Cointelegraph spoke with Genesis Mining head Marco Streng on the current state of the mining industry, the Life Inside a Bitcoin Mine project that aims to make cloud mining transparent, and how he sees the Bitcoin industry moving forward.
Bitcoin mining has become one of the world’s most difficult and competitive industries over the last 18 months. From the market price corrections after the Mt. Gox bubble burst, to specious national regulatory laws and banking lobbyist backlash, to the battle to have the latest and greatest ASIC mining rig technology and beyond, countless miners have fallen by the wayside. Not Genesis Mining, one of the world’s largest Bitcoin companies.
Not only have they survived, but they have thrived under the intense market pressures. They have even expanded their operations, creating Genesis Hive, to assist those who are looking to enter the Bitcoin mining industry do so under their umbrella of protection and leadership. Also, operations have been brought to new, more favorable regions like Iceland, while bringing you behind the scenes with a live streaming service to show you how the operation works in real time.
Cointelegraph: How is the regulatory climate in Iceland for mining and running a cryptocurrency business?
Marco Streng: Owning and mining cryptocurrencies is ok. However, related to capital controls in Iceland, buying and selling bitcoin is prohibited.
CT: Are there other countries you would consider expanding to, or might recommend, as you see then as Bitcoin-friendly in their regulations?
MS: There are a number of places that are Bitcoin friendly, e.g., Denmark and Hong Kong. However, if it comes to mining you need more than just Bitcoin-friendly regulation. Cheap electricity, low real estate prices, cold climate and a good infrastructure are on the top of the list. And you want to mine in a politically stable region. For example, we received interesting offers for cheap electricity in two countries but eventually declined, as we considered the country risk to be too high.
“Planning and building a good mining farm takes 3-6 months.”
CT: What should one expect, without giving specifics, when starting a new Bitcoin mining operation from scratch on any scale such as yours, without the oversight provided by something like Genesis Hive?
MS: If you start from scratch, without prior knowledge in large-scale mining your first farm will result in substantial losses. This is because you do not have the experience setting up an ideal farm (cooling, airflow, electricity distribution, network), and you will not correctly factor in all costs and will be too optimistic about up-times of machines, failure rates, and maintenance work. Also, you will lose a huge amount of time and money if you don’t have a tool (like our HIVE) for monitoring and optimizing your farm continuously.
For the second farm, you know a number of things that can go wrong and have better plans for cooling, airflow management, electricity setup and network. Things will look better, though you will have a hard time to break even. There are still things you will learn and need to optimize.
Third farm: you will make it even better this time if you still have enough funds (after your didn’t do to well with the first 2 farms) to experiment and improve your setup and if you have the right monitoring and tuning software (there are no commercial available tools for managing large-scale Bitcoin mining farms).
Planning and building a good mining farm takes 3-6 months. So you will need about a year of experience with large-scale mining before things are going in the right direction.
“We would prefer if the camps could bridge their differences and agree on an acceptable solution that allows for larger blocks going forward.”
CT: What is your view of the Bitcoin XT fork debate? Which side are you on? Does the way this is being handled bother you? Are your miners voting actively for or against these forked initiatives?
MS: We consider BitcoinXT an option for larger blocks. These are needed to support the medium term growth of the Bitcoin network. It is unfortunate that no consensus was reached on the side of the core developers despite overwhelming interest on the side of users and businesses.
The situation is not ideal. This is a result of missing governance in Bitcoin and bad communication of many of the participants. Having an alternative is a good thing, however, we would prefer if the camps could bridge their differences and agree on an acceptable solution that allows for larger blocks going forward.
The overwhelming majority of our users are for larger blocks. We strongly believe that this is the right decision and in the best interest for our clients, as well as, for the Bitcoin community as a whole. Therefore, we will act accordingly, but we continue to watch (the Bitcoin) space closely, also with the upcoming Scaling Bitcoin conference in Montreal this September
CT: How difficult is it for your company to compete with Chinese miners? Do they have any advantages that you may not enjoy when mining at scale?
MS: Chinese miners are strong, but they also fight with a lot of problems. Their main advantage is that most equipment is produced in China and thus transportation costs are lower for them. Labor work in China is cheaper than in most other parts of the world, however, with Genesis Hive we have an excellent tool to increase the efficiency of our workers by magnitudes.
Due to the unclear regulatory environment and quick changes in policy, the Chinese mining farms are based on an uncertain foundation. For this reason, some of the Chinese miners move significant parts of their equipment to facilities abroad. Overall, we are in a very good position in this highly competitive market.
CT: What do you think Bitcoin will become to the world 5-10 years from now? Will it replace Paypal? Will it directly compete, or replace national fiat currencies?
MS: The last 18 months were difficult for Bitcoin and it showed that any prediction regarding its future is hard to make. Nevertheless, the past year also showed that Bitcoin is very resilient and happily alive despite being declared dead dozens of times.
In the last two years, transaction numbers roughly increased by a factor of four. If this trend continues Bitcoin should grow 30-fold in the next five years. This requires that the block size will be increased and in the long term also requires an additional infrastructure that takes some load off the blockchain (e.g. lightning network).
If this is the case Bitcoin will find its place for international transactions (in particular between businesses) and also as a store of value. The crucial point here is that regulators around the world understand the value and benefits of Bitcoin and trying to stop bitcoin with red flags. If everything goes well, bitcoin, or another cryptocurrency, could replace a “real” national fiat currency.
Cloud mining transparency
To alleviate the transparency and trust issues within the Bitcoin cloud mining industry, the team at Genesis Mining has decided to provide an in-depth, all-access look at their mining operations with a webinar chronicling the new project “Life Inside a Bitcoin Mine.”
Providing 24/7/365 live streaming to their mining farm in Iceland, Marco, and the team are going to host webinars and give tours directly from the Bitcoin mining farms now and in the future. The locations will soon include their many farms worldwide.
Genesis Mining is looking to create a larger gap between legitimate cloud mining providers and “scam” providers. Fraudulent companies won’t be able to provide this level of transparency through live streams and videos and this could significantly reduce the number of cloud mining scams plaguing the industry.