Proof-of-Work mining exacts a heavy electricity cost. It involves racks of specialized servers all focused on solving a difficult mathematical equation. Those servers eat ridiculous amounts of power not just to power the computations, but in air conditioning because those ASIC rigs get hot.
But because Bitcoin’s gotten so lucrative it’s opened an entire ancillary industry. The server rooms need space and power and air conditioning, and people to run them. Entire industries have popped up seemingly overnight to meet this demand.
Tier 1 Solutions is one of the companies to meet the demand. They entered into an agreement with bitcoin miner, CryptoStar (CSTR.V), to identify and acquire real estate and permits from Newfoundland and Labrador Hydro, for the company’s data centre expansion.
“The agreement with Tier 1 is consistent with the Company’s long term expansion plans into low cost energy regions in North America and paves the way for CryptoStar to take advantage of extremely favourable power costs in Newfoundland and Labrador. CryptoStar is now positioned to become one of the lowest cost Bitcoin producers in North America.” said David Jellins, chief executive officer of CryptoStar.
Bitcoin is mined at variables prices all over the world. For example, in Kuwait, where there’s an abundance of cheap energy, it costs $1,415 to mine a bitcoin. In Seoul, South Korea, it’s over roughly $20K. In Canada, and specifically in Ontario, it’s a little under $4,000, so there’s still some money to be made in there. Whether or not it’s cheaper to mine in Newfoundland and Labrador is unknown, but it can’t be much more (or less) than Ontario.
It also doesn’t hurt that it’s cold. It’s one of the rare occasions where Canadians can be thankful for a cold snap, because companies can fling open their doors and let the frosty arctic winds winding down from Hudson’s Bay cool off their ASIC-rigs. It’s the bitcoin equivalent of shoving your beer in the snow outside because it will keep them colder than your fridge.
“Cooling is a big factor, it’s very important that it has the right cooling there or else you have to be able to equip a power plant in order to use the energy. That’s a big investment and you have to do it in the right spot,” said Marco Marcovici, cryptocurrency expert and advisor to the hydro-powered crypto-mining company, HydroMiner.
The monetary cost is only one part of it, though.
There’s also a drastic environmental cost. Have you seen images from Shenzhen and Shanghai? The smog? Most of that is from coal and Bitcoin miners aren’t helping. At least in Canada, with our natural resources and reasonably cheap hydroelectric electricity, miners won’t contribute to the destruction of the planet. Same with Cryptostar when they start mining.
Highlights of the Transaction
Material reduction in direct power costs by more than 60%
Low cost of transaction with generous support of major shareholder
The transaction is non-dilutive for CryptoStar’s other shareholders
CryptoStar positioned to become one of the lowest cost Bitcoin producers in North America
Cryptostar expects to have their first data centre up and running with 6 MW of power, and anticipates opening additional data centres in NL throughout 2020. Tier 1 has applied for NL Hydro power permits in excess of 20 MW to facilitate CryptoStar’s expansion plans. The power comes from NL Hydro’s Churchill Falls Generating Station, which is one of the largest underground hydroelectric stores in the world, providing clean, renewable energy.
The company intends to get started within two months with 8 petahashes, and expanding over the next few months. CryptoStar eventually plans to deploy to 348 PH/s of Hashrate by December 31, 2020.