[Progress thread] Building out a crypto mine, step-by-step - AMA

[GlobalWealth]

I wanted to drop an intro post about the crypto currency mine I am currently building out with my business partner.

I will go through steps on how we made decisions on where to build the facility, what other location options we chose, what type of coins we will mine, what hardware we will use, information about power infrastructure and capacity, and as time progresses the results.

If you have specific questions, feel free to post them here and I'll do my best to answer. If you are currently mining and have any best practices you can add, please do so.

 

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[GlobalWealth]

Step one:

Choosing a location.

We did a lot of research on power costs, power infrastructure, crypto regulations, ease of access, cost of real estate and more.

First of all, we have excluded the US as a viable option for any reasonable sized mining operation.

Regulations and the future of additional scrutiny are the main reasons. However, power cost was also a significant concern.

The average cost of power in the US is around $.105/kwh. While not the highest in the world, even a 10% reduction in power cost has a significant impact on the bottom line when you start discussing any amount of scale.

Of course if I'm just going to plug in 1-2 miners in my garage, it's not an issue. But we are planning to have 100-200 miners running within 6-9 months.

Of course there are low cost power options in the US, but typically that requires a HUGE upfront investment in infrastructure in order to control your own power source and get to a reasonable cost.

I've been to a few conferences over the past year or so and met guys getting .05-.07/kwh in the US, but that required signing contracts for 10mwh+ or buying their own hydro stations. I didn't have access to enough funds to get to that level.

Beyond power cost, heat management is a huge concern. We had an option to build a facility in Georgia (US) for a very low upfront cost, but the power cost was .113/kwh plus the heat in GA is so high, we would spend an enormous amount of money (and reducing our kwh capacity) for air conditioning to get to a reasonable operating temperature.

We have looked at several other options including Russia and Georgia (the central Asian country), but opted out of those for various reasons.

We are keeping Georgia (country) as an option since we have very good connections there.

Ultimately, we settled on building the facility in Estonia.

I will discuss this in further detail in a later post.

 

[MTF]

Good luck! I have no idea about crypto mining but will follow this thread anyway.

 

[biggeemac]

I've always had interest in doing this. I have two small rooms in the basement of one of my houses that I use for another business. This other business pays for the electricity at the house. I have thought about converting one or both of the rooms into a server room and running some crypto miners, but never really dug into the subject. I am an IT guy by day, so technically speaking, I should be able to figure things out. I know what my power costs, and its less than average according to what you say that the cost is in the US.

While I am not prepared to do the scale that you are, I would think running 10-20 miners in my basement may be possible. Thanks for doing this.

I guess my only question would at this point would be.....how do I figure out if this would even be worth my time and effort? And what sort of tasks would I need to do to transform a room into something that can reasonably handle a small operation like this?

 

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[Tom.V]

I wanted to drop an intro post about the crypto currency mine I am currently building out with my business partner.

I will go through steps on how we made decisions on where to build the facility, what other location options we chose, what type of coins we will mine, what hardware we will use, information about power infrastructure and capacity, and as time progresses the results.

If you have specific questions, feel free to post them here and I'll do my best to answer. If you are currently mining and have any best practices you can add, please do so.

Awesome! Been waiting for this.

 

[lowtek]

Posting to get updates.

 

[TKDTyler]

Are going to be going the route of ASIC mining or GPU mining? If it is the latter, how are you planning on sourcing 200 rigs cost-effectively?

 

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[Niptuck MD]

Posting to get updates.

likewise lol

 

[Niptuck MD]

For some reason it didnt appear on my mobile version. but duly noted for future reference.

 

[GuestUser4aMPs1]

I guess my only question would at this point would be.....how do I figure out if this would even be worth my time and effort?

Not an expert by any means, but there are tools out there that can calculate profitability based on your hardware/energy costs:

Mining Calculator Bitcoin, Ethereum, Litecoin, Dash and Monero

Or Google "Crypto Mining Profitability Calculator" and proceed to fall down the deepest rabbit hole in your life

 

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[GPM]

Hah! A word of warning to anyone looking at this.

I started with 1 gpu out of curiosity, and now have 30

*edit: Make that 31...

 

[nitrousflame]

I too have been interested in mining and am excited for this thread, thanks for sharing!

Things like hash rate, power draw and $/kWh seem pretty straight forward to me. You can easily calculate what your short term profit/loss might be, but how do you manage future projections given massive fluctuations in coin prices and increasing mining difficulty?

