Lessons from a Decade of Bitcoin Mining – Bitcoin Magazine
JThis is an opinion piece by Marco Streng, CEO of Genesis Digital Assets, one of the largest industrial-scale bitcoin mining companies in the world.
We can put hard numbers behind the growth of the cryptocurrency mining industry – a current market size of $2.29 billion, a CAGR of 28.5%, expected to reach $5.29 billion. ‘by the end of 2028 – but the real growth in mining comes from lessons learned over the years and implementing those lessons to become more profitable and sustainable.
I started bitcoin mining in my dorm in 2012 and started industrial scale bitcoin mining in 2013, just a few years after bitcoin was founded in 2009. Since then our operations have expanded to include data centers around the world and mined billions of dollars. . Mining might have been a fun hobby back then, but scaling an industrial-scale mining operation is a very different experience – one that requires focus, tact and the ability to learn from your mistakes.
Here are some of the key lessons I’ve learned over the past decade on how to scale bitcoin mining operations.
Lesson 1: Large-scale mining requires capital
The days of mining bitcoins on a laptop are over, as large-scale mining operations have become a capital-intensive industry. It’s not just the cost of the actual equipment and associated upgrades. There’s location overhead, payroll, and all the expenses associated with running a tech company in a large-scale location. Funding for these expenses has to come from somewhere – and not necessarily from reinvesting mined bitcoin into operational costs either.
When it comes to seeking capital today, many mining operations see debt financing as a good option because its lower risk is more attractive to investors. However, many mining operations take their companies public and raise equity through equity sales as a means of financing – even using their equipment as collateral.
Lesson 2: Build long-term industry relationships
Although the cryptocurrency mining industry has grown so much over the past decade, it is still relatively small, with a limited number of players involved. For this reason, it is crucial to establish relationships and build them for the long term. This is especially true with hardware manufacturers, as there aren’t many of them. If you don’t like the way they do business, you can’t necessarily go anywhere else; similarly, you must also be a good customer to establish that trust and reliability.
Lesson 3: Prioritize operational efficiency
To successfully run a mining operation, you must be obsessed with your operational efficiency. At the core, you want to make sure you’re using the right hardware in the most efficient way, which means staying on top of upgrades, adequate cooling, consistent uptime, and other factors.
Thinking through your operational considerations will not only make you more successful, but also make your business more resilient to market and industry changes.
Lesson 4: Continuous Innovation
Since you’re obsessed with operational efficiency, you’ll want to get creative with your solutions. Being in a fluctuating industry like bitcoin mining means facing recurring and new challenges, and innovating in response.
Some of the innovations we came up with include creating a better software management system for our data centers in the face of tools that couldn’t monitor and manage our operations at scale. We’ve turned to construction innovations, including modular containers that can be shipped and installed anywhere. We are also getting creative with excess heat from our data centers and using it to power greenhouses.
Lesson 5: Assess Locations Wisely
Another lesson learned is to choose your location wisely – particularly evidenced by China’s crackdown on cryptocurrency mining in 2021, forcing mining operations that controlled 71% of the global hash rate to close and relocate. a new country. So, when looking at where to place your data center, choose a country that is in favor of having mining operations within its borders and where political changes will not be a risk to livelihoods.
Choosing a good location also depends on the types of energy available, as many bitcoin mining operations look for locations that offer abundant renewable energy sources. The good news is that the bitcoin mining industry’s sustainable power mix has grown to 58.4% this year, but there’s still some way to go to make the industry greener and location will play a part in that. regard.
Lesson 6: Downtime = Lost Profits
Another lesson learned? Time is money. Any downtime, even a few minutes, can set you back. There was a time in 2015 when we knew that waiting months for new hardware to ship would result in lost productivity, so we hired a few planes to pick up the hardware ourselves, mitigating any loss of time and effort. profit.
However, with the global shortage of chips leaving companies waiting up to a year for supplies, mining companies cannot simply hire planes to get machines faster, as there may be no no machines available. In order to avoid downtime, orders should be anticipated through robust modeling of the Bitcoin ecosystem and placed well in advance of being needed.
Lesson 7: Scale creates momentum and resilience
When bitcoin mining started, miners were individuals, but mining soon had to grow into large operations running thousands of mining rigs around the clock. It is no longer possible for individuals to mine, but even small players will also have difficulty mining. There is so much for large scale operations to do as they have the economies of scale to support their operations as well as the momentum. Large farms are also more resilient to market fluctuations.
Lessons learned and implemented
Managing large scale mining operations takes focus and dedication, and many lessons will be learned as we venture into this brand new industry. However, the goal is to meet the challenges head on, learn from them and be creative in our response in order to build a sustainable and profitable business.
This is a guest post by Marco Streng. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
