Introduction
I have never been affiliated in any way, employed, in any contractual relationships, or acquaintance with Alps BlockChain or any of their employees. I only became aware of the company through an Italian Telegram channel “Bitcoin Italia” where they posted a few pictures of their mining farm. I, therefore, decided to investigate the topic independently, searching for material on the internet and submitting my questions to the CFO
Francesca Failoni, whom I thank for the availability, patience, and amount of information she granted to me. I also thank the CEO Francesco Buffa for the "supervision" of the work.
This thread is the English translation of the thread
ALPS BLOCKCHAIN: mining in Italia da energia 100% rinnovabile on the Italian board. ALPS blockchain is quite focused on the Italian market, but, as you can read in the message, they are going to expand also abroad, so I think it could be of interest here.
Who is Alps Blockchain?
Alps Blockchain Srl is a start-up founded in Trento back in 2018, by a group of young entrepreneurs, hardware and software developers, and experienced professionals united by an interest in blockchain technology. Thanks to the characteristics that distinguish it, Alps blockchain has also received a contribution from Trentino Sviluppo Spa, a startup incubator and business development agency established and sponsored by the autonomous Province of Trento. In particular, thanks to the research and analysis carried out, it has been concluded that in the next few years blockchain technology will increasingly become part of everyday life, because it will ensure global interconnectivity of values, not intended only as money but also as goods and services, exactly as it was in the past with the internet as regards the global dissemination of knowledge and information.
What does Alps Blockchain do?
The business idea is therefore to make mining sustainable in Italy. The vision is to enhance renewable energy using blockchain technology and Alps Blockchain's value proposition is to enhance Italian hydroelectric energy by giving third parties access to the world of mining, exploiting renewable energy.
ALPS Blockchain, therefore, designs, installs, and manages mining farms right on the hydroelectric energy producers' plants, which then self-consume the electricity produced to produce hashing power which is in turn sold on the mining market by Alps Blockchain. Under this scheme, third parties are enabled to mine sustainably in Italy. The mining plant is studied, designed, and installed custom-made, considering the historical production of the plant and calibrating the absorption on the quantity of energy produced with continuity and transferring the overproduction to the grid. It is therefore a personalized service for each installation, taking into account all current and prospective parameters that influence the business plan.
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| Fig.1 Average cost of different renewable sources. The ALPS Blockchain business plans are made with a cost per Kw of 5 cents. Obviously, a great deal depends on the opportunity cost of selling energy to the grid determined by the PUN (“Prezzo Unico Nazionale”, the Electricity Reference Price for Electricity on the Italian Exchange) |
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| Fig. 2. The business model of ALPS, which basically acts both as a computing power broker and as a manager of mining farms. |
Very often it is the same energy producers who exploit the mining power installed in their plants. Alps Blockchain manages the mining farms on their behalf, providing a detailed daily report on the proceeds from the sale of mining power to the various mining pools. At the end of the month, they settle the proceeds to the owner of the mining farm through a normal bank wire in Euros, obviously net of their management fee. In other cases, some manufacturers may decide to sell part of the computing power to third parties, who pay in advance and then allowing them to finance part of the upfront investment. Producers have full flexibility on the currency to cash their income into: some of them decide not to fully convert the mining farm payoff into Euros; in fact, some private clients have decided to keep a part in BTC. This does not happen for public or para-public customers (such as municipal companies or municipalities) who instead chose to collect Euro in full. Obviously, Alps Blockchain has a certified solution from both a legal and a fiscal point of view for this service, compliant with all the necessary regulations.
The self-consumption for the creation of hash power therefore allows Alps Blockchain to enhance plants that were no longer economically profitable, as the incentives on hydroelectric plants are decreasing. This has led to the lack of new hydroelectric power plant constructions, but also to the lack of maintenance of existing ones, leading to their closure. Through the opportunity to self-consume the energy produced for mining, therefore, the economic profitability is regained by power plants that were in the process of being decommissioned, and allows the construction of new power plants on concessions that otherwise would never have been exploited. The point is, in fact, that the renewable energy it is used in these plant was previously actually not used: in this sense Alps Blockchain guarantees the creation of a virtuous circle of use of renewable energy, without displacing other consumptions that would then be diverted to more polluting power sources.
Alps Blockchain has therefore offered small hydroelectric energy producers, displaced by the low price of energy following the oversupply caused by government production incentives, an alternative source of income to sales to the grid through self-consumption which is characterized by a stability of energy demand and a profitability completely disconnected from the price dynamics of the traditional electricity market. This makes the cost of energy competitive with the global miners that Alps Blockchain miners have to deal with.
