Understanding Cryptocurrency Colocation Mining
While Bitcoin mining can get a bit high-tech, you do not have to go science fiction to succeed. Terms like colocation might make it sound like that though.
In reality, it just provides a way for you to store your equipment offsite, so you do not have to hear noisy mining rigs running 24 hours per day. The process can also help you boost your ROI.
Colocation, also referred to as colo, refers to renting space for your mining rigs at a third-party data center. Doing so saves you from keeping them at home or at your office. The co-location center provides space within a building, electricity, cooling, hosting bandwidth, and security. Typically, you can rent a partial, half or full rack or cabinet and these facilities accept both ASICs and GPUs.
Many of these colo facilities use renewable energy to power their operations. They charge an annual fee or a bi-annual one, so you get a guaranteed service period of six months to one year.
Major Reasons to Use a Storage Center
Essentially, you rent plug-and-play storage. Since you are not hampered by space constraints in your home or office, you can rent space for as many mining rigs as you can afford. Since you share a rack with other mining rigs, including those owned by others, you reduce your bandwidth and electricity costs. Another plus is that these centers get specifically designed for this purpose. Some centers also rent servers. You will obtain the server IP, bandwidth and power to run the machine with your rent.
Security measures include limiting entry to the facility, locking the server rooms, and locking the machines to the racks. A center may also employ an armed guard and use biometric access control.
Other security measures include cooling the facility to an optimal temperature and providing emergency backup equipment to protect machines from power failures. These data centers also backup the servers regularly. You also benefit from an information technology specialist working onsite to administer all equipment.
An In-Depth Look at Home vs. Center Mining
Let’s tackle convenience first. While it may seem more convenient to keep the mining equipment at home, if you have a strong understanding of Bitcoin mining, you know that once you start the program, it does the work on its own. You simply make sure the machine has power. Since the rig does all the heavy lifting, you have no need to check on it. It provides the set it and forget of the money making world.
Running just one mining rig at your home can drive up your bills though. They do require more electricity than the typical home appliance or computer. Unlike an appliance or computer, you never turn the rig off. More than the power to the machine, you must also cool it. This increases your air conditioning costs. If you want to run more than one rig, you need to devote a room as a server room since you will need to cool it to a lower temperature than the rest of your home. This can require installing a window unit.
On the other hand, renting rack space at a server center, leaves setting up the cooling and energy needs to the center personnel. The data centers also use industrial liquid coolers that better cool the equipment and do so at a reduced cost.
You alleviate all of the noise as well. You never have to hear your mining rigs chugging along in the background. Most people assume that they will run as quietly as a home computer, but that is not the case.
Gone are the days when you could use your home computer to mine Bitcoin. Now you need a high-end GPU in your top-of-the-line computer or to purchase an ASIC. This increases the investment you pour into the mining because those pieces of equipment cost between $500 to $10,000 depending on the processing power and hash rate capabilities. The top company making these currently is Bitmain. Look for the following mining machines:
- AntiMiner S7
- AntiMiner S9
- AntMiner L3
Since Bitcoin mining works on the incentive system, using old or outmoded legacy computers or software reduces your profitability. Since you can conceivable mine a single Bitcoin per year with a single rig, you need to find a method that reduces your outlay of cash, while earning you a BTC per year at least. This requires you to compare the cost of equipment purchase and home hosting with that of equipment rental and rack space rent.
Some colo centers also offer mining pools. In a pool system, you share costs with a specified number of other miners and all participants share equally in the BTC earnings. Unless you own your home outright and already run it off of renewable energy, therefore you have zero electricity costs, it makes more sense to use a data center or mining pool.
Maximizing Your Return on Investment
Analyze the costs. Think outside the box, too.
What do I mean?
In the 21st century, you do not have to use your local colo center. If you plan to rent your rigs, you can find out which center offers the best balance between low costs and high quality service. You could live in Kalamazoo, Michigan, but your colo service could be located in The Netherlands or Iceland. Iceland offers some really great deals.
If you already use managed IT services for your business or personal server, you have no reason not to do the same for your cryptocurrency mining. No one mines for Bitcoin for the heck of it. You do it to make money. That means to do so effectively, you must approach it as you would a business. You determine the cheapest, safest method of mining for you and you use that to increase your return on investment. Factor in that you will want to mine for multiple years. That means depreciation for your purchased equipment and inflation increases annually for rental equipment.