Topic: The risk of NOT actually owning your mining hardware. - page 2. (Read 678 times)

Crazy story...

Not your hardware, not your hashes, am I right?

I get that when it comes to mining it's the low cost of electricity that dominates.  It is important to remember that more hands in the cookie jar is not always the best solution though.  When you use a company like Compass, they have to make money, their service providers need to make money, the equipment manufacturers need to make money, etc...  There are a lot more costs.  Sure, the cheaper electricity and less hassle might make it worth it, but there's also plenty more risk added with each person that has their hand out.  This is demonstrated well with this story. 

Are you talking about thermal power plants? Is it so easy for you to build an electric power plant?  Or can you buy electricity from this plant?
It is possible to do this in our country, but consumption should be at least a megawatt.

... so many people think "Wow Bitcoin Quick Money"

Delusion.

IDK how you can get 4¢ in PA unless you have a special deal with a power plant. The best-case scenario in the PECO service area with PJM index pricing, primary service and curtailment seems to be 6¢. Most places are 7-8.5¢. I spent days researching this. The other utilities (WestPenn/PPL/PenElec) charge more than PECO.

At least that's better than Joisey, where the lowest possible price (with PSE&G) is 7¢ while most small warehouses are 8-9¢. It might even be a cent higher this year with all the crappy ESG riders that were added to the tariff. I had to pay a ridiculous 11¢ in 2018 with JCP&L but thank god that was for GPU mining; I decided to pay the higher rate because that warehouse already had 1200A of power installed instead of 400A. Screw FirstEnergy. Of course, I called the utilities to verify these numbers.

Delaware is as bad as NJ, but at least there is no sales tax on power or equipment.

In northern Texas for ONCOR you can subtract 2¢ from the PA numbers. With ERCOT index energy, curtailment (96% uptime) and 500+ kW of primary service, the rate for the last 12 months was 5.1-5.5¢. I coded up a script to pull historical ERCOT prices and consulted with an energy broker to verify these numbers. Ultimately it was a no-go decision for other reasons, but TX seems to be the best place to start a farm for me.

We have the solar angle here in NJ which makes it decent.

We may build in nearby PA in carbondale as we can get 1 megawatt at 4 cents, but it is coal based power.

I think every country has its own problems. In Russia, you can find electricity for 1.5 cents, but you will not have guarantees for the safety of storing your equipment. Therefore, it is better to mine at home, but pay several times more.

I will never open a mining operation in New York for the same reason even though it's convenient for me! Yes, their electricity is cheap and the weather is colder, but is it worth fighting a bunch of old buereaucrats downstate who are alumni of Goldman/JPMorganChase/Citi who trash PoW as well as decentralized currencies? Hell no! Texas it is 🤠

I am USA based I can get a good deal in Canada and I won't do it because their PM is very anti BTC and the last thing I need to do is setup a 1 megawatt container in Canada subject to their wims and fancies.

If you lived in Russia, you would understand the risks that you need to consider when transferring mining equipment to other companies. Therefore, in Russia we mine in our homes or other safe places.

Usually, your miners will be pointed to your own pool, the host doesn't own a pool nor is responsible for that part, you provide them your main pool and two back up pools and they will set the miners up for you, depending on how well built the facility is, this could be done via basic methods like an email or an online portal which you use to set up your pools and then they use some sort of a script that would copy-paste your workers from that database to your miners, some hosts could give you direct access to your miner using some of the technologies available. Different hosts will have different ways of dealing with that, but the common thing is that every owner will decide the pool they want for their miners.

@mikeywith
Thank you for the explanation, it's a lot clearer now  I've not considered mining as yet, but if I do, I know what to avoid now..
I have one more question?
Do these hosting service pool the hashrate of the different mining gear contracted to them to gain an advantage in finding blocks, and then distribute the reward among all the available miners? Or is there a way for someone on the outside to verify this at all?

