The mining industry is probably the oldest activity related to cryptocurrency. It all began in 2009, when Satoshi Nakamoto generated the first block on the Bitcoin network.
Today, mining is an entire industry which spans 114 countries around the world, and restlessly ensures the functioning of the global network of cryptocurrencies. According to Blockchain.info analytics, the total profitability of the market over the past year comprised $4.1 billion. This figure doesn't include the income earned from the sale of mining equipment, which is estimated to reach some $3-4 billion, as is the case of industry giant Bitmain.
Bitcoin network
Along with the popularity of mining, the complexity of the Bitcoin network also grows. Despite the fact that 80 percent of Bitcoin has already been mined, according to experts, the entire supply will be exhausted only by 2140. The situation is explained by the fact that the calculations necessary for the production of cryptocurrency are constantly becoming more complex, and the mining process takes more time and energy.
At the same time, between 30 and 60 percent of the profit gained from mining is spent on energy costs. Figures show that to maintain the entire computer infrastructure working with Bitcoin, it would take 30 nuclear reactors running at full capacity.
Despite the reduction in the reward for generating blocks, a halving in the mining reward size from 25 Bitcoin to 12.5 Bitcoin and the increasing complexity of mining, miners can still receive up to $20 million per day in transaction confirmations. This staggering number attracts new players to join the ‘digital fever’ — and the equipment manufacturers to invent more efficient ways to extract Bitcoin.
Equipment
In the summer of 2017, with the growing popularity of cryptocurrencies, market demand grew not only for professional equipment, but also for graphics cards (GPUs). In 2017 alone, more than three million discrete graphics cards were purchased for more than $776 million, Jon Peddie Research states. PC gamers were unable to purchase top model GPUs, which had sold out to miners before they even arrived on shelves, and the manufacturers of AMD and Nvidia cards fixed the growth of profits.
In the second quarter of 2017, Nvidia increased revenues by more than 50 percent, compared to the second quarter of 2016, reaching $251 million. AMD revenue for the same period increased by 18 percent — $1.2 billion. Following the fall of the market, interest in mining also decreased — AMD and Nvidia are both expecting a decrease in revenues in the second quarter of 2018.
At the same time, mining is reaching industrial proportions. Around the world, miners have united and created entire plants and hangars, and thousands of GPU cards are assembled into giant farms with peta hash capacities. Some companies repurpose former plants and invest millions of dollars into building infrastructures for mining. On June 6, the mining company CoinMint announced it plans to open a Bitcoin-mining plant in a former aluminium smelting factory in upstate New York, near the U.S.-Canada border. Supported by the U.S. government, CoinMint aims to create 150 jobs for the next 18 months and allocate $700 million to revamp Alcoa's 1,300 acre plant.
At the same time, large players find more sophisticated methods of reducing energy costs and increasing equipment productivity — from building farms in caves to launching miners to space. Who are these industrial miners? Cointelegraph invites you to visit the five largest farms in the world.
GigaWatt
Launched: 2012
Location: Washington, U.S.
Hashrate: 1.3 PH
The emergence of new players in young and profitable niches is often difficult to predict. Billionaires are those who, until recently, repaired computers or worked in an electronics store. One of them, Dave Carlson, began to mine with an ordinary GPU and now owns the largest mining farm in North America.
A software specialist and entrepreneur with 10 years of experience decided to take up mining after having faced financial problems in his previous job at an advertising company. Founded in the basement of his own house in 2012, the MegaBigPower company, which was later renamed into GigaWatt, turned into a multimillion-dollar business in just one year.
Today, the farm is situated in a former industrial warehouse. However, its exact location is not disclosed, similar to other farms, where owners prefer not to attract the attention of public authorities.
As the company expands, Carlson estimates his monthly operating expenses, including salaries for 15 employees, at more than $1 million. The final figure of 1.3 peta hash, in his words, pays it off in full. Moreover, having managed to attract additional investments, the entrepreneur started production of mining equipment based on Bitfury chips for sale to other Bitcoin enthusiasts.
