Common issues with Bitcoin VPS hosting
Choosing a Bitcoin VPS or dedicated server hosting provider has all the usual considerations of renting a server, and a few more owing to the unique possibilities (and challenges) of paying for a server with Bitcoin.
You probably want to take extra steps to minimize transaction costs, for example. You also want to make sure the hosting provider uses a sane payment processor. And you may also want to ensure you can preserve your anonymity in the transaction.
Minimizing transaction costs
When you pay for a Bitcoin VPS, the transaction costs depend on the network traffic. If a lot of people are also trying to send money on the Bitcoin blockchain, transaction fees will be higher. However, transaction fees are always fixed – the cost to send $1 is roughly the same as the cost to send $1 million.
Therefore, the first thing you want to do is pay for several months (or years) of server hosting at once… of course, you will check that the hosting provider is suitable before you do this. This way, instead of paying $5 and having to pay an additional 20% in transaction fees, you can pay $50 or $150 and pay 1% (or less!).
If you can make Lightning Network payments to your hosting provider, this problem goes away. Lightning Network payments are essentially free, so you can pay month-by-month (or even hour-by-hour!) and not have to worry about excessive transaction fees.
Do they use a sane payment processor?
Most hosting providers will use a normal Bitcoin payment processor that lets you use any wallet (or even an exchange, though sending payments from an exchange is a bad idea). Unfortunately, there are a few “bad apples” that insist on using BitPay or a similar system that limits your choice of wallet.
BitPay is a problem because you cannot use just any Bitcoin wallet to send payments to a merchant who uses them as a processor. You need to use a BitPay-compatible wallet, which may mean having to download and set up a new wallet, then having to fund it (and incurring extra transaction costs and delays while you do).
Fortunately, most hosting providers don’t use BitPay, so this is mostly not a problem.
Can you stay anonymous?
Paying with Bitcoin does not mean the hosting provider will let you stay anonymous. While many people like the privacy of Bitcoin payments, many VPS providers are more worried about keeping out criminals. They may require you to verify your phone number, they may block people from using Tor Browser or VPNs when signing up, or the like.
Therefore, if you are working with political dissidents or dealing with another situation where privacy and anonymity are very important, you may have to try several different hosting providers until you find one that meets your needs.