Considering hosting miners for others, what kWh rate would generate interest?

[Wudcutter]

We are in the process of building low cost natural gas generated power. We have access to very cheap natural gas. We can build out the power faster than we can buy our own mining rigs due to lack of capital.

We are looking to see if there is any interest in having us host your mining rigs.  What kWh power prices should generate interest?

Thinking there are mining rigs that just got shut down post having due to poor rates of return. Please read through my other posts to learn more about my ideas. Don't get hung up on the $.05 kWh rates listed on those posts, our generated costs are well below that.

We are looking at setting containers of some sort to hold the mining units (I like them called 'gears'!) along with electric generators, at natural gas wells and other interconnect locations. I call these mining farms, where most people vision much larger factory sized farms.

We hosted a few rigs at our existing little mining farm and gotten taken advantage of. We are smarter now I think. What concerns should we be aware of hosting others rigs? What power costs are attractive. We are interested in both parties making/saving money here.

No, I'm not interested in hosting your S9's, but I will be hosting a whole bunch of mine.

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[HardFacts]

This is a BAD IDEA, for the following reasons:

1.   Natural gas prices will skyrocket soon with the coming inflation.   Only a fool would invest based on low price / low demand of the corona-virus crisis.

2.   NEW YORK:   Taxes will kill you, more than offset any lower operating cost.

3.   NEW YORK:   Cost of labor, anything you need done, any services will be SKY HIGH.

4.   In the end, this will not be cheap, it will be one of the most heavily regulated, high cost, risky places you could even think of to do business.   You will not have an advantage over other miners, you will have more barriers than you can think of, and a good way to go bankrupt.

Hard Facts

[Wudcutter]

Hey Hard Facts, thanks for your continuous support, trying to save me from myself!  Just wondering if you have ever contributed anything positive to this forum?

Must be hard always tearing everyone down.  Instead, try helping people up, supporting them and offering positive comments. This is how I live! It feels great! Best of luck.

[mikeywith]

Regardless of how he did it, he did try to help you, supporting people isn't always done by encouraging them to go ahead with their plans  .

I am not from the U.S but if whatever he mentioned in terms of tax and labor in NY then I would be giving you the exact same advice, mining isn't easy, I usually tell people to consider the fact the many people with access to a lot of money and FREE power don't mine, this is the reason why a few others who pay for power can still mine.

In your opinion, if it is all about power cost, wouldn't people with free power rate concur the network and kick you and everybody else out of the game? But because it is not, then that should get you think twice, just because you managed to find a cheap source for power it doesn't solve the other dozen issues.

We have seen multi-billion operations, Megawatts of mining gears lose their business and leave the game, so mining at it's basic form is already risky, let alone hosting gears you don't own and having to comply with all the contracts, risk, security, downtime, insurance, legal papers and etc.

You also still need to beat the average hosting price which is 5-6 cents per kwh IIRC, and will you be able to do that for a long period of time? Do you have enough capital for infrastructure and cooling?  How much would you pay for a person to be onsite 24/7 to handle reboots , mcb failures?

[philipma1957]

hosting is hard.

That said you could get customers at 4 cents easy.

5 cents they will still come.

and at 6 cents you won't get many.

Of course all is based on current coin price  and current difficulty.

From the viewpoint of a miner are you trustworthy is a big problem for you to fix.

A lot of miners won't send gear to you since they don't know you.

Then up time is your next problem.
You need to be up 29 out of 30 days.
Maybe 59 out of 60.

last 90 days we lost

1.5 days  which is about normal for us

[HardFacts]

Hey Hard Facts, thanks for your continuous support, trying to save me from myself!  Just wondering if you have ever contributed anything positive to this forum?

Must be hard always tearing everyone down.  Instead, try helping people up, supporting them and offering positive comments. This is how I live! It feels great! Best of luck.

I do not support bad ideas.   The business world does not care about emotional support.

You obviously do not want to hear about risks, reality, and very obvious problems with your idea.   Any rational businessman would carefully consider ALL risk factors, not just want to hear " feel good " encouragement about a bad idea...   This is reason enough for anyone to NEVER, ever get involved in a business or investment relationship with you  !!!  

Hard Facts

[wndsnb]

Like everyone else already said, not easy.

