neha

It is for the building and basic infrastructure and at higher rents they can include racks, tanks, and the cooling infrastructure. In essence the next level of infrastructure could be financed. What they will stay away from is the rigs and going after that piece of the market. I have modeled out what an integrated stack looks like where the rigs, the building, the rent, the power, (everything but headcount) looks like too and that is an option that would require a larger and different capital raise to deliver an integrated mining stack and company. I personally think that ultimately it ishow cryptos will be mined - a fully integrated stack like Apple vs a piecemeal approach like Microsoft/Dell/Cisco/3rd party data center.

There is a product gap that exists. I suspect that century link's deal with CoinTerra was in facilities that Century link owns but has not built out yet or they priced a Tier III facility at a Tier I price. In any case CoinTerra paid 30-48% above market for whatever they got.

Convertible notes are not an IPO, it is a form of capital raise.

The Coin Foundry is raising $10M in convertible notes to fund a site purpose built for mining crypto currencies.

The pitch is this -

Power is 5 cents, metered
Megawatt scale only
Immersion 2 and traditional rack cooling options
Rent is $50/kw-$100/kw
50MW in the first phase

Container friendly
Design help available

First leases commence 2014
Terms are first 12 months rent paid up front as deposit ($600,000/~1,000BTC - $1.2M/2,000 BTC), term length 24-60 months
First 3 months of power, true up after first 3 months ($90,000)

Locations confidential - US Midwest and US Northeast

Legal to be done by Perkins and Coie in the US

Pedigree of founders is easily verifiable
They have raised over $150M in the past for data centers

There is a site up to capture further requests for information - http://www.thecoinfoundry.com

As for the terahash calculations... That is up to the miner. The building is what is being set up and conditioned for mining. The output is dependent upon hardware, power stability, heat mitigation, and other variables unique to each mining operation and how they operate and perform.

The practical logistics side of 50MW is complex. I know of 100+MW being sourced right now, but I will tell you from experience that even moving 1MW (400 racks in a traditional data center) takes 1-2 months, even with an army and rock solid facility logistics like at Facebook. So to say that 50MW is is too small is not the case in my perspective. That is 3 months minimum of set up, move in, and optimize from what I have seen in real life. This does not account for production delays, dependencies with contractors to get things ready to operate, or any other variables that lead to setbacks.

There is also the practical financial side of all of this which is that if a mining company signs a lease for 3 years then the financial commitment is $90M USD for rent. Power at 5 cents at capacity is ~$55M for 3 years so to finance a deal at a 50MW scale there needs to be assurances that the $150M nut for the term can be covered. To de-risk that deal then you are talking about a ~$50M deposit. If there is a building owner who will take the risk and not require a massive deposit then the miner will be at risk for losing all of their rigs and physical property if their bills aren't paid. In the world of finance they see this business as having a lot of risk.

Convertible notes are actual physical financial instruments simpler and less expensive to execute than equity with preferred shares and other nuances of a more complex financial structure.

I have raised $152M in real life, my reputation is quite intact and easily verifiable

Investors would have actual paper and documentation

Perkins and Coie will legally structure the deal

I am trying to help The Coin Foundry raise $10M in convertible notes to fund a place where cowboys and suits can mine crypto profitably.

The pitch is this -

Power is 5 cents, metered
Megawatt scale only
Immersion 2 and traditional rack cooling options
Rent is $50/kw-$100/kw
50MW in the first phase

Container friendly
Design help available

First leases commence November 1, 2014
Terms are first 12 months rent paid up front as deposit term length 24-60 months
First 3 months of power, true up after first 3 months

Locations confidential - US Midwest and US Northeast

I have been in the data center business for 20 years and there is another way to look at this as a business...

The power costs what the power costs where you are
The real estate costs what the real estate costs where you locate
Labor costs what the labor costs where you locate
Taxes cost what taxes cost where you locate
The infrastructure costs what the infrastructure costs where you locate - rigs, racks, cables, switches, routers

The question is how can you make money where you are? Can you?

