Home for Bitcoin: How Entrepreneurs Create Mining Hotels

In 2012, Latypov, together with Igor Stankevich, opened a telecom, which provides emergency communication with the management company in the elevators of multi-story buildings. The business was growing steadily, and the farms were mining “for pocket money.” Everything changed in the winter of 2016–2017, when cryptocurrency prices began to rise. “In five years, I managed to understand this market and realized that there would soon be an explosion,” the entrepreneur recalls. Together with Stankevich and two other friends, he took out several loans worth 7 million rubles. and purchased components for 48 farms.

Computers were “scattered wherever they could” - at home, in garages, in dachas. By March, Bitcoin was already worth $1.2 thousand, by June it had risen in price to $2.4 thousand. Within six months, the entrepreneurs managed to repay all the loans. It became clear that the industry was profitable, but there was nowhere to install new farms, and Latypov decided to go a different route. “All miners sooner or later run into the problem of limited power: they want to buy more farms and earn more, but the home power grid cannot withstand overloads,” he explains. “We decided to create an infrastructure for those who have already outgrown the apartment option, but are not yet ready to rent industrial space on their own.”

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Latypov found a suitable site - 100 square meters. m on the ground floor of a building in Kazan, purchased industrial air conditioners, racks for storing farms and installed the Internet. The purchase of the premises cost 1.5 million rubles, 800 thousand and 500 thousand rubles were spent on repairs and equipment. respectively.

Photo: Regina Urazaeva for RBC

The mining hotel opened in early August and quickly filled with Latypov’s acquaintances, who also mined cryptocurrency. Now there are 20 farms operating on the premises, with each entrepreneur charging 2.5 thousand rubles. per month plus electricity payment. The project brings him about 50 thousand rubles. net profit per month.

After two months of work, Latypov managed to understand that the premises were not entirely suitable for these purposes: the power of the electrical network was only enough to load 12 out of 100 square meters with farms. m. So that the rest of the area would not be idle, he created workplaces there for dispatchers of his main telecommunications business.

By November, Latypov plans to open a second mining hotel with an area of ​​250 square meters. m and place 1 thousand farms there. About 18 million rubles have already been invested in the launch. own and credit funds. The main expenses (15.5 million rubles) were for the purchase and installation of a gas electric generator, which will reduce the cost of electricity from 6 rubles. (tariff for legal entities in Kazan) up to 3 rubles. for 1 kWh. This is an expensive, but justified decision, Latypov believes: now Kazan miners will be attracted not only by the guarded site, but also by the opportunity to save on electricity bills. The new premises, according to his calculations, will bring in up to 2 million rubles at 80% occupancy. profit per month. The only expense item is the salary of three administrative engineers (30 thousand rubles each). Customers pay for the electricity consumed, Internet costs are shared with the main business, the premises are owned by one of Latypov’s partners. The investment should pay off in a year and a half, taking into account loan payments, the entrepreneur hopes.

Latypov continues to mine himself: now 59 of his farms and four ASICs are already mining cryptocurrency. This brings in about 600–900 thousand rubles. profit per month, but the hotel model is more reliable, the entrepreneur believes: “During the gold rush, it was not the miners who earned the most, but those who built the infrastructure around them.” After opening the second hotel in Kazan, he plans to develop a franchise and expand to other regions - to train entrepreneurs to make money from the mining hotel business. First in line is Abkhazia, where 1 kWh of electricity costs only 40 kopecks.

Mining on a grand scale

Mining in Russia is not legalized, but it is not prohibited either. “There is no regulation of the cryptocurrency market yet. The only document that affects this industry is a letter from the Federal Tax Service dated October 3, 2016, in which transactions with cryptocurrencies are equated to foreign exchange,” says Maximilian Grishin, a lawyer at the Moscow office of an international legal entity. According to Olga Sorokina, managing partner of O2 Consulting, hotels will face risks if the owner of the premises begins to pay tenants in cryptocurrency. If payments are made in rubles, then there is nothing to complain about - in fact, the activities of miners-hoteliers are not much different from the business of hosting providers.

