The strategy behind miner colocation

abstract concept of data mining

Date Published

04/29/2020

Given the rise of cryptocurrency and blockchain technology, mining is now being considered by many across the globe – from experienced financiers to interested hobbyists.

But as with any investment pursuit, it is important to understand the profitability potential of your efforts before you direct large sums of time and capital toward an endeavor. Crypto mining is no different.

Here is a closer look at the key factors affecting the viability of crypto mining and how mining colocation can be a strategic way to help get the most out of your investment with no additional effort on your part.

Revenue minus expenses

Calculating income is done the same way whether you’re dealing in fiat currency or cryptocurrency – revenue minus expenses.

For our purposes, we will first take a look at the expenses involved in launching a mining operation via colocation.

What is mining colocation?

Colocation, also often referred to as miner hosting, is when mining equipment is placed in a third-party facility to run. A colocation provider provides the core requirements for operation power, rack space, internet access, heat management, and security.

Typically, a customer ships hardware to the colocation facility who then gets it online with access to efficient energy and abundant power. The level of management and maintenance varies depending on the managing entity and level of service agreed upon. More on that later.

Crypto mining expenses

There are two main costs to consider when mining via colocation – the cost of your hardware and the hosting fee.

Hardware cost

The expense of hardware is a one-time cost incurred at the time of purchase and varies based on the quantity and quality of the equipment. A less expensive miner might only cost a few hundred dollars, while a high-powered ASIC miner can cost a few thousand – but will typically produce greater results.

Hosting fee

The second cost associated with mining via colocation is the hosting fee paid to the colocation facility.

How the hosting fee is determined also varies from one provider to the next, but it is often based on the space, expected wattage of your mining equipment, and services selected. The best hosting locations throughout the U.S. are often strategically located near reliable and cost-efficient energy sources, helping keep power costs low.

Apart from those two factors, your only concern should be the profitability of your hardware.

Crypto mining revenue

Revenue in mining primarily comes down to the power and efficiency of the hardware itself.

Miner profitability

Today, there are many crypto mining profitability calculators across the web wherein you simply enter the values corresponding with your operation and your projected profitability at that point in time is estimated.

Here are the key factors these calculators consider.

Form of currency mined

Different cryptocurrencies have different levels of mining difficulty and different rewards, which play a significant role in how long it takes to successfully mine a block, whether or not you’ll need to increase your mining power to be successful, and the financial reward you’ll see as a result.

Hashing power (TH/s)

The hashing power (terahashes per second) of mining devices determines how quickly a given block can be mined and turned into a reward. Higher-powered miners typically come with an increased up-front cost but will also be able to deliver more hashing power and thus provide more frequent rewards.

Power consumption (W)

Dividing the hashing power of your hardware by its power consumption determines its overall mining efficiency. The goal for most miners is to find a combination of hardware that will deliver as much hashing power as possible without consuming an excess of power. This maximizes returns while minimizing power usage and cost.

Cost per KWh ($)

This figure indicates the colocation cost of your operation and varies based on location. As mentioned, high-quality hosting facilities in the U.S. are strategically located in energy-efficient sites throughout the country.

Be sure to ask what to expect for your hosting fee. Not all providers are created equal, and sometimes the price quoted can be too good to be true. Ask about service levels, onsite technicians and support services, uptime expectations, air filtration, and so on. Working with a reputable provider that you trust can make all the difference and help ensure you get the most from your investment.

Pool fee (%)

If you are a member of a mining pool, a percentage fee of your earnings will likely be distributed among the rest of the pool after each reward (but you’ll also see a percentage of other members’ earnings, as well). This should be taken into account when projecting profitability.

The power of the Tier 0 data center

Compute North’s facilities introduce the concept of the Tier 0 data center – a new solution in delivering high-performance computing at an affordable cost to support non-mission critical applications in blockchain, machine learning, AI, IoT, and big data.

The modular construction of Tier 0 data centers means they are exceptionally quick to build, deploy, and scale, aligning with the needs of your application to launch and adjust in a matter of weeks compared to the years-long timeline of traditional data centers.

This scalability helps maximize the profitability of mining efforts that need to get online quickly while still maintaining the versatility to shift and grow in the future.

And Compute North is here to manage every aspect of it.

Managed blockchain services from Compute North

In partnering with Compute North to host your miner operations, two levels of service are available.

Hosting Basic is suited for those with the ability to self-manage their miners. We provide the power, network, rack space, and onsite maintenance personnel as needed, in addition to remote access to allow you to monitor and troubleshoot any issues.

Hosting Select puts us in control of all aspects of your hardware to let you focus solely on profitability. We handle everything from daily monitoring and troubleshooting to firmware updates and miner configuration. This option is perfect for those who prefer to be hands-off and let industry experts oversee support and optimization.

Compute North owns and operates state-of-the-art Tier 0 data centers throughout the U.S. designed specifically to make the most of blockchain technology, with the ability to adapt to market demands, recognizing there are many applications being designed that don’t require maximum uptime and hyper-scale redundancy.

Contact us today to learn more.

Date Published

04/29/2020

Author

First Scribe

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