There is consumption and there is cost of consumption. The way the data center world computes power is cost of power (.05)*hours per month (730)* Kw used (1000)= $36,500 per month in power to run a 1MW footprint of rigs or 416 rigs at 2.4Kw of draw each.

There are collateral costs for the cooling required to cool the density of the rigs - remember computers turn electricity into heat - and that adds a factor of .3 to .5 depending on the facility. This means that for every Kw of power used to run a rig, you'll need to consume .3 or .5 of a Kw to power the cooling infrastructure required to keep the wires and boards from burning or melting and to keep the rigs at an operating temperature range.

So the all in cost per MW of power will be $37,595 per month at a .3 cooling uplift. You still have the cost of rigs, racks, cables, switches, etc. to cover and rent for the physical space which on the low end would be $90/kw so figure another $90,000 plus taxes.

So the question is at what scale do you mine bitcoin to clear at least $150K/month?

Biffa,

You make a clear distinction that I overlook constantly. As a data center guy, I look at things as when the data center fails, people die and/or it costs a company $2,000 per second of downtime. Mission critical goggles are always on. Bitcoin is not in that realm to a large degree (I believe it is changing) and is largely comprised of enthusiasts.

It is not the first summer of mining, but the number of miners who view mining as a get rich quick operation has dramatically increased. People with little or no understanding of computer operation are starting to mine too, and don't understand heat, electricity and cooling. What is also starting to happen is that investors are throwing money at this space and they have a very different and high expectation for operation - especially at scale. My realm is MW of electricity and you're correct that no data center can handle the heat footprint which means it is too expensive to make money. The liquid cooling stuff from Allied Control I think has promise.

As for Iceland, the seismic risk and potential volcanic ash risk will keep me away. My preference would be set up in South America or New Zealand and follow the winter, or just find inexpensive pretty reliable power in a secure building with climate control and/or a BitRack with the A/C units and mine. I don't know why anyone would want to underclock something. Overclock and run em at maximum throughput so you make more. That is where this is headed IMHO - scale, maximum throughput, an arms race for the next 5 years that will be limited by heat, or more Bitcoin share captured by those who can run fast and handle heat.

It's not just the chips. The boards they sit on, the insulation on the wires, anything plastic in the case, capacitors, and fan blades - those are where the trouble is. That stuff can melt before the data center cooling even enters the equation.

The other thing people overlook is that when you plug in a rig that is cold and fire it up, it goes from room temp to over 100F quickly. Lots of metals and heat sinks, drives, cases, and other components don't do well with a drastic and sudden exponential increase in heat. It cracks things. The A/C inside the facility at 65F if drawn into the case and over the guts of the rigs at 200F can also create a huge temperature differential. That cracks things.

Ideally you look at airflow, you look at SLA's of the facility, and tweak the rigs for the environment you operate in.

Hi folks,

I am a data center guy, so I look at the rigs from the 'how much heat do they generate' perspective. The short answer is that mining rigs are a MONSTER for a data center that is more than 3 years old. I did some math on bitcoin, and posted it on my blog http://blunthammer.wordpress.com and the data points were picked up by the Wall Street Journal for an article about the heat problem - [Suspicious link removed]j.com/moneybeat/2014/04/29/bitbeat-for-bitcoin-miners-a-hot-problem-this-summer/ which is the #1 problem the rigs have.

The heat signature of a 4U rig is the equivalent of a 42U rack and most data centers are designed for the density spread out over 42U not 4. It's like trying to cool a heat gun in a shoebox. Very tough. The heat problem (at least here in the US) hasn't been much of an issue because it was winter and heat was a desirable benefit along with the bitcoin mined. There are the liquid cooled solutions that are available, and Martin Enclosures just released a new line of racks - http://www.martinenclosures.com/product/bitrack/ that sound like they were developed to help deal with the heat problem.

