Jun

28

I have a friend who set up a bitcoin mining operation in Texas. After a pilot operation with 20 servers he just added another 50. Some interesting points on the business; At BC $2300 he makes back all of his capital in around 6 months, after which his break even on variable costs is around $1200 BC, everything above is profit. He converts bitcoin to $$$ regularly. Power accounts for about 25% of his marginal costs, though he worked an arbitrage on the power and is getting below market rates. All the servers must be ordered from China and there is waiting list.

He says Iceland is becoming a big spot for miners because of the cool climate and subsidized green energy. Cooling is important as overheated servers run slow or stop. The business model is closer to a lease than anything overly technical; renting servers to pools of bitcoin users. The calculating programs to verifying transactions are all pre-loaded in the servers and require just some basic set up. After which, he runs it all on his smartphone.

The biggest risk is something happening in the first 6 months, as well as having reliable cheap electricity. After 6 months, if BC prices get to low he will just shut off the servers, but if prices stay the same or rise he participates fully in the upside.


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