I recently got an email from a prospect who had a low price intro hosting offer and was shopping the quote around in hopes of getting someone to match or beat it. I find myself repeating much of this email frequently, so I’m posting the response in hopes that a miner might not make a big, expensive mistake.
I am a broker for a number of data centers, I also custom build affordable facilities for clients and I’m also building myself a data center.
The data centers that I broker for give me a better rate than even 12 month volume customers, but I wouldn’t even try to get a client of mine in a data center with those intro prices with the number of miners you have (not without specific language I’d put in the contract).
It could be a big mistake. I’ll tell you why, but first I want to tell you how I would help you.
With the number of miners you have, you fit the profile of a custom build. There are a couple of ways of doing this: I can often get the lowest prices by setting up one, or several, 1200 amp, 3 phase secondary services in a facility in WA or ID. I can do a lot of the electrical work myself.
One major, major advantage to this is expansion (remember how I said there could be a big mistake?). Data centers aren’t going to tell you this, but every one of them sells out their capacity as fast as they can. They give great, low prices to get you in the door for a reason you might not see right now. Every single data center with low intro prices sell their entire inventory within a few weeks, and they all even boast about being sold out on their websites.
They jack prices through the roof and they have you over a barrel because they’re going to tell you, “hey, we’ve been sold out since we opened the place, if you don’t take these prices, you’re going to have to leave because I can get someone in here to fill your spot before the door hits you on the ass.”
Not only is it impossible to grow a mining operation in the low price intro data center, but you know what can happen when a miner breaks down? They can sell that “available space” to a new customer. That’s why I said I wouldn’t let a client of mine go into a data center for pricing like that without specific language I’d put in the contract. I know their games.
Mining is all about managing growth as difficulty increases, and when brokers like myself work with you on finding pricing, we do it as part of an overall expansion plan.
Custom Build Project Proposal
The Right Profile
The miner who should consider a custom build has at least 80 miners, preferably 160+, AND has an active expansion plan. There is no uncertainty about growth. When I hear, “we’re thinking of adding some miners down the road” or “we probably will add some”, I’m concerned.
On the other hand, when I hear, “7% of our mining proceeds are liquidated every 60-90 days to purchase more miners” or “we buy 30 every month, sell 20 and keep 10″…BINGO.
Update: We now have a more practical solution for providing an environment where customers can grow. BOM entered into a deployment schedule agreement on 4/14/18 – what this means is that we contracted our data center to deploy additional hosting space for any space we occupy. The agreement keeps deployment in motion so we never hit 0% vacancy.
Custom builds make sense because you’re growing. You can’t scale in any of the Bitcoin data centers, let’s face it, every single one of them sells all of their inventory as fast as they can.
When your 3, 6, or 12 month contract with that great low price expires, guess what happens every single time?They jack prices through the roof …
For clients who are serious about a custom build, I charge $250 to do research and propose 3-5 locations, along with a build budget, timeline estimates, project plan and operational overhead (I live in Washington state, and I’m looking at WA, ID, and OR for facilities). I describe this deliverable as an accurate high level analysis. I find it’s necessary to charge for work like this in the Bitcoin mining market because there are so many dreamers who will talk serious about big plans but don’t have funds.
Let’s talk about funds…
One client I am working with has 204 S9’s. Prepayment of the hosting fees we agreed he’d pay for eight months will cover all expenses other than about $2k of finishing electrical work and about $1500 of electrical hardware (they’re providing all the networking equipment, cables, etc.). When I say “all expenses” I’m referring to the lease, power bills, Internet and security for eight months. When I say “hosting fees”, I’m referring to $87 kW, which covers the power, and my fees making everything happen and ongoing management of the facility.
So for hosting fees that are less than most hosting companies are charging, this client is in their own facility with no growth limiting factor.
Mining operations with significant inventory and serious expansion plans should really be working with brokers/consultants on some level. Even miners who have all the skill sets and experience (“quants”) aren’t going to have enough time to stay on top of everything. I’m going to write more about brokers soon. Stay tuned.