Bottom line - It is expensive to mine where power is over $0.05 per Kwh. The cost doubles when it is warm outside because you're paying for electricity to run rigs AND to cool them. Heat is not a desired byproduct when it is 90F/30C outside. The data center contracts carry a cooling uplift of 30%-50% so you'll pay for the cooling no matter what, so the best defense is to go to a facility where power is inexpensive, or go big with the mining operation (400 + rigs).

I am working on a design for a rack to put rigs in. The tabletop and under desk approach is reaching the end of its useful life. I am crowdsoliciting ideas for a rack you would build to put your rig in.

So far I am thinking:

42U, maybe a 'shorty' for a single rig
A/C optional
Power strip in the rack
Shelves vs rails so I can just plop a rig on the shelf vs. hold it with one hand and screw it into the sides
Door optional
Sides optional

More color options than a bag of Skittles or a sleeve of Spree...

What would you build?

This blog post I did - http://blunthammer.wordpress.com/2014/03/24/the-math-of-bitcoin-iii/ - lays out the economics of ANY hosting company. The ONLY thing that drives down costs in ANY data center is the cost of power, followed closely by the cost of cooling.

In a nutshell a facility that has $.05 per Kwh of power and a 10% overhead will be cheaper than a facility where there is $.10 per Kwh power and 30% overhead for power to cool the heat the computers make.

To mine cost effectively short or long term the ONLY way to do it is to find a facility that is ULTRA efficient with their cooling (PUE of 1.1 or better) and that has inexpensive power, low taxes (on the gear and power). I have been in the data center business 20 years and this is reality. The other reality is that few data centers can cool rigs without it costing 2X because of the concentration of heat.

If you have questions or need help sourcing the right facilities, I do it for a living.

mark at blunthammer dot com

The people saying that BTC will be squashed or destroyed because of taxes don't get ho business works, and why the IRS position is actually a good thing. I was at a panel at Harvard Business School on Tuesday and the challenges of BTC were discussed and the big one was the fact that there was no guidance, position, or opinion on how BTC would be treated financially. Because of this lack of understanding, and a host of other things - all of which have to do with maturity around regulatory and compliance issues - the adoption of BTC was going to remain slow.

The fact that there is now a position means that businesses can get on with factoring in the tax burden to their costs. A company doesn't leave the US because of taxes, they figure out what the laws are, what the loopholes are and manage to the rules of the game. Saying that BTC will implode because of taxes is just not true, it gives businesses some guidance on how to compute the costs, which up until now were zero, and could have been 100% because there was no guidance.

As for Belgium (or the next 30 countries) saying they won't tax BTC isn't necessarily a great deal either because the real estate taxes, VAT, cost of living, healthcare systems, price of gas/power etc. all go into factoring the total expense base which may in fact be WAY higher than the US and the laws there may not be what people see as just either.

What will kill Bitcoin is that people don't understand it a year from now anymore than today. Businesses can still use cash, pay taxes, and know what the rules of the game are.

What if you had access to a global network of cloud servers to mine with. How would you set it up and why? Would you set up a pool of 100 servers, nonvirtualized, say 20 in 5 global locations or do you go with a single location and 100 virtual machines on some big iron? Would you want faster ASICS or a distributed network of hardware?

I am thinking through if I could do this at scale, what would my payoff be and is it even possible? Or worth it? Curious what others think...

I am new to Bitcoin, but have 20 years in the data center/colocation industry. I have been hopping around this thread and understand the cries of BS and scam. I won't make any such judgement but I will share what I know about how hosting works and will break down what is available as far as information goes. You make the call.

$3,999 = 12 months of hosting.

That breaks down to $333/month. Assuming the boxes are the Terraminer IV boxes (that are customer supplied) those draw 2000W. That is 2Kw PER BOX and so at 4U per box, each 42U rack will draw 20Kw plus a switch, so let's say 22KW per rack/cabinet.

So a rack full of TeraMiner IV draws 22KW per full rack. There are maybe 20 facilities in the US that can take racks of that power density assuming the facilities were built in the past 4 years. Let's assume the gear is in such a facility.