 

[garyfritz]

I've looked at this several times over the last 8-10 years, but I always concluded the cost of entry, the razor-thin profit margins, and the short lifespan of miners before they became too weak/slow to continue producing good results, all combined to make it not viable. Apparently I've been wrong because smart people are still doing it. Looking forward to your updates, GW!

 

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[Scot]

Just musing here..

With all the hype around crypto right now, would making a mine startup company be a viable option?

Essentially, do what you’re doing now. Set up a warehouse, get 200 rigs going, show profitability in 6 months, then sell it off for a higher multiple.

Rinse and repeat.

Instead of having to manage these long term, worry about rig burn out, you can flip these every 6 months.

 

[GlobalWealth]

I've always had interest in doing this. I have two small rooms in the basement of one of my houses that I use for another business. This other business pays for the electricity at the house. I have thought about converting one or both of the rooms into a server room and running some crypto miners, but never really dug into the subject. I am an IT guy by day, so technically speaking, I should be able to figure things out. I know what my power costs, and its less than average according to what you say that the cost is in the US.

While I am not prepared to do the scale that you are, I would think running 10-20 miners in my basement may be possible. Thanks for doing this.

I guess my only question would at this point would be.....how do I figure out if this would even be worth my time and effort? And what sort of tasks would I need to do to transform a room into something that can reasonably handle a small operation like this?

For a small operation it is doable, but you should get an electrician to your house to make sure your wiring is capable of handling the power consumption. Most likely you will need to invest in some wiring upgrades and a new power panel with 50a breakers.

You need to consider heat dissipation also. If you are in a basement, you will need to channel the heat out. If your basement has an exterior window, you should be ok. 10-20 machines will create quite a bit of heat.

Sound will also be an issue. Miners are fairly loud. You don't want to listen to the humming of machines 24/7 while your trying to go to sleep at night. Maybe your basement is well insulated, but you may also need some sound proof insulation added.

Depending on what coin you want to mine, there are several online mining calculators out there. Just google search xyz coin mining calculator. You will need to get the power consumption figures from the mining rig (if you are buying asic miners, the manufactures will list the specs on their sites), the hash rate, and your $/kwh to calculate profitability.

 

[GlobalWealth]

I will discuss this in further detail in a later post.

As noted above, we chose Estonia for our mining operation. My partner and I spent a lot of time and energy researching Georgia (country) due to their crypto friendly regulations and low power costs, however we opted for Estonia for a few reasons.

#1- I live in Latvia which is just a few hours away and my business partner lives in Estonia.
#2- The power cost in Estonia is between $.06-.08/kwh. While this is not the best in the world, it is still quite good.
#3- Estonia has very clear regulations on recognition of crypto profits. In the US it is very complicated and vague. In Estonia, you realize crypto profits when you convert to fiat (EUR, USD, etc) in Estonia. For us, that means our company has zero profits since will will never convert to fiat in Estonia. We are long term investors in crypto so most likely we will only convert to fiat to pay business expenses.
#4- Estonia has a 20% VAT, however, VAT can be used as an income tax credit. So for our power bill, property expenses, internet bill, miner purchases, etc, those funds will go into our company's VAT account that can be used for paying income tax.....but....since we will not have any income, we get that VAT back as a refund every 30 days. Voila, we are VAT and income tax free.
#4- In the part of the country where we are building our mine, real estate prices are quite low. We are renting a space in a huge warehouse for eur2.5/m2. That is very, very cheap. However we are having to pay around eur16k to build out the facility to our specs, plus another eur23k to run the power into our part of the building. The 23k gets us a direct connection to the transformer and between 500-700 amps.

Based on these specifications, we will have approximately 260-370kwh.

This gives us enough capacity to run up to around 400 asic miners (depending on which type of miners we are using).

On the low end, if we use bitmain s9's, we can get 200-280 machines. On the high end, using innosilicon a9 zmasters, we can get between 400-600 miners.

We plan to mine multiple coins thus a mix of hardware.

The other reason we chose this specific location in Estonia is the property itself. It is 1.8km from the main power station and it has pipes down the road only 200m away. So if/when we want to upgrade our power with a new transformer, it won't be overly costly (it's still damn expensive) to build the transformer.

 

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[GlobalWealth]

Are going to be going the route of ASIC mining or GPU mining? If it is the latter, how are you planning on sourcing 200 rigs cost-effectively?

