Utah Bitcoin Colocation

Much has been said about currency mining but one observation that seems overlooked is how data center providers are now mining when it has become cost prohibitive for most to mine. 

Data centers have several advantages against traditional currency miners:

  • The massive quantities of power already under contract with the power companies allows for data center providers to mine off-peak times at a substantially lower rate than typical currency miners
  • Some currency miners business plans only worked when the price of bitcoin was over a certain dollar value. As the price decreased over 2014, mining became unprofitable and data center bills went unpaid. Some companies who couldn't pay their data center provider the contracted monthly charges soon were found in breach of contract and found their hardware in the ownership of the data center provider. However, since data centers have a lower break-even point for mining the defaulted customer hardware that was now in their possession is once again online and mining. 
  • Traditional currency miners don't have the cooling and power infrastructure in place to mine without burning up their equipment. Data center providers already have that infrastructure built out and can leverage it.

Since Utah has some of the best power pricing in the nation there are a lot of bitcoin miners in Utah. And if the miners didn't have the foresight to project what would happen if the price dropped they may have breached their contract. I would guess that several data center providers in Utah are now, or shortly will be in possession of bitcoin hardware, mining away.

Sources:

Bitcoin Price Index
http://www.coindesk.com/price/

Bitcoin Miner Defaults
http://www.wsj.com/articles/bitcoin-miner-cointerra-defaults-after-data-center-cuts-access-1421198160

Bitcoin Mining Profit Calculator
http://jblevins.org/btcmpc/