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 passion with just a few 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 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 for those who’re trying to begin your mining operations, scale what you’ve gotten, or spend money on a mining firm, listed here are the seven largest classes we realized that can assist you navigate your subsequent strikes.

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

Lesson 1: It takes (a variety of) cash to earn cash

There was a time when you 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 those that needed to remain worthwhile needed to scale their operations.

Quickly a passion miner could not sustain with mining in a dorm room however wanted a warehouse — or warehouses — stuffed with mining rigs operating day and night time to remain worthwhile. We scaled with the {industry} and bootstrapped our development as we went, however these wanting to hitch at present now not have the choice of beginning on the backside and dealing their means up. Meaning 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 facility. 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 only a few chip producers who’re tightly controlling the availability — to not point out that we’re at the moment in a world chip scarcity. Because of this success depends not simply on environment friendly and well-run operations however on constructing relationships within the {industry}, lots of which shall be for the long run.

Lesson 3: Obsess over operational effectivity

Talking of operational effectivity, large-scale miners keep worthwhile once they have the sting over their rivals. This implies optimizing electrical energy, having essentially the most up-to-date {hardware}, and never having any downtime or points that may 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 have been pressured out — but we survived attributable to our operational effectivity.

Lesson 4: By no means cease innovating

The adage is “innovate or die.” In Bitcoin mining, the place knowledge facilities have to remain highly effective and quick to remain worthwhile, there isn’t any choice however to maintain innovating. Most significantly, this implies protecting your tools up to date and never letting it get out of date. Mining operations must plan forward to interchange tools and time it appropriately 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 to your firm to run, like creating software program packages particularly designed for mining operations administration. On this {industry}, know-how offers you the sting, and even the smallest enchancment will hold you forward of your competitors.

Lesson 5: Select your location correctly

“Location, location, location,” they are saying. Despite the fact that Bitcoin could 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 supply the identical sources of electrical energy for a similar costs, so miners want to search out areas that not solely have considerable, low cost electrical energy however to make sure that that electrical energy is inexperienced and sustainable as nicely.

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 shall be shut down, like they have been not too long ago 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 could be pricey. 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 may’ve been misplaced attributable to normal transport.

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

Lesson 7: Scale is all the things

Lastly, scale is all the things. I stated earlier than you could now not begin on the backside and work your means up. The race as an alternative is to be as large as you’ll be able to as a result of scale is immediately correlated with income: The bigger you might be, the extra revenue you make.

Constructing ahead

The time period “larger, higher, sooner” actually does apply to Bitcoin mining, so for those who’re not able to strategize, make investments money and time, downside remedy, and take dangers, then one other {industry} could also be for you.

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

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

The views, ideas and opinions expressed listed here are the writer’s alone and don’t essentially replicate or signify 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 know-how and cryptocurrencies, Marco studied arithmetic on the Ludwig-Maximilian College of Munich.