Crypto mining is an energy-intensive process.
Marco Bello/Getty Images
Limited power and infrastructural and logistics issues have led to inefficiencies in cryptocurrency mining farms.
Sabre56 is a cryptocurrency mining consultancy working to plug a hole in this sector’s problems.
This article is part of “Master Your Crypto,” a series from Insider helping investors improve their skills in and knowledge of cryptocurrency.
Cryptocurrency mining is an infamously energy-intensive endeavor, and a growing number of crypto miners are hungry for electricity.
With limited power on national grids, “all the low-hanging fruit for power has been snapped up,” CEO of mining consultancy firm Sabre56, and ex-special forces operative, Phil Harvey, told Insider.
Pair this with the fact that, until recently, there has been a lack of direction regarding exactly how organizations should efficiently build and run crypto mining farms, and, as Harvey said: “expensive mistakes are being made.” Companies like Sabre56 aim to help crypto miners avoid mistakes and make good choices in terms of infrastructure and planning.
According to the Cambridge Bitcoin Electricity Consumption Index, Bitcoin, the world’s largest cryptocurrency, consumed 105 terawatt-hours (TWh) of electricity per year in 2021. That is more than what powers some small countries and excludes the energy used by thousands of other crypto coins flooding the market.
While many investors who populate the crypto mining industry have access to capital, Harvey says millions of dollars are often spent buying equipment without considering essential infrastructural issues.
Temperature and climate concerns, navigating local governmental regulations, and liaising with utility providers, these infrastructural setbacks can all delay a mining rig’s kick-off date.
“If machines aren’t turned on the day they arrive, the investors and companies that purchased them are losing money. I know of hundreds of thousands of machines that are sat in warehouses without plug sockets, not generating any value,” said Harvey, whose company scouts sites and works with local utility companies to ensure they can accommodate the power for mining.
Transforming a hydroelectric dam in Paraguay into crypto power
One such venture with big ambitions, but which began with very little knowledge of the practicalities of mining, is the ongoing project at the Itaipú dam on Paraguay’s Brazilian border, which is seeking to transform excess power into a source of crypto mining.
Since 2020, low energy costs in Paraguay have encouraged both local and foreign companies to increase their investments in the country’s crypto mining infrastructure, with the Paraguayan senate officially recognizing cryptocurrency mining as an industrial activity in July of this year, seeing an opportunity to create jobs and improve commerce across the South American nation.
Michael Blank, an independent advisor to Paraguay’s government, who worked on the project alongside Sabre56, told Insider, “We sought to implement this process for growing the digital asset mining sector, with limited to no in-depth knowledge about the industry.”
Citing government stipulations such as minimum employee requirements, the implementation of specific technology solutions, and ESG concerns, the team faced a number of difficulties. “The industry landscape — or lack thereof — was naturally challenging,” Blank said.
Working alongside Blank and his team, Sabre56 surveyed the site, considered how the project would integrate with local urban and rural infrastructure, and whether the technology, power, and workforce needs were sufficient in the area, and advised on how a large-scale mining rig might best be regulated by the government. At the time of writing, the project is up for tender, with cryptocurrency miners competing to take control of the dam.
Designing a successful crypto mining facility
Sabre56 has consulted on projects as varied as re-routing excess power from Abu Dhabi’s nuclear projects to sustainably-sourced mining in Norwegian and Canadian hydroelectric dams. Harvey’s team has helped deliver around 400 megawatts of power to the crypto mining sector, which they say is the equivalent of up to 800, 50-story tower blocks worth of energy.
While the design intent of each mining facility is similar — utilize excess energy to power the computers that make up the backbone of cryptocurrencies’ blockchains — each project presents its own challenges.
“The parties that come together are very different, or government regulations are different, or you have certain project nuances such as temperature, climate, timeframes, budgets, and all the drama that continues around the world to delay the project,” he said.
Sabre56 uses its military edge to navigate these competing factors — around half of the consultancy is made up of British ex-special forces operatives. “One of the things we were taught is no plan survives contact with the enemy,” he said. In mining, that enemy is anything that threatens to delay the machines.
According to Harvey, it is carefully orchestrated projects like that of the Itaipu dam that move crypto mining away from its “Wild West” reputation, and will prove critical in building a long-term, scalable, and sustainable sector.
“If there is any industry that can push forward the sustainability program, or move from carbon to renewables, then it would be the blockchain industry,” said Harvey, of the sector that is currently thought to emit around 65 megatons of carbon dioxide into the atmosphere each year.
This article is intended to provide generalized information designed to educate a broad segment of the public; it does not give personalized investment, legal, or other business and professional advice. Before taking any action, you should always consult with your own financial, legal, tax, investment, or other professional for advice on matters that affect you and/or your business.