Bitcoin Mining - The 12 rules for getting it wrong

One of the very interesting presentations at the POW summit was given by Ben Gagnon, head of Bitcoin mining operations at Bitfarms. The American miner shared his experience of around fifteen installations in five different countries.

1) Not wanting to make a profit

“Mining at a loss out of altruism, because you think the network needs to be more decentralized, is not a good idea. The reason being that your capital could be used in another way to strengthen the network. Simply by buying bitcoins. »

“The concept of solo mining, which is like buying a lottery ticket, is like scamming yourself. »

2) Mining in between

For Ben Gagnon, there is no in-between. Only a small installation at home or installations on an industrial scale make sense.

“Connecting a single miner at home is very inexpensive and very easy. But the moment you have to pay an electrician to expand your operations in the garage, etc., your profitability will plummet. »

In short, mining with medium-sized installations or an average electricity price is not feasible:

“You have to mine where you can take advantage of inefficiencies in the power grid in order to achieve high profitability. Where the price of electricity is very low or very volatile. Or even free, for example in your student residence…”

A very volatile electricity price allows you to benefit from electricity credits by switching off to relieve the network. This is what miners like Riot in Texas are doing in tandem with the local ERCOT power grid.

Adam Swick, Chief Growth Officer, tells Fox 7 Austin how Bitcoin mining can be a unique tool for balancing the energy grid by balancing demand rather than supply.

3) Blindly bet on the efficiency of your miners

“Some people think that as long as they have extremely efficient miners, everything will be fine. No. It is not so simple. No miner, regardless of its efficiency (J/TH), can compensate for a relatively high electricity price. »

The graph projected in the presentation compares the costs of mining a bitcoin between an antminer S21, an antminer S19J Pro and a Whatsminer M30S+. The first displays an efficiency of 17.8 J/TH, the second 29.5 J/TH and the third 34 J/TH.

“Look at two cents. We have practically the same price to mine a bitcoin with a miner half as efficient as the S21. »

“Two things happen if you buy very efficient miners. Firstly, you will not be financially successful because of their very high price. Second, you will be no more profitable than those who have cheap electricity. »

4) Settling despite local reluctance

“A lot of people don’t like bitcoin, and you won’t be the one to change their minds. No matter what you say, if they don’t want you, they will find a reason to get rid of you. You will lose your entire investment. The best place to mine is a place where you are wanted. »

5) Find a “convenient” location

“You don’t want to be in a place that’s easy to get to. […] You want to be in an isolated location to avoid competition for electricity, skilled workers, land, etc. You have to settle in an area that is unattractive for normal investments. Any competition will drive up your prices and make you less competitive with miners from the rest of the world. »

6) Build the Perfect Facility

“Don’t design a perfect facility for your miners. Often the simplest design is the best. You must build your installation for the long term (5 to 10 years). The power (power supply) of the miners changes every two years. Cooling techniques too (immersion cooling, water cooling). Building the perfect facility will force you to spend money to adjust it a few years later.

7) Use flammable materials

“A successful installation is very well ventilated. So there is plenty of oxygen to fuel the combustion reaction. Separations must be created to avoid losing everything if a miner catches fire. »

8) Trust local electricians

“The local electricians have never done what you are trying to do. You have to design your electricity network yourself in a very efficient way. »

9) Not thinking about the network

“First thing, the power cables must be installed before the miners. Then, we often think that any internet connection will do. No. Furthermore, many people use DHCP (Dynamic Host Configuration Protocol). Nobody uses that. The miners IP address must be a GPS coordinate in your facility. You must incorporate IP addresses in order to manage your installation properly. Otherwise you will take longer to respond in case of problems. »

10) Buy miners cheaply

“Miners are raw material. There is no reason for a miner to sell you ASICs at a price much lower than the market price. So be careful. Same thing for new miners. There must be a reason why a manufacturer offers you miners half the price of those from Bitmain. You will pay the difference differently. By minors broken on delivery. Too long a delivery time. Untimely stops by minors, etc. The ASIC market is very liquid. There is no business. There may be discounts, but not golden deals. »

Obviously, you shouldn’t buy too expensive bitcoin miners either. Which is often the case when they come out. Only large miners buying in the EH/S range can get attractive prices ($/TH).

Minors' price
Prices for different minors September 27, 2023

11) Misnaming your minors

“We should not give each minor the same name. We must be able to differentiate the name of the model and its exact location on the shelves. »

12) Put all your eggs in one basket

“We must not bet everything on a single jurisdiction, a single installation. A storm, a new law can completely eliminate your profitability, or even your investment, leaving you with debts on your back. If you are in a position to be able to expand your facilities, do it elsewhere. »

Find his intervention at 5:53 a.m. in this transcription of the POW summit.

Let us end by saying that this last point of the presentation also contributes to the decentralization of the network. Ideally, we should have bitcoin miners in every country.

The reason being that exchanges are no longer allowed to buy bitcoins abroad when a country sinks into hyperinflation due to lack of sufficient foreign exchange reserves. Miners must be on site to allow the population to obtain bitcoins despite exchange controls.

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