I'd have to disagree with most of what HardFacts said though. You only pay taxes on profit, running a mining operation is not labor-intensive, and if gas cost is going to go up because of inflation, then the wouldn't the price of gas in BTC not be affected....

The market price of natural gas can be volatile, but it seems like the OP might have access directly to a well, so his price may not be tied to the market price.

Scaling up can be very difficult. Big difference between setting up 20 miners and 500 miners. You'll need an electrician that has experience with datacenters. A building (or shipping container) full of miners generate harmonic currents that can cause very large neutral currents. I'm not sure a typical gen-set is rated for that type of load, so you may need some additional k-factor rated transformers between your generator and miners.

You'd also need a good IT person.

Make sure you can get whatever permits are required. Probably need to get to know your gas/electrical/fire/building inspectors. I'd guess it helps to be off-grid, but you are at the mercy of their whim, and they are incentivized to be as restrictive as possible.

The trend has been that mining is going more and more industrial, and is basically a race to the bottom consolidating at the cheapest operating cost available. The higher your total cost per kwh the more risk. You mentioned hosing a bunch of your own S9s, so I'll assume you've done the calculation and are currently profitable running an S9, which would mean you think your cost will be under 3.5c /kwh. If that is true, then you're in the range (or close to it) that will likely stay profitable with moderately current miners no matter what the BTC price does. But it's just a matter of time before those S9s are no longer profitable with the new 30w/th miners coming to the market.

As for hosting, that's another headache. You'll probably need a lawyer to help with the contracts and/or when you get sued.....

Like Phil said, trust is an issue. It's fist a barrier to getting clients, and second to deal with issues after. The newer Bitmain miners have shown pretty high failure rates, your clients are going to have to take your word for it when you tell them it just died and wasn't because you let the temp get too high or your transformer blew up and fried it.

[HardFacts]

[...]

You obviously did not read what mikeywith posted also, so I quoted it below.....    You are either incompetent or dishonest if you can ignore so many problems with this bad idea...  TALK IS CHEAP, so put your money where your mouth is and invest YOUR MONEY in this if you think it is great      Seriously, take out a second mortgage on your hose, and invest it in this idea with WoodCutter  

mikeywith makes some very valid points which woodcutter and some other fools just ignore...  There are so many huge problems with this idea, that I could not cover them all myself.

Regardless of how he did it, he did try to help you, supporting people isn't always done by encouraging them to go ahead with their plans  .

I am not from the U.S but if whatever he mentioned in terms of tax and labor in NY then I would be giving you the exact same advice, mining isn't easy, I usually tell people to consider the fact the many people with access to a lot of money and FREE power don't mine, this is the reason why a few others who pay for power can still mine.

In your opinion, if it is all about power cost, wouldn't people with free power rate concur the network and kick you and everybody else out of the game? But because it is not, then that should get you think twice, just because you managed to find a cheap source for power it doesn't solve the other dozen issues.

We have seen multi-billion operations, Megawatts of mining gears lose their business and leave the game, so mining at it's basic form is already risky, let alone hosting gears you don't own and having to comply with all the contracts, risk, security, downtime, insurance, legal papers and etc.

You also still need to beat the average hosting price which is 5-6 cents per kwh IIRC, and will you be able to do that for a long period of time? Do you have enough capital for infrastructure and cooling?  How much would you pay for a person to be onsite 24/7 to handle reboots , mcb failures?

[mikeywith]

... and if gas cost is going to go up because of inflation, then the wouldn't the price of gas in BTC not be affected.

You are saying if the price of gas goes up against fiat (USD) it won't go up against BTC because inflation takes everything against USD to the upside, right? if that's what you mean, sorry it's wrong.

That would only be true if the only commodity/currency in the world was BTC, but this is not the case, inflation of fiat doesn't automatically/magically give BTC any more direct value, and the simple proof is this exact period of time, how many trillions of fiat money was injected in the market post Covid19? is BTC making any higher highs on price? Nop it's doing the opposite, the money injected into the market simply did not find it's way into bitcoin.

Now to be honest, none of what you said nor what I have explained matters to begin with, simply because the host will sign a contract with gears' owners to be the hosting price in USD, if BTC goes 10 times up, and gas price increases only 50%, the host can't tell his clients, "oh you are now making way more money and I am losing money, pay me more", no such thing can happen, the host will be obligated to pay his power bill in fiat, and miners pay him in fiat, so if gas prices go up, he will handle the risk alone.

