Compute North, a U.S.-based bitcoin mining facility operator, has announced that it plans to increase its capacity by 1.2Gigawatts in the next 12 months. This is amid a global shortage of bitcoin miners.
The Minnesota-based company now has five locations under construction, and they are expected to be operational by Q2 2022, according to Compute North CEO Dave Perrill.
You can colocate your mining equipment, but you pay for a data center to host them.
Compute North already operates three facilities in Texas and South Dakota. They claim to have more than 100 megawatts of capacity. Perrill, however, declined to reveal the location of the five new sites.
Perrill stated that the energy used to power the new facilities will come from both renewable and fossil fuel sources. He stated that it would be difficult, if not impossible to be 100% renewable at such a large scale.
This plan is coming at a time that the secondhand bitcoin mining equipment market is being overloaded due to China’s recent shutdown orders for local bitcoin mining farms. The unlikely government will reverse the policy, the equipment owners are either selling the equipment or liquidating it.
He stated that he was receiving 100 megawatt requests on an average every few weeks, although some may have been duplicated by brokers.
In June, before China’s Xinjiang provinces and Sichuan provinces – the two top mining hubs at that time – issued the shutdown orders, reported the fact that there was not enough hosting capacity to meet all potential demand.
This was both a challenge to Chinese bitcoin miners and an opportunity for colocation suppliers overseas, as they look to countries like Russia, Kazahkstan, and North America as part of their exodus plans. These plans can take several months or even years to complete.
“We might not see the hashrate return to its all-time high level until Q2/Q3 next Year,” Perrill said. Perrill said that this was his hunch. He also added that the supply crunch has moved from machines to hosting capacities.
Operation scaling up
Compute North isn’t the only colocation provider with plans to increase capacity. BitRiver, a Russian-based colocation provider, stated in April that its third data centre would be operational in September and will have 100 megawatts.
According to a announcement, Bit5ive, a U.S. colocation provider, is also in place to manage the construction of a 100-MW facility.
Bitmain previously stated to The Block that they source electricity around the world and encourage customers and partners not just to host machines but also to invest in infrastructure. China’s mining equipment giant Bitmain stated that it is interested in co-investing in mining facilities, with a maximum 20% stake.
The mining gap
The supply gap is still significant. Since China’s shutdown orders, the Bitcoin network’s computing power has been reduced to approximately 90 million terahashes per seconds (TH/s). (View a timeline that summarizes the events.
Those who were operating in Xinjiang before June 9 had a combined energy capacity of 1.9 gigawatts. They were then shut down. In the following weeks, Sichuan saw more power cuts.
It is not clear how much energy was used to power the China hash rate. However, it can be determined a lower or upper limit.
The efficiency rate for the most modern and efficient mining equipment is around 40 watts per THP of computing power, while the lowest-efficient model consumes approximately 100 watts.
This means that the computing power used by 90 million people could have an energy capacity of between 3.6 and nine gigawatts. The average is around six gigawatts.
China and beyond
This crackdown does not only affect Chinese mining companies, but also U.S.-listed companies.
BIT Digital, a Nasdaq listed bitcoin miner who is also one of Compute North’s existing hosting customers, revealed that it had a total 43,606 miners at a combined hashrate of 2.4 million TH/s by April 30, with 80% of them generating income from within China.
It contained 19,060 units from Sichuan, 12,830 in Xinjiang, and 3,200 in Yunnan. Only 7,000 units were at the time being stored in U.S. facilities.
BIT Digital has not provided any information on its plans for the equipment in China. The Block also has not received any comment from them.
The Hong Kong-listed Loto Interactive was shut down last month by BIT Mining. Its three Sichuan mining facilities had a capacity to produce around 400 megawatts. They accounted for almost all of Loto’s revenue in 2020.