Rent in a facility - by the rack - is typically $300/kw per month (assuming a facility can take that HOT a cabinet) and will include nominal bandwidth. Rent with power included for a 22Kw rack and $300/kw= $6600 per month.

So the math is:

10 Terra miner boxes in one cabinet are generating $40,000 per year in hosting fees on a cost basis of $79,200 per year. That does not include overhead of employees, insurance, taxes, cabling, install fees, or additional bandwidth if required.

Other risks, as a user, would be:

There is no Service Level Agreement to anyone who uses their service. Cloudhashing received one from their facility. If they did not, then they are betting that they will have no downtime and that the facility will do its best to keep your gear running in the facility that is not responsible for anything.  If you are doing 10 installs on a single cabinet, that mean there are people going into the cabinet 10 times to plug things in, wire them up, and get them working. Any time there has been an issue in a data center people have been present. That's a fact.

There is no proof of insurance required. Other users can put their box in the cabinet and if theirs catches fire, or the box that it was shipped in catches fire next to the cabinet because the facility can't cool it and cooks the cabinet, sets off sprinklers, or other fire supression you'll get sued along with everyone else in the cabinet. British law - per their website - is the rule of law. So you'll be going to England to defend yourself.

If cloudhashing doesn't pay their bill, the facility will turn off the equipment and seize it as payment. Kiss it goodbye. 

There are no performance guarantees. For cooling, for uptime, for anything.

For those of you wanting to run these in your house, I hope you live in a cool climate. Running these TeraMiner boxes will be the equivalent of a heat gun or two hairdryers going 24x7x365.

If the cost of electricity is ten cents per Kwh, then 2Kw*730 (hours in a month)= 1460 Kwh in power added to whatever you consume anyway. At ten cents per Kwh that'll cost an additional $146/month in electricity. I do not know if that consumption happens if it's just turned on or hashing like crazy which would take more power.

You still need to keep it cool. Putting these in your home on anything but concrete outside is nuts. It has fire written all over it. Whether from the heat coming out the back or the inability of an older electrical system to handle that much juice running through wires not properly insulated.

Your call, but hopefully that sheds some light. I won't speculate on the play here, but I will go on the record saying that the math does not add up and there is FAR too much risk for me to use this.

If bitcoin (& cryptocurrency in general) is the internet of money, let's jump in the way back machine to the mid 80's....

Lynx was a dominant browser - all text
UNIX was the OS of the internet
D/ARPA Net had been around for about 20 years, yet no one knew much about it
BBS' were a step in building localized and then topic specific communities and making data useful and accessible
Users were trying to figure out this internet thing and see if it was cooler than the BBS world

AOL comes along and takes the BBS concept and creates a different graphical user experience. They ship millions of CD's, charge monthly for usage and then create an advertising driven business model. They get millions online to the AOL experience. Then the Internet blossoms and AOL must morph from it's own experience to a broader experience that was being created.

What was the tipping point? Coming up with a browser that made the Internet come alive and made it useful and usable to people who didn't understand Unix and who didn't like AOL flood of pop ups. Netscape comes along 10 years later.

Netscape went on to create software - name servers, web servers, and their browser continued to proliferate to make the internet useful to more and more people. I see Bitcoin in the AOL stage. Adopted by geeks and techies first, who know they are onto something, but cryptocurrency is still in it's infancy. ATM's merchants, miners - all creating a community, like AOL, to give people a place to kick the tires and figure it out.

I am as excited as anyone about cryptocurrency, decentralized processing, accessibility to money and currency, and all of the seismic potential of this thing. I was just starting my career in the early 90's and was part of the internet taking hold and evolving into what it has become. Models will emerge, models have yet to even be conceived.

To that end we need the catalysts to spark something and broaden adoption. Will it be hardware? Short term, probably. More hashing=more bitcoin. More bitcoin to more people = distributed decentralized currency. More ways to get and use bitcoin is what I believe we need to make this thing go and the channels are opening up. Exchanges, ATMs, merchant services, all looking at and adopting more and more.

