With digital currency gaining in popularity worldwide, additional mining operations and farms have started to appeardespite looming bans on the practice.
While many see bans on crypto mining as a hindrance toentrepreneurship and the crypto space, in actuality, its an effort to protect and enhance cities, states, and countries’ natural, historic, cultural, and electrical resources.
Back in March, a moratorium wasenacted in Plattsburgh, New York, the first major U.S. city topause any and all mining operations due to an operation that had nearly drained the city of its electrical resources, at the expense of the residents who werethe ones paying for it. Plattsburghs ban stated that it would issue a penalty of up to $1,000/dayon any firm, person, corporation, or other entity that established or ran a commercial cryptocurrency mining operation once the banwent into effect.
For its part, Russia will soon become home to one of the largest legal mining operations in the world, located in Siberia. Earlier this year, the Bank of Russia, Russias central bank,offered to allow the mining of cryptocurrencies, but proposed that miners sell their coins outside the country. The first deputygovernor of the bankemphasized the need to take ataxation point of view and consider how it can be controlled and reported. However, selling cryptocurrencies outside the country doesnt remove the requirement that miners file and pay their taxes.
One company, Minery, recently announced that it intends to establish five mining complexes with a total capacity of 55 megawattson a 59,000 square footsite within the Irkutsk region. It has partnered withBratsk Electric Grid Company JSC, a regional power supplier.
The company is considered a ‘turnkey’ mining solution, providingall necessary hardware, installation, and configuration. In the event of any service needs or breakdowns, the companymakes the necessary repairs on the spot. This type of operation comes in handy when engaging in contracts with cloud mining providers, mining pools, or third-party hosting platforms. Operating at the lowest electricity rates, it’s still considered legal in light of thepolicies proposed by the Russian Federation and Bank.
Russias energy resources and climate make for some of the best conditions for crypto mining. Consequently, more than 1.5 million Russians have started to engage in solo mining (home mining).Doing socomes with great risks, as this method of operation tends to cause an annoyance and nuisance to those around, not to mention safety hazards. Oftentimes, these operations are operating illegally, and rather than providing value to communities, they are draining them.
For example, many illegal mining farms are closed and those behindthem are arrested. Why? Well, you have (1) individuals stealing electricity that belongs toa designated area and those who pay money for it, (2) the land and premises being used for other purposes at the expense of area residents, and (3) equipment being smuggled across state lines and international borders.
“Having been mining since 2016, we have encountered restrictions[on] home mining, and came up with a solution in terms of scalability and legal operations,says Ilya Bruman, co-founder and CEO of Minery. The idea is to build a comprehensive infrastructure, providing highly-efficient, powerful, and a stable electricity supply for our investors, ensuring smooth operation of their mining businesses.
Under Russia’sproposed regulations,the majority of such businesses will become illegal. Minery is notamong them.
The biggest issue with many of the mining operations that are later deemed illegal is that the electricity being used is done so without authorizationoften draining cities and townsof this highly used and profitable resource. Its even gone digital, in the caseofcryptojacking malwarewhich attacks computers and servers, draining their CPU power and resources.
Minery’s mining complexes are located in several citiesin the Irkutsk (Siberia) region Bratsk, Irkutsk and Ust-Ilimsk. The localclimate conditions – the average annual temperatureis 28.4 Fahrenheit, or -2 Celsius – are optimal for miners’ heat transfer and cooling systems, which reduces hosting expenses. The project relies on renewable electricity from high-pressure hydroelectric power plants the Bratsk, Irkutsk, and Ust-Ilimsk Hydroelectric Power Stations. The plants are located on the Angara River, which drains Lake Baikal the largest freshwater lake in the world.
To ensure optimal working conditions, any mining operation should reduce energy costswhilemaintaining the equipment itself. This goal is achieved by placing mining facilities near the sources of the cheapest and most eco-friendly electricity hydroelectric power stations, says Alexei Paikin, co-founder and managing director of Minery. This approach minimizes the cost of delivering electricity to the point of consumption.