[...]

I am with you on most of the points you made, I think they are valid and I tend to agree with them, but let's be respectful to one another please, wndsnb is an old-timer and a very nice person, he could be in the wrong this time, but indeed his opinion is to be respect nonetheless.

[philipma1957]

Hard Facts is more often wrong then correct.

But the idea 💡 hosting is difficult.

The op is looking to use “free” gas. As waste gas occurs in some operations.

No one is willing to setup all the gear needed to move the gas to homes.

So his gas price is not going to rise.

But dropping in a few containers.
setting up a few generators does cost money.

If you do this correctly you need an idle generator.

Two active generators.

Your rotate them for maintenance .

The op has poor internet and is in rural new york which is empty and rugged land.

It will take effort to do this.

Also generators don’t last.

So they become a constant expense.

Full rebuilds every 2 years.
plus constant maintenance.

since the mine is in the middle of an under developed area how close will your workers be.

Buysolar and I almost got an ideal place 26 acres less then 5 miles from our homes.

We would have been able to build 2 megawatts of solar which is 333kwatts.

Buysolar would have moved from one home to the other place.
I would have a ten minute  drive to do proper maintenance.

I would like to see op develop it for himself and see how it goes.

[wndsnb]

...
Now to be honest, none of what you said nor what I have explained matters to begin with,
...

That I agree with. Inflation is irrelevant and was more of the point I was trying to make.

An interesting fact is that nearly 40% of electricity in the USA is generated from natural gas. If the price of natural gas spikes, the price of electricity on the grid will follow. But the market price of gas may not have much impact the OPs situation if he is using waste gas or is buying directly from the producer, bypassing distribution costs.

But we're getting off-topic here... OPs question was about what price would attract miners, not arguing about aspects of his situation that he is likely the expert on.

For that question, I'd say that this probably isn't the best time to ask with the halving only a few weeks ago and the diff not even stabilized yet. But the market price in North America at the moment seems to be in the 6.5c range for small quantities, closer to 5c for larger quantities. The trend in prices have been down, a year ago the prices available were higher and hosting operations that can't afford to go any lower are going out of business. It wasn't long ago when it was hard to find hosting for small quantities below 10c/kwh. Race to the bottom.

[HardFacts]

America at the moment seems to be in the 6.5c range for small quantities, closer to 5c for larger quantities. The trend in prices have been down, a year ago the prices available were higher and hosting operations that can't afford to go any lower are going out of business. It wasn't long ago when it was hard to find hosting for small quantities below 10c/kwh. Race to the bottom.

You miss the very simple, and obvious gorilla in the room.  The cost of doing business, regulations, insurance, labor, liability, etc. in the USA and especially NEW YORK.

You are putting MUCH, MUCH, MUCH to importance on the price of energy, that is a very small amount of the total cost of mining.

TALK IS CHEAP, it is to easy to say things in a a forum that you know are deceptive...  Send woodcutter your money, invest it that idea, see how it works out for you   

Hard Facts

[mikeywith]

That I agree with. Inflation is irrelevant and was more of the point I was trying to make.

The problem is, inflation is relevant to the host and it's a risk for him but not to miners, in other words, if for whatever reason gas prices increase and say it now cost him 7 cents per kWh while he is bound by a bunch of hosting contracts where he is obliged to offer 10MW worth of power for 5c per kWh which he got paid for upfront, and his cost is 4 cents so he makes 1 cent of revenue, say 0.5 cents per kWh of net profit, and then out of a sudden it starts to cost him 7 cents, so he loses 2 cents per Kwh on 10MW that is a ton of money to be losing.

[wndsnb]

The problem is, inflation is relevant to the host and it's a risk for him but not to miners, in other words, if for whatever reason gas prices increase and say it now cost him 7 cents per kWh while he is bound by a bunch of hosting contracts where he is obliged to offer 10MW worth of power for 5c per kWh which he got paid for upfront, and his cost is 4 cents so he makes 1 cent of revenue, say 0.5 cents per kWh of net profit, and then out of a sudden it starts to cost him 7 cents, so he loses 2 cents per Kwh on 10MW that is a ton of money to be losing.

Agreed, if we get a 50% inflation rate for the period of a single hosting contract, and the host doesn't have a flat contract rate with his energy provider, then that would be an issue for the host.