Resurrecting this thread..
Very interesting discourse.. I am a miner & colo myself and I totally agree with the "ROI" required. If its too much hassle, we'd rather drop customers. Its easier to deal with 1 customer with 1000 miners than 1000 customers with 1 miner each.
I have to agree. Back in 2017 we started construction on a general purpose datacenter in Oregon rather than a mining specific one. Between 2017-2020, crypto miners were the bulk of our revenue, but it was also the hardest earned and the most inconsistent.
The boom/bust cycle of crypto is difficult for any datacenter to accommodate. Just for historical context, in November 2018 the market dropped below profitability for our customers. Overnight everyone was asking us to turn their machines off, so we did. Unfortunately that also meant nearly 100% of our revenue stopped.
At the time, my colleague argued that if none of our customers were paying, we should evict them, have them collect their equipment and reclaim the space. However it would have been counter productive, there was absolutely zero demand to host new mining equipment. Which was pretty evident as some of our customers tried to sell their equipment with little success.
After 6 months, in May 2019 the price did turn around and all of our customers took control of their machines again. Unfortunately this only lasted 5 months until November 2019 when increasing difficulty forced all of our customers to shut off again. In June 2020 the halving occurred, which pretty much assured that equipment was never getting powered on again.
Over the course of operating 24 months, we only generated a profit for a combined 10 months. The other 14 months with non-paying "idle" customers consumed whatever profit we had managed to make previously and took us negative into the red.
Today we have almost no crypto customers, although we do have a growing number of "traditional" datacenter customers. If we hadn't built the facility with customer diversity in mind we would have perished like everyone else.
Which brings me to my point, the "mining facility" concept has little chance to succeed even with scales 10 MW and beyond. Even when you have low priced power, there are unavoidable overheads. Rent or mortgage payments, construction loans, staffing costs, local taxes, licensing, insurance, accounting fees, property tax, etc.
Obviously there are some economies of scale that can help average these costs out, but we have found that beyond a certain scale the cost actually goes up. There are a lot of cost saving opportunities when you don't have to buy everything new, pay premiums for expediting construction, permits, lawyers, etc.
No matter how you balance it, you always end up paying ~$0.04/kWh in overhead.
- Want to mine at home? Then your stuck paying for retail power with a 50% premium over commercial
- Found a mining facility with super cheap hosting in some remote country? Now your exposed to a very likely risk of losing your equipment.
- Found a warehouse to rent for $2k/month with 400 amps of power? That's $4k/month in power that your paying a 50% premium on thru rent.
- Decided to go big! Get a loan for $3M to build a 10 MW facility. Paying your loan is equivalent to paying a 50% premium on power for 24-36 months.
Ironically, I have been considering hosting mining customers again now that they aren't critical to the success of our business. I just need to find a creative way to more appropriately split the risk between hosting provider and miner.
