What Is Hosting in Bitcoin Mining and How Does It Work

Published: 24th May, 2024 | Last Updated: 17th May, 2024

Markos Koemtzopoulos

Markos Koemtzopoulos is the founder and main writer of ElementalCrypto. He has been a lecturer at the University of Nicosia on cryptocurrencies and DeFi and has taught two courses on crypto and blockchain technology.

In this post, I will walk you through all you need to know about what Bitcoin mining hosting is and how it works.

what is hosting in bitcoin mining

What is Bitcoin mining hosting?

cryptocurrency, bitcoin, mining

Bitcoin mining hosting refers to buying a Bitcoin mining machine and sending it to a facility that offers cheap electricity, storage, cooling, and maintenance services for a monthly fee.

Mining at home with residential electricity rates does not make sense for most people.

It’s just too expensive to make a profit.

In addition, you might now have the space to accommodate such heat-generating noisy machines.

Plus you may not have the technical know-how to maintain them.

Bitcoin hosting providers on the other hand are large data centers that can procure cheap electricity.

For example, take Pyminers who procure electricity from a hydro dam in Paraguay.

Their cost of electricity is around 5 cents per kWh.

Compare that against residential electricity rates in the US where the cheapest you can get is 12 cents per kWh and the average is 20 cents and you see why hosting providers like Pyminers are becoming popular.

What do I need to start bitcoin mining hosting?

To start using a hosting provider you need to purchase one or more ASIC miners.

You can do this yourself but hosting providers will usually be able to secure better prices for you and handle the shipping on your behalf.

A miner will set you back anywhere between $2,000 to $6,000.

Prices vary depending on the hash rate of the machine, its age, and what the price of bitcoin is on the market.

The higher the price the more demand there is for bitcoin miners which pushes the price up.

bitcoin miners

antminer s19

Once you have procured a mining rig the only thing you need to do is join a mining pool and you are good to go.

What is a mining pool?

A crypto mining pool is a group of miners who share their rewards.

They do this because an individual mining machine may take months or years to solve a cryptographic puzzle on its own.

By joining a pool you get rewarded more frequently in proportion to the hashing power your machine provide.

Mining pool usually charge between 1 and 2 for this service.

Other considerations

The only other thing you need to worry about is the maintenance fee plus electricity consumption.

You can choose to pay your power bill by selling in BTC you have earnt or just pay them in cash and wait until the price of BTC appreciates.

Individuals usually prefer not to sell and wait for the price of Bitcoin to appreciate.

In this sense the monthly fee you pay towards electricity and maintennace to the hosting provider can be thought of as an investment in bitcoin.

Once you are ready to stop mining most hosting providers will facilitate the sale of your machine to the next buyer.

How much can you make by Bitcoin mining hosting?

It really depends on the where we are in the bitcoin market cycle.

If you start mining at the beginning of a cycle and sell when prices are high you can see extremely good returns.

However, starting in the middle or the peak of a cycle may not be that lucrative as the cost of miners increases the higher the price of bitcoin is.

Is Bitcoin mining hosting worth it?

For most people mining hosting is the only option that makes sense.

The biggest factor that will affect how much money you can make is your electricity costs.

If you are able to procure electricity at less than 10 cents per kWh you can make a decent profit.

You also need to consider that these machines produce a lot of heat and make a lot of noise.

This will likely mean that you will need to purchase a container and cooling systems such as fans.

Containers cost around $20,000 so at this point you we are talking about setting up a small mining farm. For most people, this is not an option.

What do you need for a bitcoin mining rig?

To set up a Bitcoin mining rig, you need several components and considerations to ensure efficient and profitable mining. Here’s a comprehensive list:

1. Hardware

ASIC Miners

  • ASIC Miners: Popular models include Bitmain’s Antminer series (e.g., Antminer S19) and MicroBT’s WhatsMiner series (e.g., WhatsMiner M30S).
  • Power Supply Units (PSUs): Each ASIC miner requires a PSU to convert electrical power from your outlet into the necessary power for the miner. Ensure the PSU is compatible with your ASIC miner and can handle its power requirements.

Cooling Solutions

  • Fans and Ventilation: ASIC miners generate significant heat, so adequate cooling is essential. High-quality fans and proper ventilation systems help manage heat.
  • Air Conditioning Units: In larger setups, air conditioning units might be necessary to maintain an optimal temperature.

2. Software

Mining Software

  • ASIC Firmware: ASIC miners come with pre-installed firmware, but updates might be needed. Custom firmware like Braiins OS can optimize performance.
  • Mining Pool Software: Join a mining pool to combine your hashing power with others. Popular mining pools include Slush Pool, F2Pool, and Antpool.

