How My Bitcoin Mining Firm Is Surviving Crypto Winter Again

This is an opinion editorial by Sergii Gerasymovych, CEO and co-founder of EZ Blockchain, a bitcoin mining company focused on eliminating waste and using less energy.

We’ve been here before. this is the second “Crypto Winter”For my company, which manufactures bitcoin mining containers.

In this article, I will share the story of how our bitcoin mining company survived its first crypto winter, and is now surviving its second (as well as the world’s ongoing energy crisis), and what we think the future will hold with the energy and crypto mining industries.

Our First Crypto Winter

our company was launched in the first quarter of 2017 as a data center hosting solution with a mission to bring the best technology to bitcoin miners.

We suffered a knock-on effect when we were struggling in the midst of the cryptocurrency crash of the time and triggered widespread redundancies. But we were still young, so our company had nothing to lose. We only had five employees and we had to learn to survive, mainly by managing costs and operating in a lean and mean manner.

Surviving Our Second Crypto Winter

We arrived at the second crypto winter as one of the largest bitcoin mining container producers in the world (producing 10 containers per week). We have been one of the pioneers in using wasted flared gas energy for bitcoin mining and have built 10 cryptocurrency mining facilities in eight states and Canada, operating with over 200 megawatts (MW) of electricity.

But 2022 turned out to be one of the most challenging years for us and the entire bitcoin mining industry. Bitcoin prices were affected by the energy crisis triggered by the war in Ukraine and characterized by rising energy costs. Many mining companies declared bankruptcy, and those that survived had to rethink their operations.

Few companies managed to survive the year-long crypto winter, one that is arguably not over yet, with record mining difficulty and funding completely locked down. From my six years of experience running a bitcoin infrastructure company, there are a few solutions I can share that I hope will help others or provide insight into how flexible bitcoin mining can be. This should not be considered a panacea for market downturns or management advice, but rather something I learned for myself.

First, we called our electricity providers

The bull run over the past few years has shown that bitcoin miners prioritize acquiring miners over securing relationships with utilities.

But we believe it is important to prioritize the security of power and all the infrastructure behind it. Last year, the bankruptcies of mining companies taught us that. Open communication with electricity providers on realistic expectations always helps in having a clear plan to ensure safe and timely electricity flows.

There are several reasons why utilities are incentivized to sell electricity to bitcoin mining companies: First, they make a profit on each kilowatt-hour (kWh) sold. However, offering more incentives to electricity suppliers, such as load flexibility, higher capacity factors and controlled load growth, has helped build a stronger foundation among integral partners in the bitcoin mining industry. From my experience, electricity providers don’t look at bitcoin miners any differently than other electricity consumers, as long as bills are paid on time.

When the energy crisis hit us, the first thing we did was call our power company partners and tell them all bills would be paid. We started going the extra mile by investing in relationships with them.

Take a practical approach to construction

We all know that electricity bills often account for more than 90% of mining expenses. However, the seeds for a successful bitcoin mining operation site are planted with the first groove in the ground long before the machines start buzzing.

Developing a bitcoin mining farm is a difficult task, requiring many moving pieces to come together. Often, we focus so much on the price and difficulty of mining bitcoin that not enough time is spent on the design, site planning, and construction of a well-run facility. This fundamental work is usually outsourced to a consulting firm, an engineering firm or someone else.

But carelessness in planning an operation during the construction and development phase can pay dearly later. Even the most professional construction firm is unlikely to have gained experience in building a bitcoin mining farm yet. This should be guided by bitcoin nerds who are aware of common power supply problems like ASIC overheating issues, firmware upgrades, etc.

We’ve learned that a well-built bitcoin facility reduces operational, cooling, maintenance and uptime expenses over the years. On the other hand, a poorly-designed site can lead to rebuilding an aircraft in the air. The worst nightmare can happen when everything is set up, and you realize something vital is wrong. It could be that the voltage on the transformer is wrong, or the cable is not sized correctly to operate 24/7, 365 with around -95% load factor, just to name a few possible issues.

Learning about transformers, substations and airflow during development helps avoid future mistakes. This type of partnership is more important than constantly negotiating the price of online mining equipment. From a simple business perspective, the depreciation rate on a mining farm project over a decade is relatively low compared to mining equipment that is only a few years old. This is why we let the mining infrastructure sit and wait for ASICs.

Bitcoin mining operations are a marathon, not a sprint. They have to do a lot of hard work behind the scenes before the hash rate is visible in the pool. So, when the second crypto winter hit us, our key corporate players rolled up their sleeves and put their best foot forward to ensure business operations aspire to success.

Think creatively about energy consumption

gas flaring suppression

As electricity demand and electricity costs continue to rise, miners must vertically integrate their electricity generation. They have to find new ways to generate revenue that doesn’t only depend on hashrate.

In 2018, when the price of bitcoin started to drop, we were looking for alternative and cheaper electricity to stay afloat. The clear idea was that generating electricity needed to eliminate middlemen to get the cheapest electricity. Then we realized that there was no way to generate hydro, wind or solar power with the limited budget.

However, the production of gas and electricity has been around for decades and is relatively simple. What about natural gas? We don’t have to buy a propane tank to mine bitcoins. when was not needed Billions of cubic feet of natural gas are burned annually in oil fields, When drilling for oil, natural gas is released from the same reservoir. Sadly, the gas has gone awry due to a lack of infrastructure or the economic feasibility of capturing it. That’s when I first realized that bitcoin mining could be a tool that complements the inefficiencies of the energy industry. since we started bitcoin mining on natural gas,

flexible load

The energy sector is transitioning from a fossil-fuel-dominated era to renewable energy. In particular, wind and solar are intermittent, putting a strain on the grid. Our solution to inconsistent supply is mixing renewable energy with natural gas-peaking power plants. These power plants are flexible enough to fire up the turbines within a few minutes’ notice to respond to short supply.

Operations that rely heavily on the renewable energy grid need to implement demand-response programs where the grid incentivizes users to reduce loads. It has become a game changer in power grid operation. By reducing peak energy demand, demand response programs reduce the need to build new, expensive peak generation units. However, since the beginning of National Action Plan on Demand Response In 2010, there is still more progress to be made.

A decade later, bitcoin mining is a game changer. It is the most flexible, efficient, financially viable and, most importantly, workable solution to grid instability. It can send huge amounts of power in minutes without the need for any subsidy. It is market driven as bitcoin miners are always searching for low cost operating facilities. Interestingly, the demand-response industry gained a lot of attention after it started working properly on a large scale. But the protagonist was the long-hated “villain”: bitcoin.

Future

Energy companies have worked with bitcoin miners long enough to understand that the industry is here to stay. It’s only a matter of time until the entire energy industry develops a tough enough skin to admit this. Bitcoin mining has flipped from being just a power consumer to a consumer with profit. Mining companies that adopt different mining strategies, including optimizing operating costs, partnering with energy providers, and finding ways to earn additional revenue using bitcoin mining as a tool for energy management, will prevail.

This halving cycle, which ends in less than a year, means that electricity sourcing and electricity prices will be even more critical to the long-term success of the bitcoin mining community. The next era of mining winners will be technologically optimized companies with versatile toolkits to manage crises at multiple levels, including technical solutions for updating existing ones and developing new ones.

Winters will come and go, bitcoin will remain. The question is, who lives with it?

This is a guest post by Sergii Gerasymovych. The opinions expressed are solely his own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.