What is a bitcoin farm?

LBitcoin mining farms and all kinds of cryptos consist of concentrating a large amount of mining hardware in the same place and keeping it operational. 

What is a bitcoin mining farm

A bitcoin mining farm is a space in which cryptocurrencies are generated on a large scale, using specialized Bitcoin mining equipment, which performs many computerized data calculations at the computer level. It is important to keep in mind that there is no concrete concept to define from how many mining equipment a project becomes a mining farm, but as a general rule we talk about projects from a medium size.

Cryptocurrency mining (in this case bitcoin) is the process by which miners use hash or computing power for processing transactions and earning rewards, in this case in the form of bitcoin. That is, it is the process by which new transaction records are added as blocks to the blockchain.

Bitcoin needs a consensus mechanism to ensure that stakeholders agree on transactions that are legitimate in order to prevent people from spending the same money twice. In this way, to achieve this, bitcoin uses proof of work. Thus, when a block of transactions is completed, miners must compete to be the first to solve complex mathematical problems or equations. Upon achieving this, they generate a 64-character hash that validates the transaction, allowing miners to generate bitcoin as a reward.

We must bear in mind that there are mining farms for many different cryptocurrencies. Likewise, One of the important points when maintaining a cryptocurrency farm is to appreciate that having good air conditioning for the equipment is key. It is also important to take care of the mining power offered. In addition, we must appreciate that there are some programs designed to facilitate remote and simultaneous monitoring of mining hardware.

On the other hand, market fluctuations also influence the profitability of mining, as well as the cost of electricity and the difficulty of mining the network in which it is operating.

How does a bitcoin farm work?

Bitcoin mining requires conditioned facilities, of specialized software to monitor the different equipment and even of a number of people who are in charge of monitoring the hardware and performing maintenance on the equipment whenever it is necessary to do so.

Of course, mining teams never rest. Once plugged in they should not be switched off and if they are switched off it should only be for maintenance. In order to get the most out of mining equipment, it is essential that they are active all the time. In addition, it is key to continuously monitor the operation of the mining farm: from the hardware used to heat dissipation and electrical connections.

Maintaining a cryptocurrency mining farm

In this way, when we talk about a bitcoin farm we are referring to dozens or hundreds of mining devices that work at the same time. In mining farms, special software is also used to monitor the performance of each of the miners, which allows operators to more efficiently detect and correct faults remotely.

Likewise, when it comes to maintaining the hardware of mining farms, it is key to do it in parts. This means that it is interesting to carry out the maintenance of a specific part of the equipment while the rest of them continue to be active. In this way, after the reinstallation of the equipment that has already been checked, it will be possible to disconnect and work with those that have not yet been checked. This is key because it allows you to keep the bitcoin farm operational.

In the same way, both the video cards to mine ethereum and the ASIC equipment to mine bitcoin require maintenance in all their electrical components and chips. 

What types of mining farms exist

Likewise, next we will also assess the different types of mining farms that exist. It is possible to classify them into different types depending on the hardware used for mining. We find the mining farms that work with ASIC hardware with application specific integrated circuits, with GPU or graphics processing unit and with CPU or central processing unit.

First of all, ASICs are equipment designed to mine specific algorithms. In this way, they are undoubtedly more efficient and powerful mining farms compared to other types of mining hardware. ASICs are the most used equipment in bitcoin farms, although they are also widely used in mining other cryptos such as bitcoin cash, litecoin, decred or dash.

Likewise, GPUs are designed to process graphics, but since they are powerful and versatile, they are equipment that is also used to mine cryptocurrencies in some cases. Finally, CPUs are less used today to create mining farms, although it is possible to monetize these tools in this part of the industry.

Cryptocurrency farms can mine more than one crypto, but this always depends on the hardware used. The farms that use CPU or GPU equipment allow to work with different types of cryptocurrencies while the farms that work with ASIC equipment are designed to work with more specific algorithms.

Thus, bitcoin mining farms usually work with ASICs. ASIC miners are subject to a mining algorithm and not to a specific cryptocurrency. In this way, the ASICs work with this kind of “language” and can communicate with all the cryptos that “speak” it. Thus, a farm that is dedicated to bitcoin mining will also be able to mine peercoin and bitcoin cash, because all these cryptos work with the SHA-256 mining algorithm.

Is there money to be made from a mining farm?

The answer is that this is quite relative. Whether or not to generate income from mining depends on many different aspects. The first of them is to keep in mind that it is a volatile market and therefore it is important to know it well and choose a good time to be able to generate money with a mining farm.