We already to gpu mining at our other facility. I have absolutely zero interest in investing anymore resources into gpu mining at this point.

GPU rigs are much more finicky to keep humming and require more intensive labor. They are also much less profitable and take up more physical space.

We have already placed one order for a few Innosilicon A9 Zmasters (they just arrived yesterday actually) and a few Bitmain Z9 minis that arrive early September.

 

[GlobalWealth]

Hah! A word of warning to anyone looking at this.

I started with 1 gpu out of curiosity, and now have 30

We also started with gpu mining with another partner. Now have a couple thousand gpu's humming and heating a warehouse.

 

[GlobalWealth]

I too have been interested in mining and am excited for this thread, thanks for sharing!

Things like hash rate, power draw and $/kWh seem pretty straight forward to me. You can easily calculate what your short term profit/loss might be, but how do you manage future projections given massive fluctuations in coin prices and increasing mining difficulty?

I would love to say we have some magic formula on this. But alas no.

Correct, calculating profitability is fairly straightforward. You just input the $/kwh, hashrate, W usage, and cost of infrastructure. Easy peasy.

Unfortunately crypto doesn't follow any rational model for predictions.

One negative news piece and the market can tumble double digits. One big company decides to invest in blockchain tech and you get a double digit gain.

Imagine if the S&P500 had regular double digit ups and downs. Wall Street would need trapeze nets around their buildings.

For a crypto investor, it's commonplace.

So I research a lot, subscribe to a couple of newsletters, attend conferences and talk to some INSIDERS. This has given me confidence in the long term viability of blockchain tech and crypto in general.

Beyond that, I am only mining coins that have a lot of support and a real utility.

I personally believe at least 90% of the cryptocurrencies in existence are fraudulent. But that doesn't diminish the long term viability of the technology.

But ultimately, like any investment it's a calculated risk and I could lose my a$$.

 

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[GlobalWealth]

Just musing here..

With all the hype around crypto right now, would making a mine startup company be a viable option?

Essentially, do what you’re doing now. Set up a warehouse, get 200 rigs going, show profitability in 6 months, then sell it off for a higher multiple.

Rinse and repeat.

Instead of having to manage these long term, worry about rig burn out, you can flip these every 6 months.

Not a bad idea. I tried to buy a mine in Georgia (country) a few months ago. Unfortunately the owners bought all of their hardware (around 200 rigs) in December...lol.

The literally bought at the peak of the market and the hardware companies always adjust pricing based on coin prices.

So these guys wanted to recoup their investment, but I could have replicated their operation at just a bit more than half what they invested.

They weren't interested in taking such a big hit so we parted ways.

But if you wanted to go about doing this, I'd buy hardware today. It is the cheapest I've seen hardware in a long time.

Get a mine running and when the coins rebound in price, but it up for sale at a discount to replacement cost, which should be higher than your investment.

 

[GPM]

So these guys wanted to recoup their investment, but I could have replicated their operation at just a bit more than half what they invested.

That is exactly what made me build my second GPU rig. I was looking for used stuff and everyone wanted like $4,000-7,000 for some hardware that had been used for 6 months. I got to researching the costs to building a brand new one with better hardware and it was cheaper than most peoples used stuff. And it just kept growing from there...

Are you doing anything fancy for your cooling on this, or do you just route all the air in channels in and then out of your mining areas?

Are you also worried about security at all on all these fragile machines?

You say you have investors on this project correct? How does that look like, are you cashing out any coins to pay them back at all, or is everyone on board with holding until target prices are reached?

 

[GlobalWealth]

Are you doing anything fancy for your cooling on this, or do you just route all the air in channels in and then out of your mining areas?

Once the buildout is done, I will post some photos. Until then...

Estonia is a cooler country. We don't need ac. On one wall, we will have big vents to push out the heat. The racks that hold the miners will sit about 1.5m away from the wall with the vents. On the back of the racks will be insulation board and holes cut out for each miner. The space between the insulation board and the wall with the vents will be about 1.5m (as noted above) and about 3m tall, full inclosed.

This basically creates a really damn hot and small space behind the insulation wall (also higher pressure) and the heat will escape out the vents. Since asic miners are basically fan tubes, they push their own air.

Eventually (probably 3-4 months) we will build a small room from frame and drywall in the front side of the mining racks and install 42" fans to push air.

