It all began with Bitcoin mining (BTC) from a dorm-room. It started out as a hobby, with just a few mining machines. But it grew into twenty large-scale mining operations around the world. We had to scale our operations in a new sector and learn what worked through trial and error. There is no guide for this.
It’s not easy to build a multi-site, scaled mining operation like ours. But here are seven key lessons that we have learned to help you make your next move.
Related: How to Mine Bitcoin: A Beginners Guide to Mining BTC
Lesson 1: To make money, it takes a lot of money
In the past, you could mine Bitcoin using a laptop or setup mining rigs in your home to mine profitably. However, as more miners became more competitive, those who want to remain profitable must scale up their operations.
A hobby miner soon realized that he couldn’t keep up mining in a dorm. He needed a warehouse or warehouse full of mining equipment to be able to continue making a profit. While we scaled up with the industry, and then bootstrapped our growth along the way, those who want to join today do not have the option of starting from the bottom and working their ways up. This means that you must invest in capital-intensive projects right from the beginning.
Lesson 2: Establish long-term relationships
Although the Bitcoin mining industry is growing rapidly, it is still highly consolidated and only a few players hold the power. A large-scale mining operation cannot simply order hardware from any vendor.
Only a handful of vendors are currently supplying hardware. Their production cycles are based only on a few chip producers who tightly control the supply. Not to mention that there is currently a global shortage of chips. The success of the industry depends on not only efficient and well-run operations, but also on building relationships that will last for many years.
Lesson 3: Focus on operational efficiency
Large-scale miners are more profitable if they have an advantage over their competition in terms of operational efficiency. This includes optimizing electricity and having the latest hardware. There should also be no downtime or issues that could cause a loss in computing power.
Operational efficiency should be a top priority. Example: In March 2020, Bitcoin fell below $4,000 and many miners were forced to leave. However, our operational efficiency helped us survive.
Lesson 4: Never stop innovating
It is a common saying that you must innovate or die. There is no other option than to continue innovating in Bitcoin mining, where data centers must be powerful and efficient to remain profitable. This means that you must keep your equipment up-to-date and not let it become obsolete. Miners need to plan ahead and know when to replace their equipment. Hardware may be backordered for a while so it is important to time your work accordingly. Any type of downtime can be costly.
Innovation is also about creating more efficient and effective ways for your company’s operations to run. For example, software programs that are specifically tailored for mining operations management. Technology will give you an edge in this industry. Even the smallest improvements will help you stay ahead of your competitors.
Lesson 5: Choose your location wisely
They say, “Location. Location. Location.” Although Bitcoin can be mined from anywhere, large-scale mining operations must consider where they will be located when setting up shop. This is for many reasons. There will not be the same electricity sources in all locations. Miners must find places that have cheap, plentiful electricity, but also that are sustainable and green.
Related: Clearing the air: A renewable source of Bitcoin could ensure a cleaner energy future
Go to a place that encourages Bitcoin miners. You know the political winds won’t shift overnight, and all operations will be stopped, just like in China and Iran.
Lesson 6: Money is time
It’s been said before, but time is money. Any downtime or lags in computing power can lead to costly losses. This requires great operational control over hardware upgrades and a plan to serve mining rigs. It also means software that can efficiently manage operations. This also requires creativity: We knew in 2015 that waiting months for hardware shipment would reduce our revenue. We rented 747s to speed up the delivery of our machines, which enabled us to generate millions more revenue than would have been possible with standard shipping.
These are calculated moves that you must be willing to make and be informed enough about your operations so that you can take them.
Lesson 7: Scale is everything
Scale is everything. As I stated before, you cannot continue to work your way up from the bottom. Instead, you should aim to win as many races as possible because scale directly correlates with revenue. The more you have, the more profit your business can make.
Bitcoin mining is a good example of the term “bigger,” better, and faster. If you don’t have the time or desire to strategize and invest money, solve problems, and take risks, there may be another industry that might suit you.
We have learned many lessons and will continue to learn more in the coming years. We will continue to develop this industry today that is already creating a future with decentralized currencies and new exchange methods around the globe.
This article is not intended to provide investment advice. Every trade and investment involves risk. Readers should do their research before making any decision.
These views, thoughts, and opinions are solely the author’s and do not necessarily reflect the views or opinions of Cointelegraph.
Marco Streng, the CEO and co-founder of Genesis Group is one of the most important crypto mining companies worldwide. Marco studied mathematics at the Ludwig-Maximilian University of Munich before co-founding Genesis and becoming an enthusiastic advocate for blockchain technology.