Likewise, the number of miners present in the network must also be taken into account. This is important in relation to the consensus mechanism. Almost all cryptos work on a PoW or Proof of Work basis. This test includes an automatic difficulty adjustment that changes based on the global network hashrate to balance block production. 

On the other hand, the price of other services such as internet and electricity will also affect the income of mining farms. Electricity is the most important point to consider because the equipment used to mine cryptos consumes a lot of energy to process data quickly. In this way, the most interesting places to mine bitcoin are the areas of the world with stable and cheap electrical energy. For example, there are some places in the world with very cheap energy or electricity, but instead they have poor services and therefore are not a good place for bitcoin mining.

Finally, the return on investment that must be made in principle to be able to set up a bitcoin mining farm must also be taken into account: from acquiring the hardware for mining to internal and external facilities. In addition, we must also assess the cost of maintaining the equipment and the place, the cooling systems and the costs of the operating systems used, including those that usually work with monthly or annual subscriptions such as monitoring.

Which countries mine the most cryptocurrencies?

Until mid-2021, China has been the area with the highest mining activity in the world, as it has an economical and safe electricity network. In June 2021, China concentrated almost XNUMX percent of the world's hashrate or mining power, but in September Beijing banned crypto transactions, mining, and advertising.

In this way, many mining farms moved to Kazakhstan, a neighboring area of ​​China, since the border province called Xinjiang accounted for almost 60 percent of all Chinese mining. In this area, the mining networks were powerful due to the large hydrocarbon reserves present in this place. In addition, Kazakhstan was a good alternative because it initially ruled out taxing activities related to cryptocurrency mining.

During this last year, the United States, Kazakhstan, Russia, Canada, Ireland, Malaysia and Germany therefore dominated bitcoin mining around the world, but a crisis finally broke out in Kazakhstan with the crypto sector. This country began to experience overload problems in its network due, according to its detractors, to bitcoin mining and the rest of cryptocurrencies, which increased the tension in the country with this sector, a tension that ended up exploding when in 2022 it entered into force the new tax that obliges mining farms to pay for energy.

Thus, the mining farms that had moved from China to Kazakhstan, country that seemed to become the new center of the bitcoin mining world, They ended up finding problems at this place as well. At first the energy was very cheap and the regulation did not exist, but finally the energy was not so cheap, power cuts began to occur and the Ministry of Energy began to blame mining farms and announce cuts to this type of activity. In addition, mining activity was taxed and energy began to be much more expensive for mining farms. In a few months, the miners went from being respected and valued workers in Kazakhstan persecuted.

Now, according to different analysts, the cause of the blackouts and power outages in Kazakhstan has nothing to do with bitcoin mining, but with the poor infrastructure in the country. In addition, it is evident that there is a black market that makes power plants reserve some capacity for their needs at a reduced price and some companies benefit from these reserves through private agreements, which undoubtedly reduces the energy available for distribution.

The Kazakh government, for its part, distinguishes between white miners, those who register their activity, with a sum of light consumption much lower than that of other sectors of industry and society, and gray miners, who according to this government operate irregularly. consuming twice the energy. In fact, a line has even been created on WhatsApp to report gray miners, receiving a reward in return.

For all these reasons, miners are now leaving Kazakhstan behind again and among the most popular destinations for setting up bitcoin farms today we find the United States, a country that is only reinforcing its dominant position in the market in as far as mining farm is concerned. Other miners value options such as Russia or other alternatives such as Chile or Argentina.

Now, although after China's ban last year, the US, Russia and Kazakhstan were at the forefront in terms of mining farms during the last year, after the most recent events the data shows that China is once again another of the main areas of the world in terms of bitcoin mining, only behind the US.

Economic and energy efficiency

Similarly, there is a general idea that Bitcoin mining farms heavily pollute communities and contribute to greenhouse gases, but many experts agree that data processing centers and power plants are really being confused. Of electricity.

Bitcoin mining data centers are not that different from those occupied by other large companies such as Google, Apple or Amazon. Mining farms work by buying energy from a generating plant like other companies. In addition, the mining farms do not emit carbon dioxide or other types of pollutants: only the heat generated by the machines, which can be controlled with ventilation systems.

It is also essential to take into account that more and more mining farms run on renewable energy when carrying out all their operations. In fact, according to various studies, this industry as a whole uses approximately 58,4 percent of sustainable energy, which makes it a very sustainable industry and far from sources of electricity generation created with fossil fuels.

In order to save, in addition to choosing the best possible hardware, companies in the sector decide to locate their mining farms in the areas with the most economical and efficient energy on the planet. Many companies in the sector are locating their plants in places with the cheapest electricity, as we presented above, but others are deciding to bet on places where cooling is completely natural, such as the Arctic Circle in northern Sweden.