7 lessons learned from building and scaling a Bitcoin mining business

It all started with mining Bitcoin (Bitcoin) In dormitory. At first it was a hobby of several mining equipment, and later expanded to 20 industrial-scale mining farms around the world. Because we have expanded our business in a new industry, we have to find out which works and which do not work through trial and error-because there is no manual for this.

It’s not easy to build a multi-site, large-scale operation like ours, but if you want to start a mining business, expand your existing scale, or invest in a mining company, here are the seven lessons we learned that can help you navigate your The next step.

related: How to mine Bitcoin: A beginner’s guide to mining BTC

Lesson 1: Making money requires (a lot of) money

There was a time when you could mine bitcoins from your laptop, or set up some mining equipment in your room and mine, and profit from it. However, more miners create more competition, and those who want to remain profitable have to expand the scale of operations.

Soon, amateur miners could not keep up with the pace of mining in their dormitories, but they needed a warehouse — or multiple warehouses — full of mining equipment that operated day and night to stay profitable. We expand with the industry and guide our growth as we move forward, but those who want to join today can no longer choose to start from the bottom and gradually grow upward. This means investing in capital-intensive projects from the start.

Lesson 2: Building a long-term relationship

Although the Bitcoin mining industry is developing rapidly, it is still very consolidated, with only a few key players holding power. For example, large-scale mining operations cannot simply order new hardware from any supplier they want.

At present, only a few manufacturers provide hardware, and their production cycle is only based on a small number of chip manufacturers. control Supply-Not to mention that we are currently in a global chip shortage. This means that success depends not only on efficient and well-run operations, but also on building relationships in the industry, many of which will be long-term.

Lesson 3: Focus on operational efficiency

When it comes to operational efficiency, large miners remain profitable when they have an advantage over their competitors. This means optimizing power, having the latest hardware, and no downtime or problems that can cause loss of computing power.

Put operational efficiency first. For example, in March 2020, when Bitcoin fell below $4,000, many miners were unable to survive the uncertainty and volatility and were forced to withdraw-but we survived due to operational efficiency.

Lesson 4: Never stop innovation

The proverb is “innovation or death”. In Bitcoin mining, the data center must remain strong and fast to remain profitable. There is no choice but to continue to innovate. Most importantly, this means keeping your device updated, not making it obsolete. Mining operations need to plan ahead of time to replace equipment and time it correctly, because the hardware may be out of stock for a period of time. Remember, any type of downtime will cost you.

Innovation also means creating better and more efficient ways of operating your company, such as creating software programs specifically designed for mining operations management. In this industry, technology will give you an advantage, and even the smallest improvements will keep you ahead of the competition.

Lesson 5: Choose your location wisely

“Location, location, location,” they said. Although Bitcoin can be mined anywhere, for various reasons, large mining businesses need to consider their location when opening a store. Not all locations provide the same source of electricity at the same price, so miners need to find locations that not only have sufficient and cheap electricity, but also ensure that the electricity is green and sustainable.

related: Clean the air: Bitcoin from renewable sources can ensure a clean energy future

Finally, go to a place that encourages Bitcoin miners, Where do you know the political wind Will not change and close all operations overnight Will be closed, just like they were in China and Iran recently.

Lesson 6: Time is money

I have already said that, but time is really money, and any downtime or lag in computing power can be costly. This means strong operational control over hardware upgrades, plans to service mining equipment, and software that can effectively manage operations. This also means being creative: in 2015, we knew that having to wait for several months before shipping mining hardware would cut our revenue. Therefore, we rented a 747 to get the machine into our hands faster, which allowed us to generate millions of dollars in additional revenue, which may be lost due to standard shipping.

These are the types of calculated actions that you must not only be willing to take, but also have enough knowledge of your actions to know what action to take.

Lesson 7: Scale is everything

In the end, scale is everything. As I said before, you can no longer start from the bottom and go all the way up. On the contrary, the competition is as large as possible, because scale is directly related to revenue: the larger the scale, the more profit is obtained.

moving forward

The term “bigger, better, faster” does apply to Bitcoin mining, so if you are not ready to develop a strategy, invest time and money, solve problems, and take risks, then another industry may be for you.

We have learned more lessons, and we will learn many lessons in the coming years. Today, we will continue to build this new industry, which has created the future of decentralized currencies and new methods of exchanging value on a global scale.

This article does not contain investment advice or recommendations. Every investment and trading action involves risks, and readers should research on their own when making a decision.

The views, thoughts, and opinions expressed here are only those of the author, and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Marco Strong He is the CEO and co-founder of 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 cryptocurrency, Marco studied mathematics at Ludwig-Maximilian University in Munich.