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| Fig. 3. Addressable Market in Italy. There are significant growth spaces. | Fig. 4. ALPS business roadmap predicts a marked increase in acquisitions over the next few years |
If, paradoxically, a hydroelectric power plant was used to power a bitcoin mine we would in fact have the "displacement" of the consumption of the other users of the plant which would perhaps use more polluting energy sources, canceling the total benefit. Alps Blockchain, on the opposite, as we have seen, guarantees the use of renewable energy that otherwise would not even be generated. It reminds us if you pass the comparison, of the announced project in El Salvador for the exploitation of the geothermal energy of a volcano for the mining of bitcoin.
Alps Blockchain currently uses two different technologies. On large plants it uses ASICS technology, characterized by very high hash power production efficiency, but linked to the mining of coins with SHA technology. The latest generation S19j pro asics are used, the same ones actually used in the large new-concept mining farms installed in the USA or Canada.
The installation of the mining farms at the hydroelectric plants started in 2020. Today, Alps Blockchain has 18 active mining farms under management, between Trentino, Veneto and Valle d'Aosta, the largest of which has a power of 1MW, with a total of approximately 300 S19j Pro installed.
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| Fig. 5. The largest ALPS Blockchain plant is located in Valstagna (VI). |
This mining farm, located in Veneto in Valstagna (VI), alone generates about 5 BTC per month. You can see a short video
here . At the moment in Italy, among machines already installed and under construction, there are about 6000 between S19 pro and S19j pro: the goal is to produce about 3-4 Bitcoins per day for the next year. At the moment Alps is taking care of the installation of a 2 MW power plant in Rio Pusteria (BZ) with 600 Miners. All from 100% renewable energy. Just to get an idea, keep in mind that before the ban, the largest Chinese mining farms had 6 times higher computing power, albeit using less advanced miners. This is thanks to the first customers who, by paying important advances on their contracts, have allowed the company to grow a lot and have a supply contract with Bitmain for 25 million dollars. Subsequently, Alps Blockchain found financing partners and banks willing to open important lines of credit.
At the moment, the most widespread hydroelectric technology is run-of-the-river technology, which guarantees approximately 8,400 hours (equivalent to approximately 350 days) of operation per year and has a constant base production.
In parallel, ALPS Blockchain is pursuing the development of mining farms based on FPGA technology, an acronym for Field Programmable Gate Array: it is a programmable chip, designed to be configured through software after production. Contains programmable logic blocks and memory elements. It has the characteristic of being flexible, reprogrammable, and usable for other purposes, including artificial intelligence, data processing, data mining, or for the mining of digital currencies whose algorithms are not already supported by ASIC. FPGA cards are cards that, despite a lower energy efficiency, are not linked to a specific mining algorithm, and can therefore be addressed to the mining of different coins depending on the market trend. It is a niche technology: to use FPGAs for mining, they must be programmed through specific software called bitstreams. They can be developed for most Proof-of-Work-based digital currencies, so FPGA boards are very versatile. the advantage of FPGA-based solutions is given by the lower consumption: if an ASICS consumes 3kW, an FPGA board consumes 250W, thus adapting to solutions that are not purely industrial.
This type of solution requires a strong propensity for research and development, an area in which Alps Blockchain dedicates a lot of energy. In the R&D field, efforts are directed both in the field of software, dealing personally with the development of customized firmware for both FPGA and ASICS boards, to make them more and more performing, but also from the hardware point of view, designing more and more efficient liquid cooling systems specific for each ASICS technology, FPGA or GPU. Finally, ALPS Blockchain has developed a series of software for the management of mining farms: monitoring systems based on IoT, auto-switching algorithms, reporting systems, and everything necessary for the management of operations.
Alps Blockchain's objectives
In the course of 2021, ALPS Blockchain promises itself strong growth, through the creation of new plants and new mining farms. At the moment we already have 34 companies that are mining or under construction using 100% renewable energy, including some municipal companies, also worried about being able to make their plants no longer economically viable economically.
Another goal of ALPS is to acquire a proprietary electrical system to give the company financial solidity and carry out internal research and development, testing their hardware, software, and management solutions more quickly and effectively.
A parallel company to Alps Blockchain is in fact Idromine. While Alps Blockchain builds farms, manages, and trades computing power, Idromine will be an integrated company upstream of the production process, having as its purpose the purchase and management of its own mining operations.
Finally, an expansion abroad is being planned, always using hydroelectric power sources.