Small mining hotels with an area of ​​up to 300 square meters. m will not withstand competition with large companies that are already beginning to fill the market, says Anatoly Knyazev, founder of the Bitcoin Fund hedge fund. One of the pioneers in this area was Internet ombudsman Dmitry Marinichev, whose company Radius Group plans to place equipment for cryptocurrency mining on the territory of the former.

Igor Shuvalov, appointed by Vladimir Putin to be responsible for the development of cryptocurrency technologies, plans to bring mining to the level of state corporations. “We talked about the future of this sector in Russia, given that it is developing so quickly in the world. Among other things, we talked about electrical energy generators, near which such [mining] centers could be installed. But there are no specific projects yet,” Shuvalov told RBC.

There is already an alternative to mining hotels - cloud mining, the collective use of computing power. Companies providing such services purchase equipment and offer part of this capacity to clients for rent. In return, they receive income minus expenses for the Internet, electricity and the organizer’s commission. However, many market participants do not understand the economics of such projects. “Think for yourself: why rent out a machine for printing money, which can bring high income to the cloud owners themselves?” - asks Alexey Ivanov from SberBit. According to the owner of the mining hotel, Adam Guchigov, this scheme provides less income than independent mining, and does not allow control over whether the owners honestly share profits with tenants.

What do mining hotels offer?

Mining hotels offer a place to install equipment that is equipped with all the necessary communications: stable Internet, a reliable “outlet” and an air conditioning system. The miner can only transfer his machines to the site and create a wallet for mining cryptocurrencies.

Miners incur additional expenses due to the fact that most modern ASICs cannot be kept in a residential area. The level of noise emitted due to the operation of the fan is higher than the established standards. This is complicated by the fact that the device must operate around the clock. You can find out more about what an ASIC miner consists of in our article.

This problem forced the miners to look for places for ASICs, where their work would not interfere with everyday activities. But placing equipment in businesses, garages or even a separate room is not as convenient and safe as renting space in a hotel.

How much air flow is needed for 1 kW rigs?

It is worth noting that it is more important to recover hot air from the rigs and the room than to try to cool them. This is why using conditioner is not recommended. For a 1kW rig you will need approximately 300m3/h of airflow to keep the room at 30°C when the outside temperature is 20°C. You can use this data to get an estimate of the amount of air flow needed for your farm. If you want to build a mining rig that consumes 5 kW, you need approximately 1500 m3/h of air flow.

Hotel advantages

The hosting of mining equipment must meet the requirements for successful “mining” of digital money.

The main advantages of a quality hotel:

1. Installed ventilation or air conditioning system. Mining equipment already has elements for cooling “internal organs.” But this is not enough if the device is working at full capacity, and it is summer heat outside.

2. Improved electricity supply system. The equipment may fail if there is a power outage. A high load on the “socket” is a risk of fire. Especially if the “mining” is carried out in an old apartment building. Therefore, hotel owners must approach the issue of electrification with complete seriousness. The cost of an error in calculations when designing cables amounts to hundreds of thousands of rubles, and sometimes millions. High-quality hosting is distinguished by additional machines and reinforced wiring. It is also important to choose the right power supply for the ASIC.

3. Installed air filtration system. The room must be constantly ventilated, but to prevent dust from settling on the equipment, filters must be installed on the air supply. When working with dozens of devices and air conditioning systems, ASICs can become covered in dust after just two to three months of active mining. Any electronic equipment cannot stand such a neighborhood, so it is important to check the cleanliness of the premises before handing over the farm and check the monthly maintenance. maintenance in the form of blowing ASICs.

4. Stable Internet. To connect all devices to the network, a stable Internet is required, the connection speed of which will be sufficient for the operation of ASICs. It is important to understand that communication breakdowns are the main reason for unsuccessful “mining” of cryptocurrencies.

