Future-proofing Cryptocurrency Mining in an Unregulated Market

In January 2018, approximately 80% of the entire Bitcoin (BTC) supply was mined, a total of roughly 16.8m. It was a significant milestone for the cryptocurrency community because it revealed that only 4.2m Bitcoins remained before hitting the coin’s supply cap. With the growth of BTC mining the global crypto mining sector has continued to expand and diversify from individuals to big corporations. As it continues to bring significant revenue (paired with ever-increasing OpEx), the location of a large mining pool spell the difference of millions of dollars. But to set up even a basic mining facility in a location simply because of low cost of electricity and climate is short-sighted in this unregulated cryptocurrency environment. While anticipating regulations is nearly impossible, mining companies should look to investing their operations in countries with a stable and progressive government.

With increasing competition, more companies are choosing locations with low power costs, such as Venezuela, Uzbekistan, and Myanmar. While the lower electricity costs in these countries is compelling, other factors should be taken into consideration before building data centers. For instance, socioeconomic aspects should be scrutinized, including government stability, seasonal climate, as well as the cryptocurrency regulatory landscape. A recent example is Venezuela’s Petro, which President Trump is working to ban for purchase by U.S. citizens.

Another consideration when selecting a location to mine is understanding what the energy implications mean to government entities on a federal, state and local level. While many are concerned about the environmental impact, estimates of mining power consumption are oftentimes based on weak and loose assumptions. Without having the ability to analyze direct data from the mining centers across the globe, it is impossible to properly estimate the long-term energy consumption.

Nevertheless, companies should think about the real world implications of these assumptions and how it will affect their mining operations. As an example, Plattsburgh, a small town in upstate New York, was the first to ban cryptocurrency mining due to exploitation of their low-cost electricity. This should be a warning sign for all miners when they enter very small areas. Other locations around the globe must create more renewable energy supplies before we will start to see diverse “mining proficient” regions, or more cost efficient rigs will need to be developed to keep this from being an issue moving forward.

Mining companies must evaluate a host of factors when deciding where to mine; though some countries have cheaper electricity costs, they are located in unstable regions of the world with corrupt governments, which could have disastrous effects on a company's business operations. Instead, they should look to countries like Canada or certain areas of the U.S., which provide stable, progressive governments, little to no regulation on mining, low cost of electricity and cold climates. The intangibles of having stable leadership in the country may not seem to be a top priority when attempting to keep costs down, but it is a long-term investment in both the country where the mining is being housed, and in the company itself.