Monitoring and Management Software

  • Dashboard Interfaces: These are used to monitor the performance of your mining rigs. Examples include Awesome Miner and Minerstat.
  • Remote Management Tools: Tools like Hive OS enable remote monitoring and management of multiple miners.

3. Network and Connectivity

  • Stable Internet Connection: A reliable and fast internet connection is crucial for maintaining a constant connection to the mining pool.
  • Ethernet Cables and Switches: Ensure that your mining rigs are connected via Ethernet for stability, rather than relying on Wi-Fi.

4. Power Considerations

  • Electricity Supply: Mining rigs consume a significant amount of power. Ensure your location can handle the electrical load without frequent outages.
  • Power Distribution Units (PDUs): For larger setups, PDUs can distribute power evenly among your mining rigs.

5. Physical Space

  • Location: Choose a location that can handle the noise and heat generated by the miners. A dedicated space like a garage, basement, or commercial warehouse is ideal.
  • Shelving or Racks: Proper shelving or racks can help organize your miners and improve airflow.

What crypto mining machine should I buy?

Nowadays the only viable way to mine bitcoin is to use an application-specific integrated circuit (ASICs).

This is a high powered machine that can do the kind of calculations that are required for bitcoin mining.

Your job is to find the most efficient one at the best price.

So you are going to be looking at power consumption vs hashrate or computational power i.e. how good it is at solving the cryptographic puzzle in order to be able to add a new block to the bitcoin blockchain and claim the reward.

What should I be looking out for when choosing a Bitcoin mining colocation service?

There are a few factors you should consider when choosing a hosting company

  • Years of experience
  • Reviews. Check for user complaints about delays in the delivery of Bitcoin mining equipment, uptime in internet connectivity, and scams
  • Check the electricity prices that the hosting facility can procure. The lower the better. If you are eco conscious check if they use renewable energy.
  • Do they have a reliable power source and high-speed internet connection?
  • Technical support: what exactly do they offer
  • Security: is the mining hardware guarded and are they insured in case of theft?
  • Do they have a dedicated team that can manage customer support?

Drawbacks of hosted mining

  • Cryptocurrency miners need to place their faith in a third party.
  • You need to verify your ID. Many miners prefer to remain anonymous
  • It usually does not make sense to buy a machin and send it to the hosting provider. instead you need to have faith in them that they will buy the machine and hook it up.
  • Bitcoin maxis will also point out that using a hosting provider centralizes transaction verification which is something they do not like. Centralization exposes the bitcoin to the risks of regulatory crack downs.

Which is the best bitcoin mining hosting service

In my research I have identified 8 providers that I approve of. These are

  • ECOS who have a dedicated facility in Armenia
  • Compass mining
  • Frontier
  • FZCO
  • Wattum
  • QuoteColo colocation services
  • b2Miner
  • Bitkern colocation facilities

You kind find out more about each on my review of the

Best Bitcoin Mining Hosting Solutions

Alternatives to Bitcoin mining hosting

An alternative popular option is to go for Bitcoin cloud mining.

This is similar to mining hosting except that a cloud provider already owns and operates the machines and you lease their power.

I am more hesitant to recommend this as there have been scams that claim to be mining on your behalf but actually just pocketing the money you send them.

FAQs

Is hosted Bitcoin mining profitable?

Bitcoin mining with a hosting provider can be profitable if the provider offer cheap enough electricity costs. In fact this may be the only viable option for an individual to start mining bitcoin.

How long does it take to mine 1 Bitcoin?

It depends on the computational power of your bitcoin mining machine. One average you can expect it to take about 50 days of you have 100 mining rigs.

Is Bitcoin hosted on a server?

Copies of the Bitcoin blockchain are hosted across the bitcoin network of computers. They each have an identical copy of the blockchain which is why it is impossible to censor or stop.

Is mining bitcoin illegal?

It depends on the jurisdiction. In some countries such as China bitcoin mining is illegal. However in most of the world bitcoin mining is a legal activity.

How much Bitcoin is left to mine?

At the time of writing the is less that 1.5 million bitcoin left to mine. 19,6 million out the maximum supply of 21 million bitcoin have been mined.

How many GPUs are needed to mine 1 Bitcoin?

It no longer makes sense to mine bitcoin using GPUs no matter how many you use. The hashes difficulty has increased so much that you need way more powerful miners such as ASICs.

How many computers do you need to mine Bitcoin?

No matter how many computers you use to mine Bitcoin it is very unlikely that you will solve the cryptographic puzzle with your computer’s CPU. The mining difficulty is just too hard.

Markos Koemtzopoulos is the founder and main writer of ElementalCrypto. He has been a lecturer at the University of Nicosia on cryptocurrencies and DeFi and has taught two courses on crypto and blockchain technology.

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