner. But bear in mind that we are risking $4186 to make a profit of $708.78 in 2 years. The cloud mining contract ends in 2 years.
On the other hand, the expenses associated with hardware mining is $1115. $1115 is significantly lower compared to the cost of cloud mining contract of $4186. So you are left with more money in your pocket. The amount that you didn’t spend can be utilized to invest in other, less risky opportunities. Due to time value of money, the amount saved by hardware mining is higher than the profit of $708.78 made by cloud mining for 2 years.
But if we regard profit as a profit regardless of how much you risk, then cloud mining is a winner. In a scenario where Bitcoin plummets in price, you’d lose more money than if you had mined it yourself.
In a scenario where Bitcoin price skyrockets, both cloud mining and hardware mining can be very profitable. But it is important to understand that when Bitcoin price increases, more miners join the network. When this happens, the mining reward decreases. Although the amount of BTC you mine is lowered, the value of Bitcoin you mine converted to fiat money is likely to stay consistent, since the price of Bitcoin has increased.
The most desirable outcome for miners and cloud miners is to have the price of cryptocurrency they mined increase, after they stop mining or when cloud mining contract ends.
But at this point, you may wonder, “what if I had bought Bitcoin instead of mining?”. Yes! You’d be making more money if you had bought Bitcoin instead of mining it, in a scenario where the price of Bitcoin increases.
Whether you mine, cloud mine, or buy Bitcoin, it is a game of chance you play. It is prudent to say cloud mining is the riskiest of the three.
Pros & Cons of Cloud Mining
- Pros: The biggest advantage of cloud mining is that it is very convenient. There is no maintenance and monitoring needed by your end. The mining company maintains everything.
- Inexpensive. Some of the cloud mining companies like Eobot enables you to cloud mine with little as $10. If you do not have a significant amount of money, you can start small.
- No technical skills needed. When you buy a mining contract, mining starts automatically. All you have to provide is your wallet address.
- Scams. Cloud mining is one of the favorites of scammers. All you need is a nice looking website with fake reviews to steal someone’s money.
- You have little to no control over cryptocurrency you mine. If you want to change the cryptocurrency you mine, you have to buy a new contract.
- No refunds.
Pros & Cons of Hardware Mining
- You can alternate between mining different cryptocurrencies or mine the most profitable cryptocurrency at the given moment.
- Can mine multiple cryptocurrencies at once.
- Once you’ve stopped mining, you can sell components of the mining rig.
- Expensive to build and maintain a mining rig.
- Technical skill is needed to build a rig. If something breaks down, you need to have the knowledge and expertise to fix it.
- Need extensive monitoring.
There is no clear answer to the question “Cloud Mining vs. Hardware Mining: Which is More Profitable?”. The only conclusion that can be derived from this comparison is that cloud mining can be profitable, but it is a riskier investment than mining.