7 lessons from building and scaling bitcoin mining operations

189
SHARES
1.5k
VIEWS
ADVERTISEMENT

Related articles


It all started with mining Bitcoin (BTC) in a dormitory. What started as a hobby with a few mining rigs has grown into twenty industrial mining farms around the world. As we scaled our operations in a new industry, we had to try and error to find out what works and what doesn’t – because there is no manual for that.

Building a multi-site, scalable operation like ours isn’t easy, but if you’re looking to start your mining operation, scale your inventory, or invest in a mining company, here are the top seven lessons we learned to help you navigate yours next steps.

Related: How To Mine Bitcoin: A Beginners Guide To Mining BTC

Lesson 1: It takes (a lot) money to make money

There was a time when you could mine bitcoin from a laptop or set up some mining rigs in your room and mine for profit. But once again the miners created more competition and those who wanted to remain profitable had to scale their operations.

Soon, a hobby miner couldn’t keep up with mining in a dorm room, but needed a warehouse – or warehouses – full of mining rigs that ran day and night to stay profitable. We’ve scaled with the industry and driven our growth, but those who want to get in today no longer have the option to start at the bottom and work their way up. That means investing in capital-intensive projects right from the start.

Lesson 2: Build Long-Term Relationships

While the bitcoin mining industry has grown rapidly, it is still very much consolidated and few key players have power. For example, a large-scale mining company cannot simply order new hardware from any vendor.

Right now there are few vendors supplying hardware, and their production cycles are based on just a few chip makers tightly controlling supply – not to mention we are currently suffering from chip shortages around the world. This means that success depends not only on efficient and well-managed processes, but also on building relationships in the industry, many of which will be long-term.

Lesson 3: Obsessed with Operational Efficiency

Speaking of operational efficiency, large-scale mining companies stay profitable when they have an edge over their competitors. That means power optimization, state-of-the-art hardware and no downtime or problems that would lead to a loss of computing power.

Make operational efficiency a priority. For example, when bitcoin fell below $ 4,000 in March 2020, many miners couldn’t survive the uncertainty and volatility and were ousted from office – yet we survived because of our operational efficiency.

Lesson 4: never stop innovating

The saying goes “innovate or die”. In Bitcoin mining, where data centers need to stay powerful and fast in order to remain profitable, there is no choice but to keep innovating. Most importantly, you keep your equipment up to date and not getting it out of date. Miners need to plan ahead to replace equipment and determine when it is right because the hardware may be behind for a while. Remember, any type of downtime will cost you.

Innovation also means creating better and more efficient opportunities for your company, e.g. B. the development of software programs specially developed for the management of mining operations. In this industry, technology gives you an edge, and even the smallest improvement will give you an edge over your competition.

Lesson 5: Choose Your Location Carefully

“Location, location, location,” they say. Although Bitcoin can be mined anywhere, large mining operations must consider their location when setting up a shop for a number of reasons. Not all locations will offer the same sources of electricity at the same prices, so miners need to find locations that not only have abundant and cheap electricity, but also make sure that electricity is green and sustainable.

Related: Clear air: Bitcoin from renewable sources can ensure a clean energy future

Finally, go to a place that encourages bitcoin miners, where you know the political wind won’t turn overnight and all operations will cease as they recently did in China and Iran.

Lesson 6: time is money

As I’ve said before, time is really money, and any downtime or delay in processing power can be costly. This means full operational control over hardware upgrades, a plan for deploying mining rigs, and software that can efficiently manage operations. It also means getting creative: in 2015, we knew that months of waiting for mining hardware to be delivered would reduce our sales. So we rented 747s to get the machines to us faster, which allowed us to generate millions of dollars in additional revenue that would have been lost with standard shipping.

These are the types of calculated movements that you not only need to be ready, but also have adequate knowledge of your operations.

Lesson 7: yardstick is everything

After all, yardstick is everything. I have already said that you can no longer start at the bottom and work your way up. Instead, it’s important to be as big as possible, because scaling is directly related to sales: the bigger you are, the more profit you make.

Build forward

The term “bigger, better, faster” really applies to Bitcoin mining. So if you are unwilling to strategize, invest time and money, solve problems, and take risks, another industry might be for you.

There are many more lessons we have learned and many lessons we will learn in the years to come. Today we will continue to build this new industry that is already creating a future of decentralized currency and new opportunities for the global exchange of values.

This article does not provide investment advice or recommendations. Every step of investing and trading involves risk, and readers should do their own research when making a decision.

The views, thoughts, and opinions expressed herein are those of the author alone and do not necessarily reflect the views and opinions of Cointelegraph.

Marco Strictly is CEO and co-founder of the Genesis Group and Genesis Mining – one of the largest crypto mining companies in the world. Before co-founding Genesis in 2013 and becoming a passionate advocate of blockchain technology and cryptocurrencies, Marco studied mathematics at the Ludwig Maximilians University in Munich.