The reason Wi-Max didn't explode like people thought it would was backwards compatibility with the carrier networks. In essence WiMax was an awesome new technology that was asking companies to abandon billions of dollars in investments over a century in their infrastructure to make it work. HUGE oversight by the engineers. It may be awesome but you gotta sell it. You don't sell it by telling someone they need to shoot their family to use the new awesome.

I see one of the largest challenges being the integration with other forms of currency and backwards compatibility or integration with them to insure success, or bitcoin will go the way of Betamax or DAT. Good news is we are on our way, adoption is increasing and proliferation will happen. How fast depends on how useful it can be made to the greatest number of people. In other words scale. If it scales, it'll be ok. If it scales and plays nice with others, then it will fix a lot of issues in the system.

Thoughts? Opinions?

How expensive is the hardware?
How expensive is it to burn the building the closet is in down because there is no way to mitigate heat that is generated from the hardware?


Slow hardware=less heat

Powerful hardware=more heat

Computers turn electricity into heat no matter what. If the hardware needs to crunch numbers and algos faster they will run hotter. CME, NYSE, and the racks that house the rendering software for motion pictures all run 25kw+ because they get data crunched faster. The challenge every one of them has is heat rejection.

So if I have $3M in hardware in a rack running 30Kw means it's costing $100,000 per Kw of processing. You'll pay $10k a month to put that rack in a secure building where you have a contract that says you'll have less than 5 minutes of downtime per year. So if it costs you $100,000 a KW one time, and $120k a year to house and cool that hardware, you need to clear $240k to break even.

How much can you mine a year?

New to the thread. I am a data center guy. I know containers and sold one to NASA in 2009. I know data centers and the companies who own and run them. I have started two of them, one funded the other not.

I wanted to interject something as it relates to the overall solution - finding a place that can and will take a container, back it with an SLA you can get at another 'traditional' facility, and deploy it is VERY tricky. I know this because I spent most of 2013 building the business plan, team, four sites, and facilities to build a container data center. I ran out of money before we got live, but here is what I can share based on that year long experience:

The dividing line between a high density facility and 'you're full of sh*t when you say you're that dense' is 30Kw/cabinet. I spent $10,000 to have a third party who does a lot of market research for Dell validate this with 26 'high density' providers in 4 states where I wanted to put these facilities.

Liquid cooling is absolutely an option in the short term, but the back of house operations, maintenance and servicing the tanks increased the points of failure (risk). Techs don't like dressing up in aprons, gloves, and getting greasy and walking on slippery soles either.

The solution we designed cost $6M/MW (building, mech/elec, container, TI's all in) and cool 34KW/rack and 600Kw of actual critical load (750Kw capacity) on a site with a 1.3 PUE. Cooling towers + containers, traditional UPS. Concurrently maintainable.

The customer base were movie studios, geospatial, and HPC customers. About 2% of the overall data center market. I had not looked at bitcoin miners yet.

I love that there are companies building out integrated stacks (hardware, software, containers), the challenges will be delivering the reliability we have come to expect from a Tier III/concurrently maintainable facility:

Carrier density to mirror other transactional standards (<100ms)
Security - physical
Compliance - customers buy risk, compliance (right or wrong) provides standards
Reliable efficient power acquisition and distribution within the site
Managed buildings/sites who understand containers (offloading, landing, testing, commissioning)
Lease terms flexible enough to handle increasing or varying densities, dedicated infrastructure adds, moves, etc. to align with hardware cycles
Geographic diversity with a vendor who understands the above

You may think 'all of this non technical stuff doesn't matter' but  has for 30 years in the data center industry and while there may be a higher risk tolerance at the outset, that will evaporate with the first financial or technical hiccup or crater that happens. Don't fight the mindset, exploit it.

The end game is a well designed and optimized facility or facilities that can handle the flexibility and changes that are inherent with the guts of a miner - the hardware and the things that happen on it.

mark at blunthammer is the best way to get me if you want to do a deep dive on any of this.