Q&A:
I asked Francesca Failoni, Alps Blockchain CFO, a few questions to provide us some additional colour and details on the above description of ALPS operations.
1.
Among your values I see that you care about "Corporate Social Responsibility" and "Sustainability": what do you think is the biggest misunderstanding about the "E" component of the famous "ESG" acronym, to which many investors refer to when it comes to Bitcoin? On bitcointalk.org I have collected some resources to try to debunk the environmental criticism of bitcoin, but it is a misunderstanding against which we often collide, as it is difficult to pass some concepts. What is your approach? FF
We are in a world that is increasingly moving towards digitization, and digital also means energy-consuming. So rather than fighting technology by saying that it is energy-intensive, in my opinion, something needs to be done to improve this situation. Our way to do it is with the creation of new renewable energy plants, consuming part of the energy they produce, but always selling it a portion to the net.
Furthermore, what characterizes and makes the PoW always state-of-the-art and never obsolete is the computing power at the base that makes sure that the blockchain is safe, works, and is difficult to attack. If you also want to digitize the value, either you rely on a third party that guarantees the security of the network (which we have however seen that is fallible) or you rely on computing power. And it is precisely the high costs of maintaining the network that makes a potential attack absolutely uneconomical and practically impossible for blockchains like Bitcoin.
2.
What is the difficulty of doing crypto Italy business? I imagine that the main difficulty is to move in a context of constant regulatory uncertainty, rather than the mistrust on the matter itself. FF
Initially, in 2018, there was a lot of mistrust, it was even difficult to open a bank account. Subsequently, the problems were the regulatory uncertainty, which we have resolved through legal and tax opinions and with a ruling that we are crafting. In the world of mining, the problem is that currently, it has become a sector that can only be approached industrially, with a very high level of investments. And this has brought us in a few days from a start-up with investments of 2 million to a company with investments of 25 million. We have grown a lot in a short time, but it was a necessary growth and for the management of the company being able to do everything was not easy.
3.
Other plans for the future? FF
Absolutely. We are constantly looking for new plants and new orders. Expansion abroad. Purchase a proprietary plant. There will be a collaboration (of which I cannot reveal anything yet) that will make mining accessible to everyone in Italy. Constant research and development, always aimed at optimizing our business.
4.
Are you thinking of expanding the model to other renewable energy sources? Wind Farm? Solar farms? I understand that it is not exactly relevant to your mission: but would it be possible to couple a mining farm to a nuclear power plant? That would be a good way to decrease the dependence on state incentives and increase the profitability in terms of the life cycle of the plant itself. FF
We have recently created a small photovoltaic energy plant with a circular economy perspective because it recycles the heat generated by the miners to heat a wellness center. Economically, given that photovoltaic production is not constant, it only makes sense if there are other incentives, in this case, heat recycling. The wind has even less continuity of production, so we normally discard it. Atomic energy instead, would go against our values.
5.
Are you planning to expand abroad? Maybe in partnerships with other operators? There are regions, I am thinking of the Scandinavian peninsula, where I imagine these solutions have already been tested and many problems have already been addressed. FF
Yes, we are building a plant in Russia and studying a plant in Chile. Moreover, there are some customers of ours, who have hydroelectric plants abroad, and we are studying to install a mining farm there.
6.
Are you planning to expand vertically? Maybe becoming an exchange? Or even a sort of “dealer of freshly mined bitcoins?” FF
Our focus is on mining and what is around that. We do not want to invent ourselves to do activities in which we are not specialized. We have constant requests to sell freshly mined bitcoins, but given the regulatory uncertainty in this area and that we do not have the necessary licenses, we avoid doing this activity. It's not worth the risk, it's not our core business.
In the future, however, we would like to expand vertically into mining, perhaps creating a mining pool.
7.
What kind of agreement do you have with customers? Mining revenues are inherently uncertain. Who takes the "risk"? FF
The risk belongs to those who bought the miners. We buy the computing power produced from the mining farm at market price and resell it to mining pools.
8.
The mining farms are owned by the customers, but you are managing those on their behalf. Does this mean the electricity manager does not need any technical expertise regarding mining? FF
That's right, we create an all-inclusive service, tailormade to our customer needs. We study the productions of the plant and calibrate the farm on those. We create, through collaborations, the electrical, ventilation, sound-absorbing systems amongst the others.
Then we manage the entire farm and buy what is produced, paying for it by bank transfer. Therefore the producer only has to issue a monthly invoice for how much is produced.
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