We got a look inside a vast Icelandic bitcoin mine
Genesis Mining
Bitcoin is going nuclear.
The digital currency is hitting all-time highs, with a single coin going for more than $2,197.
It’s an epic bull run that has accelerated in recent months: Just a year ago, it was sitting at just $443.
This is great news for bitcoin miners, the people responsible for creating new bitcoins.
Their mining infrastructure is the backbone of bitcoin. Anyone who contributes computing power to help process transactions on the network is rewarded with the chance to “mine” bitcoin.
In plain English, in return for helping keep the network up and running, they have the chance of being given a newly created piece of the digital currency.
This payout makes the entire process — with the right equipment — incredibly lucrative. It has helped spawned a huge and surreal industry.
You can mine at home, and many people do. But companies dedicated to mining have also sprung up, some worth tens of millions of dollars.
These companies build huge data centres, or mines, that consume vast amounts of power and perform insane computations on the hunt for digital gold.
Here’s a look inside one …
Get the latest Bitcoin price here.
These photos are from Genesis Mining, a cloud mining company. It lets customers mine using its “cloud,” without having to buy specialised hardware.
Here’s its website.
It’s technically possible to mine on just about any computer, but it’s not profitable to do so unless you have the right kit. Many people do mine themselves, often joining large pools to improve their odds. But Genesis’ model is another option.
The company had early mines in Bosnia and China, and most of its operations are now based in Iceland.
The country boasts three very important qualities for mining: cheap energy, good internet connections, and a cold climate.
Climate is incredibly important. Mining hardware generates a tremendous amount of heat and uses huge amounts of power. If you can save on cooling costs because of the natural temperature, it could mean the difference between losing money and making a profit.
Even so, Genesis’ electricity consumption is very significant. CEO Marco Streng says energy companies “offer us helicopter rides whenever we arrive” and speculates that the company may be one of the biggest single users of power in the country.
Assuming you’re getting a good deal on electricity — and ignoring all other costs — Streng says one bitcoin costs about $260 to mine. One bitcoin is currently worth $2,197.
But there are a lot of other costs, including hardware, production costs and staffing. “Right now profitability is much higher than 20%, but 20% is usually right in terms of long term equilibrium because no one knows what the future will look like and when we purchase hardware we can’t predict spikes in Bitcoin and other currencies like we’re seeing now,” Streng said.
Streng says cloud mining “has a major trust issue.” Customers never actually see or own the mining hardware themselves — putting them at risk of fraud.
Ponzi schemes can pop up, with perpetrators using later customers’ money to pay earlier customers while keeping most for themselves. “They don’t ever even own their own mining facilities. They just take pictures from other companies, Photoshop them, then pretend they are theirs.”
Genesis doesn’t just mine bitcoin. It has also mines Ethereum — another type of digital currency that can support decentralised applications and “smart contracts” that execute themselves automatically.
The price of Ethereum is now $160.
Here’s another shot of Genesis’ mining operations. More than 10,000 mining GPUs are in this one room.
So what are the conditions like in the mine itself? Speaking in a promotional video, chief technical officer Stefan Schindler is candid: “Working inside a bitcoin mine is absolutely terrible.”
“You’re constantly surrounded by machines that are completely shouting at you all the time,” he says. “It’s as if you were listening to jets starting and landing without stopping.” Heat is another factor — parts of the facility reach 40 to 50 degrees Celsius (104 to 122 Fahrenheit).
Here’s a video of Genesis setting up a new Icelandic farm. The company has several dozen full-time employees, including electrical and internet specialists, and it brings on extra labour help when it establishes new facilities.
And here’s a video of CTO Stefan Schindler talking about life at Genesis:
Lastly, here’s the price of bitcoin since its inception, courtesy of Coindesk:
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