The cryptocurrency industry has seen a surge in interest from investors and corporations, as the nascent technology provides an opportunity to create new markets. However, many have been left behind by the rapid growth of Bitcoin mining operations. Here are 7 lessons learned from building and scaling Bitcoin mining operations so you can avoid pitfalls on your own journey towards success.
Bitcoin mining is a process that produces new bitcoins. Bitcoin mining operations are required to have members of the Bitcoin Mining Council, which has been formed by the leading mining hardware manufacturers. 7 lessons learned from building and scaling Bitcoin mining operations.
It all began with Bitcoin (BTC) mining in a dorm room. What began as a pastime with a few mining rigs has grown into a global network of twenty industrial-scale mining farms. Because we were scaling our operations in a new industry, we had to learn by trial and error what worked and what didn’t – there is no manual for this.
It’s not simple to build a multi-site, scaled operation like ours, but whether you’re seeking to establish your own mining operations, grow what you already have, or invest in a mining firm, here are the seven most important lessons we learnt to assist you navigate your next steps.
How to Mine Bitcoin: A Beginner’s Guide to BTC Mining
Lesson 1: Making money needs (a lot of) money.
There was a time when you could mine Bitcoin economically from your laptop or put up some mining equipment in your room. However, when additional miners entered the market, those that wanted to remain profitable had to cut down their operations.
To be lucrative, a hobby miner soon couldn’t keep up with mining in a dorm room and required a warehouse — or warehouses — full of mining rigs working 24 hours a day. We grew in lockstep with the industry and bootstrapped our expansion, but those who wish to join today can no longer start at the bottom and work their way up. This necessitates early investment in capital-intensive initiatives.
Lesson 2: Make long-term commitments.
While the Bitcoin mining sector is rapidly expanding, it remains highly centralized, with just a few prominent companies wielding significant influence. A large-scale mining business, for example, cannot just purchase new gear from whatever vendor they desire.
At this time, only a few suppliers are delivering hardware, and their manufacturing cycles are reliant on a small number of chip manufacturers that closely manage supply — not to mention the fact that we’re presently experiencing a worldwide chip scarcity. This implies that success is contingent not just on efficient and well-run operations, but also on the development of long-term industry partnerships.
Lesson 3: Be concerned about operational efficiency.
When it comes to operational efficiency, large-scale miners remain profitable when they have a competitive advantage. This entails conserving energy, using the most up-to-date technology, and avoiding downtime or other difficulties that might result in a loss of processing capacity.
Prioritize operational efficiency. For example, when Bitcoin fell below $4,000 in March 2020, many miners were driven out owing to the uncertainty and volatility; yet, we were able to remain due to our operating efficiency.
Lesson 4: Never stop experimenting with new ideas.
“Innovate or die,” goes the proverb. There is no choice but to keep developing in Bitcoin mining, where data centers must remain powerful and speedy in order to be lucrative. Above all, this entails maintaining your equipment up to date and not allowing it to become outdated. Mining businesses must plan ahead to replace equipment and do it at the appropriate time, since gear may be on backorder for some time. Keep in mind that any downtime will cost you money.
Creating better, more efficient methods for your firm to function, such as software applications particularly built for mining operations management, is an example of innovation. Technology will provide you an advantage in this business, and even little improvements will keep you ahead of the competition.
Lesson 5: Select your place carefully.
They say, “Location, location, location.” Despite the fact that Bitcoin may be mined anywhere, large-scale mining companies must take into account their location while establishing their operations for a number of reasons. Because not all places will provide the same sources of power at the same costs, miners must seek out areas that provide not just plentiful, low-cost electricity, but also electricity that is green and sustainable.
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Finally, travel to a place that is friendly to Bitcoin miners, where you know the political winds won’t change overnight and shut down all operations, like they did recently in China and Iran.
Lesson 6: When it comes to money, time equals money.
I’ve previously said that time is money, and any outage or lag in computer power may be quite expensive. This entails having complete operational control over hardware changes, a strategy for servicing mining rigs, and software that can effectively manage operations. It also entails being inventive: We realized in 2015 that having to wait months for mining gear shipments would hurt our bottom line. So we hired 747s to bring the computers to us faster, resulting in millions of dollars in additional income that would have been lost owing to ordinary shipping.
These are the sorts of calculated actions you must be willing to make, as well as knowing enough about your operations to know which ones to make.
Lesson 7: It’s all about the scale
At the end of the day, scale is everything. You may no longer start at the bottom and work your way up, as I previously said. Instead, the objective is to become as huge as possible, since scale is directly proportional to revenue: the bigger you are, the more profit you generate.
Taking steps onward
If you’re not willing to strategy, spend time and money, solve problems, and take chances, then another sector may be a better fit for you.
We’ve learnt many more lessons, and we’ll continue to learn many more in the years to come. We’ll keep building this new business today, which is already paving the road for a future of decentralized money and new methods to trade value throughout the globe.
There is no financial advice or suggestion in this article. Every investing and trading choice has risk, and readers should do their own due diligence before making a decision.
The author’s views, ideas, and opinions are entirely his or her own, and do not necessarily reflect or represent those of Cointelegraph.
Marco Streng is the CEO and co-founder of Genesis Group and Genesis Mining, one of the world’s biggest cryptocurrency mining firms. Marco studied mathematics at the Ludwig-Maximilian University of Munich before co-founding Genesis in 2013 and becoming a passionate advocate for blockchain technology and cryptocurrencies.
The “large crypto mining operations” is a term that has been thrown around in the cryptocurrency space, but what does it actually mean? There are seven lessons learned from building and scaling Bitcoin mining operations.
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