Posted on 05-11-2020.
Like any other high-power computing hardware, Proof-of-Work mining rigs turn lots of electricity into lots of heat, which makes this business very sensitive to geographic location. Large mining farms and data centers tend to congregate around the cheapest electricity providers available, preferably somewhere colder. This is a story about one such place deep in Russian Siberia where miners enjoy both the signature cold climate and the dirt-cheap power from a dam that was once the world’s single biggest electricity producer.
“Currently, almost 100% of our clients’ rigs are running cryptocurrency-related computations. This is the most demanded type of energy-intensive computation. Eventually, we also expect the shares of machine learning computations and large dataset processing to grow,” says BitRiver CCO Dmitrii Ushakov.The actual site is indeed industrial-scale. Individual devices are stacked three-story high and walking all the way along the racks can count as a short hike. Large fans run cold outdoors air through the building to vent out vast amounts of heat generated by the rigs. Equipment racks at the site. Source: BitRiver Engineers are monitoring the equipment around the clock and if something goes wrong, there’s a repair workshop on site. In case something goes very wrong, the site is constantly guarded by armed security personnel. BitRiver engineer reads the temperature around the equipment racks. Source: BitRiver Aside from the sales office in Moscow and a back office in Yekaterinburg, the team is predominantly located in Bratsk. According to BitRiver’s Dmitrii Ushakov, the project takes part in the development of the city and has a cooperation agreement with the local authorities.
“We offer internships for the students studying technical disciplines at the Bratsk state university, sponsor local events, even helped build a vet clinic. Of course, we also create IT jobs and pay our taxes there,” says Dmitrii.The most notable partner and the largest client of the datacenter is BitCluster, a company providing mining-oriented services like equipment hosting and consulting. The company operates around 14,000 devices in the Bratsk data center. During the crypto-winter of 2017–2018, when mining profits were dwindling, the company and many other businesses in the industry had to move to a better location to cut costs.
“Back then, the profitability was nearing zero. We had to move our mining capacity to a place with cheaper electricity and chose Irkutsk Oblast, which had a surplus of hydroelectric power. Now we have two working sites there: the main site at BitRiver’s facility in Bratsk and another one in Angarsk,” says Sergey Arestov, co-founder of BirCluster.Importantly, the beneficial conditions enjoyed by miners in Bratsk are not unique. Russia hardly has a shortage of notoriously cold places and Soviet-built concrete megaprojects still kicking. While there’s plenty of room and power for mining rigs, there’s no clear regulatory framework for crypto-mining and the country’s authorities don’t seem to have a consensus.
“Our country has everything for mining to thrive: a huge electricity surplus, vast landmasses, and a cold climate. The state sells electricity and gets taxes. Miners create jobs and pay the import taxes when buying new equipment. If the government prohibits mining, everybody loses,” Sergey explains, “Energy companies would lose part of their profits, the state budget would get less tax money, and private miners will obviously have to go.”Right now, miners that work openly have to assume the risk that one day the government may decide that cryptocurrencies and mining aren’t allowed in Russia. This is a significant barrier for those who would like to enter the industry and use the country’s otherwise favorable conditions.
“The government has to introduce clear guidelines, licenses, and taxes for miners. We want to believe that the bill “On Digital Financial Assets” will be mining-friendly,” says Sergey Arestov.The bill in question has been in development for about two years now. It is known that the legislation will include the definition of cryptocurrencies and will restrict their use for payments but mining is unlikely to be banned. According to the Chairman of the State Duma Committee on Financial Market Anatoly Aksakov, mining isn’t mentioned in the document at all and is of any interest to the government only for the sake of taxation. Yet, the new legislation has been delayed because of the pandemic. Back in 1961, when the Soviet premier Khrushchev visited the construction site of the Bratsk HPP, the official propaganda depicted it as an “act of a great creation” that would usher in the “innumerable riches of the Eastern Siberia” for the benefit of “all the people.” Long gone are the Soviet premier, the person who wrote those pompous propagandist verses, and the Soviet Union itself. But these days, ironically, thanks to bitcoin mining, all those words seem to have gained another meaning. Follow us on Twitter and Facebook and join our Telegram channel to know what’s up with crypto and why it’s important.