Carlson’s business is apparently going well. Among the factors that contributed to his success, Carlson specifies not only a desperate desire to escape poverty, but also the luck to have low electricity prices. Washington state, where the company is based, offers some of the cheapest power in the country with just $9.56 per kWh for individuals and $8.42 per kWh for businesses.
Genesis Mining
Launched: 2014
Location: Iceland
Hashrate: 1000 GH
Another owner of a truly large mining farm is Genesis Mining. Initially, their mining capacity was located in Bosnia and China, but today they are concentrated in Iceland and Canada. The cold climate — combined with cheap electricity prices — makes these countries attractive for mining cryptocurrency.
It is believed that Genesis mining farms are the largest consumer of electricity in Iceland. The electricity consumption and cooling issues are usually kept secret by large miners, so as is the exact location of their farms. Genesis, like Carlson and others, in accordance with their security policy, does not disclose the exact geographical location of its mining farms.
Dalian mining farm
Launched: 2016
Location: Dalian, China
Mined monthly: 750 BTC
Electricity costs monthly: $1,170,000
Hashrate: 360000 TH*
*Given the average Bitcoin network hashrate of December 2017
China is known for its numerous plants for the manufacture of video cards and ASIC miners. Consequently, the miners in China have the advantage of purchasing equipment at lower prices. The delivery of equipment is cheaper — or even absolutely free.
China is amongst countries with the lowest price for electricity, along with Venezuela, Taiwan, and the Ukraine. The most important factor in this matter is the decision of the Chinese government to encourage the industrial production of cryptocurrency by reducing the price of electricity consumption for the official owners of such farms.
China has a huge population, which increases job competition. In the country, industrial cities have existed for a long time, with workers living without visiting the outside world at all. The same is practiced at mining farms, where system administrators are ready to live in dormitories near a farm for a relatively small salary, ensuring uninterrupted production of cryptocurrencies.
All these factors create a fertile ground for the deployment of the largest mining farms, like in Liaoning province. Its small city of Dalian is the center of mining in China and, probably, the whole world. It is a three-story mining farm with a specially designed ventilation system. Currently, the farm in Dalian accounts for more than three percent of the hash rate of the entire Bitcoin network.
Another Chinese province, Sichuan, launched an industrial farm near a hydroelectric power station. Since 2016, the capacity of the farm has grown almost threefold and reached 12 PH. Other provinces, throughout China, are also not without their own large mining farms.You can easily understand, when such a farm is nearby, because of the piles of obsolete mining equipment.
Swiss mining farm
Launch year: 2016
Location: Linthal, Switzerland
Hashrate: Unknown
The largest mining farm in Switzerland is located in the small village of Linthal in the eastern part of the country. Its owner, Guido Rudolphi, has already run a mining farm in Zurich but found the operating costs too high. After almost two years of searching, Rudolphi opted for Linthal, which offers the most attractive prices for electricity in the country.
The new farm, located in a former factory building, is considered the largest in Switzerland. Although the issue of cooling processors still remains relevant, Rudolphi insists that the possible financial benefit is not decisive for him. The world needs Bitcoin more for political reasons, he believes. The owner of the farm compares the cryptocurrency with the internet of the 1990s, when many people looked at this phenomenon with a great deal of skepticism.
Russian farms
Mined monthly: 600 BTC
Hashrate: 38 PH
Russia is also among the countries in which large mining areas are located. The largest of these is believed to be located near Moscow, though the exact location of the farm is not disclosed. The power of the Moscow farm allows for the mining of approximately 600 Bitcoin a month. The currency is generated by 3000 Antminer S9 ASIC-miners and, for this, a performance of about 38 PH per second is needed. To cool this amount of equipment, modern ventilation from Iceland is used. The electricity expenses are over $120,000 each month, Slavorum.org states.
Looking to the future
Major mining farms began to appear only a couple of years ago. In 2014, these were farms of enthusiasts. Today, mining farms consist of large technological infrastructures with a regular staff of professional employees, like GigaWatt, Genesis Mining or Coinmint, which combine into agglomerates at the site of former factories and hangars. With the increased complexity of the network and the declining prices of cryptocurrency, individual miners are pulling out. However, those players who managed to deploy large-scale infrastructures will be able to provide an ideal balance of productivity and low cost.