Is Bitcoin Mining as a Passive Income a good idea?
98 sats \ 11 comments \ @nakamoto502 16 Aug 2023 bitcoin
I've come across various companies that provide miner hosting services. The deal is simple: you purchase the miner upfront, and they subsequently bill you for monthly energy usage (that's their revenue model), while the mined Sats are yours to keep.
From this standpoint, it looks like a promising method for a passive Sat income. You can simply hold onto everything in BTC, and in around two years, you might even double your investment in USD terms. Plus, it's possible that you retain control over your node keys.
However, what if they suddenly halt their electricity generation? Or worse, what if they go away with your miner?
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125 sats \ 0 replies \ @nullama 16 Aug 2023
Much better to buy sats directly.
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23 sats \ 0 replies \ @jasonofbitcoin 16 Aug 2023
I was considering doing this almost exactly two years ago (August, 2021) using a company then called VBit. (They rebranded as "Advanced Mining".)
I made a spreadsheet analyzing five different levels of their service ("Silver"/$3.6k to "Black Diamond"/$88k) over 2- and 3-year service contracts, versus just buying and hodling the equivalent dollar investment as BTC. (I chose 2- and 3-year contracts so I could avoid the complication of having to account for the next halving.)
The results, when taking into account their default assumptions, hardware costs, hosting costs, and a wide range of possible end values of 1 BTC ($20k to $500k), were initially ALL positive. Even with the very pessimistic $20k BTC price, mining would have yielded you a few percent better outcome than hodling.
BUT, once you factor in an increasing global hash rate (leading to decreasing yields over time -- which we've certainly seen over the last 24 months!) and/or having to pay annual US income taxes on your mining income, there isn't ANY situation in which the mining beats hodling. Hodling ALWAYS wins out, usually by triple-digit percentage points.
Mining is for the big players, and even they have to manage very tight margins. There's no way you can compete with them while also paying high electricity costs (minimum $0.07/kWh) and the overhead of a management company. Plus you're taking on all the counterparty risk of that hosting company.
Just take that fiat you would've "invested" in the mining and buy and hodl bitcoin.
And I think it's Michael Saylor (correct me if I'm wrong) who says you don't need to earn "yield" on your bitcoin, because as bitcoin absorbs industry after industry over time, all of the value added by those industries (productivity gains) accrue to the purchasing power of your bitcoin.
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21 sats \ 0 replies \ @orthwyrm 16 Aug 2023
No need to earn yield when your money isn't being dilluted.
With yield, there's risk. In this instance there is counterparty risk. You're trusting a third-party to deliver the sats, manage their business properly, energy prices remaining low, not abscond with the ASIC, etc.
Compass Mining is one such example of a hosted miner who went under.
Just KISS and stack sats into cold storage.
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21 sats \ 0 replies \ @benthecarman 16 Aug 2023
I would stay away from any hosted mining service.
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21 sats \ 2 replies \ @wikparclones 16 Aug 2023
In my opinion... Store your Bitcoin at Paper wallet and stack it and don't look at it. Just keep it secret. Waiting for a decade and you will get more than mining. ⚡🤟⚡
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0 sats \ 1 reply \ @nakamoto502 OP 16 Aug 2023
That’s true! 0 complications.
But there are people who have a Bitcoin Focused Portfolio. Even people with Bitcoin Businesses.
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0 sats \ 0 replies \ @wikparclones 16 Aug 2023
Again, people just look at Bitcoin as a Business and Money. Deep on that it's Freedom. Also imagine you can tranfer your wealth from country to other country without worrying about Freezing your Bank Account. Or pay like an admin to the Banks 😅
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417 sats \ 3 replies \ @justbradmills 16 Aug 2023
The internet Space is full of Shady companies who promised false hope to investors, thread carefully.
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0 sats \ 2 replies \ @nakamoto502 OP 16 Aug 2023
True! A healthy paranoia is needed.
What about https://simplemining.io/? 🤔 They seem pretty legit to me
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54 sats \ 0 replies \ @R2Bot 16 Aug 2023
I prefer you stay away from them ❌
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0 sats \ 0 replies \ @netstatic 16 Aug 2023
I would stay away, unless you know the business owners personally. In terms of yield, you probably won't make as much as you think you will. Only dip your toes in it if you feel strongly towards contributing to Bitcoin's hashrate or if you somehow get ridiculously low energy prices (which I can almost guarantee this site won't be offering)
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