Advantages of mining cryptocurrency in a hotel

The use of mining hotels is extremely beneficial for those who do not have their own huge capacities and the ability to launch truly industrial mining. The main advantages of renting space in these specific premises are:

• savings on electricity tariffs;
• no additional costs for premises, their support, additional equipment, personnel, etc.;
• Even a beginner in this field can start mining cryptocurrencies using mining farms;
• the customer’s farm will be under round-the-clock security and vigilant supervision of technical experts and security services;
• the issue of conflicts and clarification of relations with neighbors has been completely resolved;
• high-speed and stable Internet of mining hotels, ensuring greater efficiency of the mining process;
• possibility of earning money remotely, because a mining hotel will not tie you to a specific place of residence.

There are enough advantages. In this regard, mining using such hotels is one of the most promising areas of modern crypto mining. It is this that makes investments in mining truly accessible and widespread.

Necessary safety measures at the site

The protection of devices from physical impact must be ensured by the following factors:

1. Availability of a fire alarm. Fire, smoke detectors and gas traps must be installed in the room. If several dozen devices are operating in one room, the risk of fire increases significantly. Before signing a lease, you need to make sure that the systems are actually installed, and that the hotel itself has been inspected by the fire inspectorate.

2. Security and alarm. If attackers find out that there is expensive equipment on the premises and there is no security at night, then the miners can say goodbye to the devices. The owners of a quality hotel know that such a situation can arise, so they must protect the property of the “earners”.

So, in order to choose the right hotel, you don’t need to pay attention to prices and reviews. First of all, you should make sure that you have security and fire protection systems, and also find out about your electricity supplier and Internet provider.

If the hotel owner has no problems with the above points, then the information will be provided in full and upon request.

Brief business plan

Experts often joke that soon there will be no less mining hotels than miners themselves, at least in terms of the popularity of this phenomenon. However, at the moment it is still a promising market that can bring good profits in the short and medium term. You also need to understand that currently the mining hotel industry is not regulated, so in the near future you need to be prepared for the fact that you will have to obtain certain licenses or other methods of legalization. Therefore, the best insurance is to do everything right from the beginning; this will provide a guarantee not only from the legal field, but also in terms of the influx of clients.

Primary steps:

1. Renting premises (optional purchase, but only if there is cheap space or large starting amounts).
2. Purchase of special equipment for organizing cooling and ventilation (air conditioners, hoods and other devices).

3. High-speed Internet connection.
4. Electrical connection (stations, industrial generators, etc.).
5. Organizational issues (installation of video surveillance, search for personnel, installation of alarms, stands, tiers, etc.).
6. Organization of technical personnel and security at the site.

The key factors in the stable operation of the entire center are the presence of a competent team of specialists, as well as the supply of electricity. Every month, some hotels close due to incorrect electricity calculations, so it is important to correctly determine the power of the electrical network, taking into account the premises and the total volume of equipment.

The estimated cost of such a startup can vary greatly depending on the region, conditions, luck and other factors. To calculate averages, you need to evaluate the average prices for renting premises in the region, organizational issues and power supply. It is these items that will require most of the initial budget.

If we take the most expensive opening option, that is, the example of mining hotels in Moscow, then for 400 sq. m. the center will have to spend at least half a million rubles for rent, excluding other expenses. Even with good advertising and a rapid influx of customers, the payback for such a hotel will take quite a long time. As a rule, we are talking about 10-12 months. However, it all depends on the region and the chosen premises. Sometimes the amount of initial costs can be reduced by 2-3 times with a well-chosen premises and an electrical connection (especially near a thermal power plant).

Another example, which concerns Kazan, looks much more interesting in commercial terms than the “expensive” capital. In Kazan you can buy a premises of 100-120 sq. m. m from 1.5 million rubles, which cannot be compared in terms of potential benefits with rent. Repairs, purchase of necessary equipment and other work will take another 1 to 1.4 million rubles. If there is not the most expensive electricity, the project pays for itself in an average of 3 years. Taking into account renting space rather than purchasing – in a year and a half. These are quite serious figures, because the payback period for farms and many ASICs today is 1.5-2 years.

In addition to rent and arrangement, the main expense is the electrical network. For example, in Kazan, the installation of a gas power generator will cost 15-16 million rubles, but it allows you to reduce electricity by half, which will result in a good profit when filling the center with several hundred farms.

