7 lessons learned from building and scaling Bitcoin mining operations

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It began with mining Bitcoin (BTC) in a dorm room. What began as a pastime with a number of mining rigs scaled into twenty industry-scale mining farms throughout the globe. As a result of we scaled our operations in a brand new {industry}, we needed to uncover what labored and what didn’t by way of trial and error — as a result of there’s no handbook for this.

Constructing a multi-site, scaled operation like ours isn’t straightforward, however should you’re trying to begin your mining operations, scale what you will have, or put money into a mining firm, listed below are the seven largest classes we realized that will help you navigate your subsequent strikes.

Associated: How to mine Bitcoin: A beginners guide to mine BTC

Lesson 1: It takes (numerous) cash to become profitable

There was a time when you possibly can mine Bitcoin from a laptop computer, or arrange some mining rigs in your room and mine, profitably. However as soon as extra miners created extra competitors and people who needed to remain worthwhile needed to scale their operations.

Quickly a pastime miner could not sustain with mining in a dorm room however wanted a warehouse — or warehouses — filled with mining rigs operating day and evening to remain worthwhile. We scaled with the {industry} and bootstrapped our development as we went, however these wanting to hitch at present not have the choice of beginning on the backside and dealing their approach up. Which means investing in capital-intensive initiatives from the get-go.

Lesson 2: Set up long-term relationships

Whereas the Bitcoin mining {industry} has been rising shortly, it is nonetheless very a lot consolidated with just a few key gamers holding the ability. For instance, a large-scale mining operation can’t merely simply order new {hardware} from no matter vendor they need.

There are just a few distributors supplying {hardware} at this level, and their manufacturing cycles are primarily based on just some chip producers who’re tightly controlling the availability — to not point out that we’re at the moment in a world chip scarcity. Which means that success depends not simply on environment friendly and well-run operations however on constructing relationships within the {industry}, lots of which will probably be for the long run.

Lesson 3: Obsess over operational effectivity

Talking of operational effectivity, large-scale miners keep worthwhile after they have the sting over their rivals. This implies optimizing electrical energy, having probably the most up-to-date {hardware}, and never having any downtime or points that might trigger a lack of computing energy.

Make operational effectivity a precedence. For instance, in March 2020, when Bitcoin dropped beneath $4,000, many miners could not survive the uncertainty and volatility, and had been pressured out — but we survived on account of our operational effectivity.

Lesson 4: By no means cease innovating

The adage is “innovate or die.” In Bitcoin mining, the place information facilities have to remain highly effective and quick to remain worthwhile, there is no choice however to maintain innovating. Most significantly, this implies maintaining your gear up to date and never letting it get out of date. Mining operations have to plan forward to interchange gear and time it accurately as {hardware} could also be on backorder for some time. Keep in mind that any kind of downtime will price you.

Innovation additionally means creating higher, extra environment friendly methods in your firm to run, like creating software program applications particularly designed for mining operations administration. On this {industry}, expertise will provide you with the sting, and even the smallest enchancment will maintain you forward of your competitors.

Lesson 5: Select your location properly

“Location, location, location,” they are saying. Although Bitcoin will be mined anyplace, large-scale mining operations want to think about their location when organising store for a wide range of causes. Not all areas will provide the identical sources of electrical energy for a similar costs, so miners want to search out areas that not solely have ample, low cost electrical energy however to make sure that that electrical energy is inexperienced and sustainable as effectively.

Associated: Clearing the air: Renewably sourced Bitcoin may ensure a clean energy future

Lastly, go to a location that is encouraging of Bitcoin miners, where you know political winds won’t shift overnight and shut down all operations will probably be shut down, like they had been just lately in China and Iran.

Lesson 6: Time is cash

I’ve stated it already, however time actually is cash, and any downtime or lag in computing energy will be expensive. This implies having nice operational management over {hardware} upgrades, a plan for serving mining rigs, and software program that may handle operations effectively. It additionally means getting artistic: In 2015, we knew that having to attend months for mining {hardware} shipments was going to chop into our income. So we rented 747s to get the machines to us faster, which allowed us to generate hundreds of thousands in additional income that might’ve been misplaced on account of normal transport.

These are the sorts of calculated strikes you need to not solely be prepared to take however be educated sufficient about your operations to know to take.

Lesson 7: Scale is the whole lot

Lastly, scale is the whole lot. I stated earlier than that you could not begin on the backside and work your approach up. The race as an alternative is to be as large as you’ll be able to as a result of scale is straight correlated with income: The bigger you’re, the extra revenue you make.

Constructing ahead

The time period “larger, higher, quicker” actually does apply to Bitcoin mining, so should you’re not able to strategize, make investments money and time, drawback clear up, and take dangers, then one other {industry} could also be for you.

There are various extra classes that we have realized, and loads of classes that we’ll study within the years to come back. As we speak, we’ll proceed to construct this new {industry} that’s already making a way forward for decentralized foreign money and new methods to trade worth all through the world.

This text doesn’t comprise funding recommendation or suggestions. Each funding and buying and selling transfer includes threat, and readers ought to conduct their very own analysis when making a choice.

The views, ideas and opinions expressed listed below are the writer’s alone and don’t essentially replicate or symbolize the views and opinions of Cointelegraph.

Marco Streng is the CEO and a co-founder of Genesis Group and Genesis Mining — one of many largest crypto mining firms on the planet. Previous to co-founding Genesis in 2013 and turning into an impassioned advocate for blockchain expertise and cryptocurrencies, Marco studied arithmetic on the Ludwig-Maximilian College of Munich.