It all started with mining Bitcoin (BTC) in a dormitory. What started as a hobby with a few mining rigs has evolved into twenty industry-wide mining farms across the globe. Because we expanded our operations into a new industry, we had to find out what worked and what didn’t by trial and error – because there is no manual for it.
Building a large-scale, multi-site operation like ours isn’t easy, but if you’re looking to jumpstart your mining operations, scale up what you’ve got, or invest in a mining company, here are the seven biggest lessons you can learn. we’ve learned to help you navigate your next moves.
Related: How to mine Bitcoin: A beginner’s guide to mining BTC
Lesson 1: It takes (a lot) of money to make money
There was a time when you could mine Bitcoin from a laptop or set up mining rigs in your room and in the mine, cost effectively. But once again, the miners created more competition and those who wanted to remain profitable had to expand their operations.
Soon an amateur miner could no longer keep up with mining in a dormitory, but needed a warehouse – or warehouses – full of mining rigs running day and night to stay profitable. We have moved with the industry and started to grow as we go along, but those who want to join us today no longer have the opportunity to start at the bottom and move up through the ranks. This means investing in capital intensive projects from the start.
Lesson 2: Build Long-Term Relationships
While the Bitcoin mining industry has grown rapidly, it is still very consolidated with only a few key players holding power. For example, a large-scale mining operation cannot simply order new equipment from the supplier of its choice.
There are only a few vendors providing hardware at this point, and their production runs are based on a few chipmakers who tightly control supply – not to mention the fact that we are currently facing a global chip shortage. This means that success depends not only on efficient and well-managed operations, but also on building relationships in the industry, many of which will be long term.
Lesson 3: The obsession with operational efficiency
Speaking of operational efficiency, large-scale miners remain profitable when they have the edge over their competition. This means optimizing electricity, having the latest hardware, and having no downtime or issues that would result in wasted computing power.
Make operational efficiency a priority. For example, in March 2020, when Bitcoin fell below $ 4000, many miners couldn’t survive the uncertainty and volatility, and were forced to leave – yet we survived thanks to our operational efficiency.
Lesson 4: Never stop innovating
The adage is “innovate or die”. In Bitcoin mining, where data centers must remain powerful and fast to remain profitable, there is no choice but to continue to innovate. Most importantly, it means keeping your equipment up to date and not letting it become obsolete. Mining operations need to plan ahead to replace equipment and time it properly, as equipment can be out of stock for a period of time. Remember that any kind of downtime will cost you dearly.
Innovation also means creating better and more efficient ways of running your business, such as creating software programs specifically designed for the management of mining operations. In this industry, technology will give you the edge, and even the smallest improvement will keep you ahead of your competition.
Lesson 5: Choose your location wisely
“Location, location, location,” they say. Even though Bitcoin can be mined anywhere, large-scale mining operations must consider their location when setting up the store for a variety of reasons. Not all locations will offer the same sources of electricity for the same prices, so miners should find locations that not only have abundant and cheap electricity, but also ensure that that electricity is green and sustainable.
Related: Clean the air: Renewable Bitcoin can secure a clean energy future
Finally, meet somewhere encouraging Bitcoin miners, where you know the political winds will not change overnight and all operations will be shut down, as they were recently in China and Iran.
Lesson 6: Time is money
I’ve said it before, but time really is money, and any downtime or lag in computing power can be costly. This means having great operational control over hardware upgrades, a plan to serve mining platforms, and software capable of effectively managing operations. It also means getting creative: in 2015, we knew that having to wait months for mining hardware deliveries was going to reduce our income. So we hired 747s to get the machines to us faster, which allowed us to generate millions of additional revenue that would have been lost due to standard shipping.
These are the types of calculated moves that you not only need to be prepared to take, but also know enough about your trades to know how to take.
Lesson 7: Ladder is Everything
Finally, the scale is everything. I said before that you can’t start from the bottom and work your way up anymore. Rather, the race is to be as big as possible because scale is directly correlated to income: the bigger you are, the more profit you make.
The term “bigger, better, faster” really applies to Bitcoin mining, so if you’re not ready to strategize, invest time and money, problem solve and take risks, then another industry may be for you.
There are many more lessons that we have learned, and many lessons that we will learn in the years to come. Today we will continue to build this new industry which is already creating a future of decentralized currency and new ways of exchanging value around the world.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research before making a decision.
The views, thoughts and opinions expressed here are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Marco streng is the CEO and co-founder of Genesis Group and Genesis Mining, one of the largest crypto mining companies in the world. Before co-founding Genesis in 2013 and becoming a strong advocate for blockchain technology and cryptocurrencies, Marco studied mathematics at Ludwig-Maximilian University in Munich.