I hope this was relatively clear, but I will post pics once we get it all built out.

Are you also worried about security at all on all these fragile machines?

The industrial site where the building is located has security, plus the building is a block building. Internally, we are building block walls with iron security bars in the block. We will also have a heavy security door as the only way in/out. We will add security cameras and monitored alarm system as well.

You say you have investors on this project correct? How does that look like, are you cashing out any coins to pay them back at all, or is everyone on board with holding until target prices are reached?

We have investors in the gpu mine operation. Actually, it's mostly investor money. Basically the investors buy the hardware and we have a coin share on the back end.

With the new mine, I 'MAY' take investors, but not right now. And 'IF' I take investors, I am only taking money in larger sums. I am not interested in having a lot of small investors.

 

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[GPM]

One more questions.

With these massive quantities of coins coming in, what are you doing to secure them digitally?

Are you using paper wallets in bank vaults, or a bunch of hardware wallets?

Just curious mostly. I feel nervous about my fractions being generated (just got a Nano S), I can't imagine sitting on large quantities.

 

[CareCPA]

So pretend I'm a newbie here (not a stretch of the imagination at all).
I see this miner: ASICMiner 48Th/s, Silent Water Cooling, Built-in PSU | ASICminer Company.
The stats say it has a hash rate of 48TH/s, using 3900W
I go to this website mentioned earlier: Mining Calculator Bitcoin, Ethereum, Litecoin, Dash and Monero

If I plug in 48 TH/s, and the 3900W the miner says it takes, the calculator tells me I'll make roughly half a billion dollars a year.

What critical piece of information am I missing?

 

[GlobalWealth]

One more questions.

With these massive quantities of coins coming in, what are you doing to secure them digitally?

Are you using paper wallets in bank vaults, or a bunch of hardware wallets?

Just curious mostly. I feel nervous about my fractions being generated (just got a Nano S), I can't imagine sitting on large quantities.

Multiple hardware wallets.

 

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[GlobalWealth]

What critical piece of information am I missing?

LOL. That is a BTC miner, not ETH. The payoff on that machine is around 2 years. Not a great deal IMO.

 

[CareCPA]

LOL. That is a BTC miner, not ETH. The payoff on that machine is around 2 years. Not a great deal IMO.

That makes more sense than the billion percent returns it was forecasting.

So do you find the income amounts on this page to be accurate: Realtime mining hardware profitability | ASIC Miner Value
It projects ~$100 per day at current prices for the A9 ZMaster.

 

[Gepi]

Posting for following.

 

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[eliquid]

I vote this most interesting thread of the month

 

[Roli]

Step one:

Choosing a location.

We did a lot of research on power costs, power infrastructure, crypto regulations, ease of access, cost of real estate and more.

First of all, we have excluded the US as a viable option for any reasonable sized mining operation.

Regulations and the future of additional scrutiny are the main reasons. However, power cost was also a significant concern.

The average cost of power in the US is around $.105/kwh. While not the highest in the world, even a 10% reduction in power cost has a significant impact on the bottom line when you start discussing any amount of scale.

Of course if I'm just going to plug in 1-2 miners in my garage, it's not an issue. But we are planning to have 100-200 miners running within 6-9 months.

Of course there are low cost power options in the US, but typically that requires a HUGE upfront investment in infrastructure in order to control your own power source and get to a reasonable cost.

I've been to a few conferences over the past year or so and met guys getting .05-.07/kwh in the US, but that required signing contracts for 10mwh+ or buying their own hydro stations. I didn't have access to enough funds to get to that level.

Beyond power cost, heat management is a huge concern. We had an option to build a facility in Georgia (US) for a very low upfront cost, but the power cost was .113/kwh plus the heat in GA is so high, we would spend an enormous amount of money (and reducing our kwh capacity) for air conditioning to get to a reasonable operating temperature.

We have looked at several other options including Russia and Georgia (the central Asian country), but opted out of those for various reasons.

We are keeping Georgia (country) as an option since we have very good connections there.

Ultimately, we settled on building the facility in Estonia.

I will discuss this in further detail in a later post.

Great thread. I think I can already guess why you chose Estonia, I've been thinking of becoming an e-citizen of them for awhile now.

In my mind they are miles ahead and it shouldn't be too long before they are the place to go for all things tech.

I'm guessing they are giving you huge incentives to set up there? Plus of course their broadband coverage is second to none.