Bitcoin and the Data Centre

by | Sep 8, 2014 | Articles, Crypto-Currency & Blockchain

In the last five years we have seen one of the most significant advancements in the evolution of currency. On January 3rd 2009, Bitcoin was introduced to the world and it has since become the most intriguing phenomenon to hit cyberspace since the advent of P2P (peer-to-peer) networking.

WHAT IS BITCOIN?

Bitcoin is a software-based online payment system used to transfer bitcoins person to person via the internet. Unlike the modern banking system, Bitcoin is without a central repository, making it the world’s first decentralised digital currency.

At the time of writing this, there are over 13m Bitcoins in circulation with just 1 Bitcoin equating to £283.30. However, Bitcoin was created and lives in the virtual world, so accrediting it with an intrinsic value has been widely debated around the globe. With physical money, governments choose when to produce and distribute it, whereas Bitcoins are generated by ‘miners’. Mining is employed by users who utilise specialised software to solve mathematical problems and process Bitcoin transactions. In turn they are rewarded with Bitcoins, thus providing an incentive for more miners to join the network.

RAPID GROWTH LEADS TO AN ARMS RACE

Mining Bitcoin is an intensive CPU activity and the need for computing power increases as the network grows. In the early days of the platform, miners would use the processing power of their personal computers to solve the mathematical problems, but soon found that graphics cards were much more suited to the task. The problem was that graphics cards, while capable, required more electricity and produced much more heat. As the network grows, the Bitcoin algorithm automatically adjusts its difficulty higher, making it increasingly challenging to profitably mine Bitcoin.

What it has led to is an arms race with miners building powerful computers and custom mining rigs in Frankenstein fashion to stay ahead of the curve. The issue with this is that the energy consumption and costs associated with implementing these powerful set-ups soon start to become prohibitive.

In fact, the obsession to take advantage of the rising trend is so vast that there have already been court cases over the use of it. A gaming company was fined $1m when one of their employees covertly turned their user base into a Bitcoin mining colony.

WHERE THE DATA CENTRE CAN CAPITALISE

Companies who specifically cater to Bitcoin mining have dedicated server space in data centres equipped with specialised cooling hardware. Recently CoinTerra, a major player in the Bitcoin-mining ecosystem, has become a tenant at one of CenturyLink’s data centres. However, the data centre demands for a bitcoin mining enterprise are a little different from the norm. Whereas most data centre builds are focused around a reliable infrastructure with minimum downtime, mining companies do not consider this as an important factor. Downtime does not really impact the business of a company like CoinTerra, but the capacity for extreme power densities and tight deployment deadlines does.

As Bitcoin continues to grow there is a huge opportunity for data centre providers, but due to the specialised requirements, many are not in a position to seize it. Over $600m is expected to be invested on Bitcoin mining infrastructure in 2014 and the digital currency’s worth is predicted to rise dramatically. What this means is that we could see a significant portion of venture capital flow into Bitcoin mining start-ups, all of which will require a very different kind of data centre.

If you have a requirement for high density computing, “lean” data centre design or Bitcoin mining suitable facilities contact Future-tech today at info@future-tech.co.uk