I met with another miner dude to consider starting a warehouse for hosting purposes. But after looking at the spreadsheets as well as the upfront cost required to upgrade a warehouse electric supply to 1MW, we realized it was an awful idea. Even if we charged customers 11 cents on a 12-month contract, making a profit would be very hard if the underlying power cost was 5-6 cents. It would take a year to pay off the initial $50-80k in startup costs. There would be no profit for 6-8 months as we would go through the long engineering process of getting a new transformer.

The only way to turn a profit quickly would be deceiving the customers, which was unacceptable. This is why I believe so many cloud mining / colocation farms cheat the customer. Both the host and the customer are locked into a certain wattage and cannot adjust efficiency or liquidate the equipment, even if they think the market will go down.

Better to go with GPU mining and invest all of that $50-80k into viiideoo cardz without having to rent a warehouse!

Personally I decided to focus on new business ideas instead of copying thousands of other miners with much deeper pockets.

First thing first, you should assume that the majority of those services are scams, so don't send your gears until you have done your research, however, the legal ones operate as follows.

They provide the infrastructure like internet, electricity, cooling, and all that's needed for mining gears to run, and then they will make you sign a contract to pay x amount per KwH your miner uses, an example:

Your miner is 1*S19 pro, it consumes 3kWh, and you pay them 10 cents per kWh, so you pay them 0.1*3*24 = 7.2$ daily, of course, they won't collect the fees daily, maybe monthly, maybe yearly, it all depends on their terms and conditions.

These folks supposedly pay less to the power company, so maybe 0.5 cents per kWh, so for every S19 they host, they make 3.6$ daily minus all the operation fees they have to handle, you as a client get your miner up and running by them, pointed to your pool, you make money, they make money, and everyone is happy until someone is not.

Compass on the other hand offers a sort of a modified version of the basic hosting, while the majority of other hosts will ask you to send your mining gears to them, with Compass you will have to buy the gear from them, by selling you an "overpriced" mining gear, they make some good money, and then again, more money for the hosting services.

There are many things that can go wrong with this business model, most hosts won't let you see your miners in person, they can just tell you "your miner is dead" and need fixing, send us $300 in fees, and if you decide to take your miner, they might ask you for another $300 for uninstallation and packing fees, it's doesn't matter how good the host is, they will have the upper hand in this mess.

With that said, there could be and probably are some honest and good hosts, and to get a good power rate, sometimes your place is not an option, so this hosting stuff might be your only option if you really want to mine, but then, it comes with an added risk.

Goodday mikeywith,
Please, can you explain what "hosted mining" is?
I did a quick Google search on it and it seems to be a sort of system where the service provider manage your mining gear for you rather than you dealing with the logistics. Most of the relevant search results I got were from companies that offer such service, so I am not sure if I should entirely trust it, as they would definitely market their service.

In hosted mining would I still provide the electricity?
What exact logistics does the company handle?

A few days ago, one of the largest host providers 'Compass Mining' was hit by U.S sanctions against Russia (this is not a political discussion, I will report any off-topic).

Compas is a U.S based company that sells mining gear with hosting services included, thousands of people overpaid (around 13k) for a miner, when the war started, they sent out emails telling their clients not to worry and don't rush to move their miners and that they "Compass" can handle the situation if needs handling.

A few days ago, they sent out emails telling their clients that the new sanctions require them to stop dealing with the Russian host and the clients have two options.

1-Pass ownership for their miners to Compass mining so that they can liquidate the gears in Russia on their behalf.
2-Contact the Russians directly and deal with your own problem (not recommended by them because of a high risk of losing the gears).

Today, someone reported that they will get 4.5k for the gear he bought for 13k (probably an S19 or M30) although that isn't likely because s19s brand new go for 7k range, these are used miners that MUST sell fast, and where? in a heavily sanctioned country, so only some Russian whale may buy them, so my guess is, not even 4.5k is possible.

The moral of the story: having someone else host your gear is very risky even if the company is based in your country and you think they can be highly trusted, it's not about Russia, it could be anywhere else, you can't control the outcome, you may never know when you might be forced to pass ownership of your miners and hope the host can sell your mining gears for whatever they can, and you won't be able to reject the offer regardless of how much your gear is actually worth.