One of the most profitable cities in terms of return on investment when opening a mining hotel is Irkutsk, which is already called the “capital of mining.” This is due to cheap electricity, which becomes a determining factor in the profitability of the enterprise after the initial costs of rent.

Information taken from the article Home for Bitcoin: How Entrepreneurs Create Mining Hotels

In general, the prospects and potential benefits of mining hotels are clearly demonstrated by the pace of development of this area. Despite some organizational difficulties, opening centers can bring no less profit than direct cryptocurrency mining.

Risks

Mining hosting located in Moscow or any other city also carries risks for the owner of the equipment. The main risks of such cooperation: • Fraud. Unscrupulous hotel owners offer their services in order to steal clients' ASICs. Most often, such companies have the most favorable conditions. • Equipment insecurity. Systems may break down and the guard may fall asleep. During this time, theft, fire, or breakdown due to a power outage may occur. If these aspects are not monitored by hotel staff, the equipment is at great risk. • Poor quality of services. Hotel employees may turn off the device, abandon it, or not make contact. A low level of service is possible in any industry, hosting is no exception. A well-drafted contract can protect you from many risks.

Cooling of mining equipment

In winter it is cooled by forced ventilation. It is unwise to run industrial air conditioners. In summer you need air conditioning. And it’s worth making sure they are available. There have already been examples when equipment was simply placed in halls with high ceilings, but in the summer in Russia the heat can reach 40 degrees and you shouldn’t hope for natural cooling. Cooling equipment in containers also poses a number of challenges.

Firstly, high equipment density with a small volume. Secondly, the metal container quickly heats up not only from the equipment, but also from direct sunlight.

There have been cases when powerful fans sucked in rain or snow along with the outside air, which led to the failure of expensive equipment

Legal safety of equipment

The very fact of having an agreement is mandatory. When signing a document, the owner of the equipment must pay attention to the following aspects: • whether the placement conditions specified in the contract coincide with those announced during oral communication; • what address is indicated in the document, does it correspond to the actual one; • who takes responsibility for equipment breakdown or emergency situation; • whether the name of the company that provides the services is correct.

It is also worth checking the legality of the electricity connection and how the amount of electricity consumed is calculated.

If this is possible, then you should make sure that the owner of the premises has no claims against the company’s representatives. A hotel is more reliable if the owner of the business and the building is the same person.

Electricity

Unless you are a professional, we highly recommend hiring a professional electrician, as having your house burned down due to bad wiring is not worth the few dollars saved!

There are a few basic things about electricity and mining that you need to understand.

1. Almost all the electricity that the rig consumes is converted into heat. If the rig draws 1000 watts, the output will be approximately 1000 watts of heat.

2. The basic formula for calculating current/amps (A) is the quotient of power (W) and voltage (V) . For example: for a rig with a power of 800 W (220 V): A = W / V = ​​800 / 220 = 3.63. This is very important because if the fuse is overloaded, it will trip, causing unnecessary downtime for the rig. Never load a fuse to 100%. Always leave about 5% or 10% as a reserve.

3. If possible, use the fuse only for rigs. Don't use the same fuse for your freezer or freezer and a couple of other rigs. Freezers and refrigerators only use power periodically when needed. This may cause the fuse to overload and trip. Again, this will result in unnecessary downtime.

4. When planning, always leave extra fuse and cable. This will make things easier if you want to expand your mining rig in the future.

Accommodation options

So, let's talk about accommodation options.

In China

Pros: no need to transport equipment; you can send any ASIC under warranty. Cons: the mining hotel is very far away and it will be difficult to react in case of unforeseen situations

Place in Russia officially

Pros: few risks in terms of inspections from various authorities. Cons: high price, ASICs also need to be imported “in white”.

Place in Russia unofficially

Pros: cheap. Cons: there are many risks in terms of the legality of placement.

Mining hotels are convenient, but there are risks that need to be considered before transferring equipment.

Net

Mining itself requires a very small amount of network bandwidth. Riga with 6 video cards needs about 50-70 MB per day. Please note that most mining software requires updates, which may use more bandwidth.

