Is Colocation the Right Choice for Bitcoin Mining?

Jan 23, 2018 | Colocation, Insights

So, you’ve had some success profitably mining bitcoin and other cryptocurrencies. You’ve continued to expand your operations, and now you’re looking for a space that can offer you all the power and cooling you need as you continue to expand. What could be better than renting space in a data center for bitcoin mining? As it turns out, not all data centers are created equal, and colocation isn’t the optimal solution for many bitcoin miners. Here’s why:

Redundant Power, Cooling & Network

Many colocation providers build their data centers to have redundant power and network feeds, as well as redundant cooling equipment. The purpose of this is to keep IT equipment running at all times, 24x7x365. Building redundancy into data centers is expensive. To put it into perspective, the Data Center Journal estimates a difference of $650 per square foot between building a tier 1 data center (no redundancy) and a tier 4 data center (fully redundant). The Uptime Institute estimates the cost of building a tier 3 data center to be double the cost of a tier 2 data center.

In other words, if you place your bitcoin mining equipment in a data center that offers redundancy, you’re going to pay significantly more. If you can afford to have your equipment offline for about 24-36 hours out of the year, the cost of colocation in a data center with redundant infrastructure likely isn’t for you.

Multiple Layers of Security

Many colocation facilities are built to be highly secure. Data Foundry, for example, employs eight layers of security in many of our data centers. This includes a security booth with 24×7 security personnel, CCTV cameras, carefully managed video archives, man traps and biometric scanners. This level of security is beneficial for some companies, and necessary for others that must meet certain compliance requirements and protect sensitive data. The cost of multiple layers of security in many data centers may not be worth it for cryptocurrency miners.

What You Need to Know before Contacting a Data Center Provider

Before you contact a colocation provider to see if they might be a good fit, you need to understand your power requirements. How many kilowatts of power do you need for your mining operation? You’ll also want to think about how much space you will need in terms of racks. Some colocation providers charge by space, others charge by power, and some by a combination of both. Without having power and space in mind, you won’t be able to obtain an estimate. It’s also a good idea to have an idea of what your budget is for colocation. How much can you spend and still remain profitable? Keep in mind that many providers will require a deposit and a 12-month contract at a minimum.

Options for Bitcoin Mining in Data Centers

If you decide colocation at this level isn’t the best option for you, there are a few hosting providers out there that can provide cost-effective solutions for bitcoin miners. Mining Colocation, based in Canada, charges around $100 per kilowatt. Root Level Technology based in Houston also provides mining solutions. Frontline Data Services in New York accommodates miners, and Enhanced Mining has several locations in the U.S and Canada for mining equipment.

About Data Foundry

Data Foundry provides enterprise colocation services in purpose-built data centers in Austin and Houston, Texas with redundant power, network and cooling. Our facilities provide eight layers of security, in addition to customizable security options. If you have a need for redundant utilities and high-level security, and this fits your business model, contact us.