What is the point of being a mining host?

[Actual_Criminal]

I used to be a miner myself about 6 years ago and since then, have dabbled a bit in cryptocurrency buying and selling etc.

 

However, I have recently been introduced to 'Mining Hosting' by a very wealthy friend who is renting machines to make cash.

 

The way it works (from my understanding) is that you pay to effectively rent a mining rig(s) remotely across the globe, typically somewhere with cheap electric costs and the owner/host of the rig mines your chosen cryptocurrency for a dedicated period (usually hourly) and then sends you anything mined straight into your crypto wallet.

 

Now this is the parts I don't understand:

1.) Why wouldn't the miners who own the machine just mine the cryptocurrency themselves? Surely they would make more by doing that?

2.) Why wouldn't the potential buyer of the service just purchase $1,000 of their chosen cryptocurrency rather than paying someone $1,000 to receive roughly the same amount? - Some exchanges are pretty much fee free these days.

 

Obviously there is a reason it exists. Feel free to explain it in as much as detail as possible.

 

(No links please)

[j1philli]

3 hours ago, Actual_Criminal said:

1.) Why wouldn't the miners who own the machine just mine the cryptocurrency themselves? Surely they would make more by doing that?

The person renting out their hardware could be taking some sort of fee. Not to mention the fact that doing it this way the renter is not having to pay fees to transfer around the coin. So they are able to essentially do and exchangless transaction off blockchain for cash. Now arguably they could hold the coins and it has a chance to go up but that is a long to term play where this is a good way to cash in on the crypto hype short term.

 

3 hours ago, Actual_Criminal said:

2.) Why wouldn't the potential buyer of the service just purchase $1,000 of their chosen cryptocurrency rather than paying someone $1,000 to receive roughly the same amount? - Some exchanges are pretty much fee free these days.

Ease of use sells itself. If someone is not as inclined to use an exchange or wants to steer clear of exchanges because they heard about Mt. Gox for an example, they would much prefer to have this sort of arrangment

[tikker]

11 hours ago, Actual_Criminal said:

1.) Why wouldn't the miners who own the machine just mine the cryptocurrency themselves? Surely they would make more by doing that?

Either they simply don't want to deal with crypto's volatility and prefer fiat now or they're renting out the machines for more than the crypto that customers will mine is currently worth.

11 hours ago, Actual_Criminal said:

2.) Why wouldn't the potential buyer of the service just purchase $1,000 of their chosen cryptocurrency rather than paying someone $1,000 to receive roughly the same amount? - Some exchanges are pretty much fee free these days.

Same reason why people spend 10k on GPUs to build a mining rig. Either a longish term interest in mining or trying to benefit from the fluctuating mining rewards I guess.