We do not recommend using 4G Internet via SIM cards. Although in theory it should work fine, there are certain limitations. 4G Internet is also not stable and its use can lead to frequent disconnections.

We also recommend using cable connections instead of a wireless WiFi connection . This may require more wiring work, but solves problems associated with WiFi and connection dropouts (especially when using wireless USB adapters).

Stages of business organization

Premises and requirements for them

Location is secondary. It is not necessary to open such an enterprise in the city center; residential and industrial areas are suitable.

The main criteria for choosing a room:

• area from 100 m²;
• good ventilation;
• Possibility of stable internet connection.

ATTENTION! To prepare the premises for starting a business, it is necessary to make repairs - replace the wiring, install an alarm and cooling system, install an additional hot air exhaust system.

Room requirements:

1. High-quality room cooling system. To prevent the equipment from overheating.
2. Good ventilation. Hot air is removed from the equipment.
3. Reliable power grid. Withstands heavy loads and works smoothly.
4. Stable Internet. Even a short-term lack of network can cause loss.
5. Fire protection system. Includes alarm and automatic extinguishing system.

Such enterprises are most often opened in basements, in industrial areas or in the private sector.

Purchase of equipment

To open a mining hotel, you will need the following equipment:

• furniture - shelving, cabinets, desk and chair;
• fire alarm;
• wiring that can withstand heavy loads;
• Power supplies;
• sockets;
• fans;
• air conditioners;
• ventilation system.

Internet and electricity

The success of the entire enterprise largely depends on the stability of the Internet and the electrical network.

IMPORTANT! It is necessary to choose the most reliable provider and conclude an agreement with him for the provision of services. Providers have special rates for businesses. They are used by large enterprises and mining centers.

The profitability of the project depends on the cost of electricity. Some miners buy cheap electricity directly from thermal power plants.

Thermal power plants always have a supply of excess electricity, which is stored at substations. The state does not prohibit the sale of these balances at a price below market value. However, to take advantage of this opportunity, the mining premises must be located in close proximity to the thermal power plant.

To purchase electricity directly from a thermal power plant, you must enter into an appropriate agreement with the supplier. Such agreements are available only to large businesses registered as a legal entity.

Staff

To organize a business you will need the following employees:

• account Manager;
• IT specialist;
• technical staff - on duty at the hotel day and night, in shifts;
• security guard;
• accountant.

IMPORTANT! Employees must understand electronics and software. The best option is people with higher technical education.

Information about the supplier company

The data listed below can be collected when choosing any supplier of services or goods, be it stationery or food.

Use the TIN to identify the company on various services; you can simply paste the TIN into the search bar. Collect the following information:

1. Company age. Year of foundation according to extract from the Unified State Register of Legal Entities.
2. Does the legal registration address coincide with the actual address.
3. Average number of employees.
4. Turnovers for previous years.
5. Taxes and salary contributions.
6. Court cases.
7. Enforcement proceedings.

It is very convenient to compare the listed data, because they are already numerical. It's more difficult with ships. A complete absence of court cases is as bad as a large number of them. Share courts with customers and suppliers. Next come the quality options, which you will have to evaluate individually.

Management contacts

Systems don't work without feedback! A guarantee of high-quality provision of services and maintenance are management contacts in the public domain, if you don’t want to listen to all sorts of nonsense from ordinary employees like “unfortunately, we work differently, but we will take into account your wishes.” Any employee should know that if he provides poor service to a client, the client can complain directly to the head of the company. Otherwise, communication with such companies is like a wall. This is how banks, Yandex, Google, hh.ru and many others communicate with us. Over the years, we have never been able to get any large organization to improve its business processes or quality of service.

Reviews and reactions to them

Look at reviews of the organization and reactions to reviews. If there are a lot of positive reviews, then perhaps they are custom-made.

history of the company

On the website nalog.ru, an extract from the Unified State Register of Legal Entities will tell you a lot. How long has the company existed, how often has its management and owners changed.

Server room location

We recommend placing equipment for manning geographically in the region where you are not far from travelling. If you place the equipment several thousand kilometers away from you, then if something happens, getting there will be a real problem for you.